# Tricky tax situation



## Mouton (Mar 17, 2013)

We have a uk registered business, pay Corporation tax, Vat & NI contributions in the UK for same, and spend a Few months per year in our holiday home in Spain. If we become residencia in Spain, do we then make two tax returns, one for income in Spain (UK salaries which go the Spanish bank account) and another for income kept in the UK bank account? Also, what is the situation as regards payments of the company tax elements, as all the work is carried out and monies are generated in the UK? Can we move the company to Spain (on paper, ie, change the register office etc) but still carry on as usual? I have discussed this in small detail previously with an Abogado re. The personal tax implications but didn't get as far as the company. I am a 56 year old male and my wife and fellow company director is 50, so not of state pension age by any means. Info and opinions would be welcome and most appreciated.


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## Dunpleecin (Dec 20, 2012)

No disrespect to anyone on this board but for something as complex as this I would seek professional help rather than on an internet message board.


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## Horlics (Sep 27, 2011)

Any money you receive as income would have to be declared on a tax return in Spain. You mentioned Spanish and UK bank accounts. It doesn't matter where the accounts are, it's the declaration of any income that you put into them that matters.

That said, you are in a good position because you have a business. As you no doubt know, you are free to draw as much as the business can afford in salary, or as little as you want, leaving the remainder in the business. 

I've done a bit of research on this and I suspect that what you will be told to do is declare your salary in Spain and leave the business in the UK. What you can then do is draw the smallest salary you need to live on and leave the rest in the company. Then, if you find yourself in the UK for more than 6 months at some point in the not-too-distant future (two or three years time, maybe) register for tax in the UK and suck out more money from the company in the form of bonuses etc. in that year. But, if you're still resident in Spain years from now, you'll have to take it out of the company eventually and pay tax on it in Spain.

The good news is, you have lots of flexibility relative to a PAYE person.

But, as somebody said above, you really do need to get an account with experience of international tax in Europe. In the end, I would want to be looking at a spreadsheet with the different scenarios mapped out so that I know how much difference the various options cost. It'll cost you a few hundred to get that done, but it'll be worth it.




Mouton said:


> We have a uk registered business, pay Corporation tax, Vat & NI contributions in the UK for same, and spend a Few months per year in our holiday home in Spain. If we become residencia in Spain, do we then make two tax returns, one for income in Spain (UK salaries which go the Spanish bank account) and another for income kept in the UK bank account? Also, what is the situation as regards payments of the company tax elements, as all the work is carried out and monies are generated in the UK? Can we move the company to Spain (on paper, ie, change the register office etc) but still carry on as usual? I have discussed this in small detail previously with an Abogado re. The personal tax implications but didn't get as far as the company. I am a 56 year old male and my wife and fellow company director is 50, so not of state pension age by any means. Info and opinions would be welcome and most appreciated.


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## StevejR1 (May 21, 2013)

On our latest trip we went to see an accountant to discuss a similar situation....when we move I will continue to work for my uk based limited company (that only employs me) for the first three years.

I asked the same question, as I wasn't sure if it would be better to remain a resident in the uk (although my partner would become a Spanish resident) and submit books to both governments under the double taxation agreement, or just become a resident and put in a tax return for my wages and dividends.

She suggested it was better to become a resident, and submit my books under the tax agreement, and was willing to calculate what the tax liability would be based on last years accounts.

But I'd agree that all taxation/financial decisions are better discussed with an appropriate body, as each situation is probably different.


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## Mouton (Mar 17, 2013)

Appreciate your thoughts, the post was mainly to see what others in a similar situation had done and it has achieved that now, thank you.


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## xabiaxica (Jun 23, 2009)

Mouton said:


> Appreciate your thoughts, the post was mainly to see what others in a similar situation had done and it has achieved that now, thank you.


what was the solution?

your experience could help others


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## snikpoh (Nov 19, 2007)

StevejR1 said:


> On our latest trip we went to see an accountant to discuss a similar situation....when we move I will continue to work for my uk based limited company (that only employs me) for the first three years.
> 
> I asked the same question, as I wasn't sure if it would be better to remain a resident in the uk (although my partner would become a Spanish resident) and submit books to both governments under the double taxation agreement, or just become a resident and put in a tax return for my wages and dividends.
> 
> ...



That wouldn't work - if your 'partner' was here and you were supporting them, then you automatically become tax resident in Spain - this overrides the 182 day rule. It isn't a matter of choice.

Also, you wouldn't "submit books to both governments under the double taxation agreement" - you would have to do a company return in UK and then submit tax returns in BOTH countries.


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## StevejR1 (May 21, 2013)

snikpoh said:


> That wouldn't work - if your 'partner' was here and you were supporting them, then you automatically become tax resident in Spain - this overrides the 182 day rule. It isn't a matter of choice.
> 
> Also, you wouldn't "submit books to both governments under the double taxation agreement" - you would have to do a company return in UK and then submit tax returns in BOTH countries.


Isn't tax resident, and resident different?

As I recall, she said both to become residents, and tax residents, probably for the reason you say.
And then I would submit my accounts in the uk as normal, with a tax return, as a uk based company. But I'm sure she implied I would then have to submit my profit and loss accounts to the Spanish government to decided what the tax liability would have been, and then pay under the double tax agreement....plus also then filling a tax return as a resident with an income (PAYE income from the uk)

I'll have to check.....


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## gus-lopez (Jan 4, 2010)

StevejR1 said:


> Isn't tax resident, and resident different?
> 
> As I recall, she said both to become residents, and tax residents, probably for the reason you say.
> And then I would submit my accounts in the uk as normal, with a tax return, as a uk based company. But I'm sure she implied I would then have to submit my profit and loss accounts to the Spanish government to decided what the tax liability would have been, and then pay under the double tax agreement....plus also then filling a tax return as a resident with an income (PAYE income from the uk)
> ...



yes it is but, if you are claiming you are a non-tax resident & you have family here that are being supported by your income then it will not work as snikpoh said. 
You would become tax resident by virtue of the support. Known as where you centre of family interest lies.


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## rewdan (Feb 23, 2010)

but that is only one of the 'tie breaker' rules. if you spend 183 days in the uk then the uk would win maybe under the tie breakers even if you had kids at school in Spain??. Anyone know?? It's a big question!


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## xabiaxica (Jun 23, 2009)

that's why I asked Mouton if he'd share the advice he'd been given......


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## Horlics (Sep 27, 2011)

An example:


I live on an island somewhere and earn lots of cash
I have a wife and kids who live in the UK
I come home for weekends now and then, and occasionally for a longer break, e.g. a couple of weeks a couple of times
Overall, I am only in the UK for 80 (no significance to the number, just an example well within the 180) days in a year

The UK Revenue would judge me to be UK domiciled for tax purposes as the UK is my "centre of life". The fact my wife and kids, who I suppport (different if you are separated and having to pay them maintenance as ordered by a court), live in the UK full time.

No tie breakers or such, just a very clear case according the the UK guidelines.

I don't know if Spain looks at it the same way but I think it's highly likely they do.

I believe Snikpoh and gus-lopez are probably correct.



rewdan said:


> but that is only one of the 'tie breaker' rules. if you spend 183 days in the uk then the uk would win maybe under the tie breakers even if you had kids at school in Spain??. Anyone know?? It's a big question!


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## rewdan (Feb 23, 2010)

ok, I spend 280 days in the Uk, my wife and kids live in Spain. Where do I pay my tax?


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## xabiaxica (Jun 23, 2009)

rewdan said:


> ok, I spend 280 days in the Uk, my wife and kids live in Spain. Where do I pay my tax?


If you're working in the UK then you pay tax in the UK

but you still have to do a tax declaration in Spain & might have some more to pay


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## Horlics (Sep 27, 2011)

The example I gave explains where you would pay tax if working outside of the UK under the circumstances you have laid out. As I said, I don't know the Spanish rules. Xabiachica is right. There will be some to pay in the UK but possibly also an additional hit in Spain.

If you are going to make a solid decision based on advice on this matter, the advice should come from an accountant with experience of international tax rules, not this forum. There could be a large amount of cash involved here. Please invest a little with a professional for peace of mind.

And to reinforce that advice.....

I was working in the UAE and waved farewell to a colleague who headed back to the UK. He'd had down-the-pub advice about the tax position. He was back a month later having called the company he'd resigned from to ask for his job back. The week after he'd got back to the UK he'd met with an accountant. The accountant explained that the bar-room advice was all wrong and that come April he'd be facing a tax bill of 70+ k.

A year later he finally returned home after doing some proper planning based on professional advice. 



rewdan said:


> ok, I spend 280 days in the Uk, my wife and kids live in Spain. Where do I pay my tax?


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## Supercod (May 22, 2014)

Hi, I know this thread is a wee bit older but it sounds something like I am looking at. I went to see an accountant in Spain, explained that I am a share holder in several UK companies but only take an income/money from one of them. I am thinking of moving to live in Spain from the start of next year with my wife and 2 children. Anyway I was advised that I and my wife should register as self employed in Spain and pay €315 (each) Social Security contribution as this means me, my wife and children would be covered for Spain's NHS, unemployment and later on pension (we are both in our 30's) ... and then instead of getting paid via PAYE from the UK company that I should invoice the UK company (my wife the one she works for) for the work done each month. We would then pay quarterly the income tax due on the money we receive.

Is this what others have been told?

Clearly before moving I am keen to ensure Health Service stuff is covered and that we are paying our taxes correctly in Spain.


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## StevejR1 (May 21, 2013)

Supercod said:


> Hi, I know this thread is a wee bit older but it sounds something like I am looking at. I went to see an accountant in Spain, explained that I am a share holder in several UK companies but only take an income/money from one of them. I am thinking of moving to live in Spain from the start of next year with my wife and 2 children. Anyway I was advised that I and my wife should register as self employed in Spain and pay €315 (each) Social Security contribution as this means me, my wife and children would be covered for Spain's NHS, unemployment and later on pension (we are both in our 30's) ... and then instead of getting paid via PAYE from the UK company that I should invoice the UK company (my wife the one she works for) for the work done each month. We would then pay quarterly the income tax due on the money we receive.
> 
> Is this what others have been told?
> 
> Clearly before moving I am keen to ensure Health Service stuff is covered and that we are paying our taxes correctly in Spain.


That's an interesting option....but I'm not sure if it's a loophole, or a legitimate method? Certainly paying €315 (is that per year?) to get the healthcare benefits would be beneficial.


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## StevejR1 (May 21, 2013)

Just done a little research...that €350 for autonomo is more likely to be monthly!!


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## Supercod (May 22, 2014)

Yes it's monthly.


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