# How to take income as a director of a UK Company



## preeny (Aug 9, 2014)

Hello, 

Here is my problem, I am currently director of my own UK company. I will be moving to Spain in a couple of months and want to continue to take a salary (it will be a small salary, around 800€ per month). Can anyone advise on what I need to do so this is done legally in Spain and all social security and income tax is paid? 

I have done some research and found conflicting messages so am just a little lost. I'm sure there must be others who have been in similar situations...

Any help would be much appreciated!


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## KIP1958 (Aug 2, 2014)

I'm interested in this too with my company of which I am a director.

I am interested in which is the best way for tax reasons.

Salary or Dividends or both?

Dividends would obviously already have corporate Tax paid to UK.


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## preeny (Aug 9, 2014)

From what research I have done, I believe to receive a salary as a spanish resident the UK company needs to register in spain to be able to pay the social security of the employee, but if anyone can confirm this or advise how this can be done would be great...

I also read divdends start at 21% tax! so after corporation tax your looking at 41% and thats just up to 6000€ anything more will be higher.

Becoming self employed in spain would not work as I dont believe you would be able to invoice your own company as a director (at least you cant in the UK) and even if you could you would have to register for IVA which would take a 21% chunk from your company!


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## KIP1958 (Aug 2, 2014)

preeny said:


> From what research I have done, I believe to receive a salary as a spanish resident the UK company needs to register in spain to be able to pay the social security of the employee, but if anyone can confirm this or advise how this can be done would be great...
> 
> I also read divdends start at 21% tax! so after corporation tax your looking at 41% and thats just up to 6000€ anything more will be higher.
> 
> Becoming self employed in spain would not work as I dont believe you would be able to invoice your own company as a director (at least you cant in the UK) and even if you could you would have to register for IVA which would take a 21% chunk from your company!


I must admit, I have done little research on this at all.

I'm hoping someone will come along and offer a far easier solution than registering my company in Spain just so I can be paid. I sure companies in Gib don't have to register in Spain to Pay workers who are Spanish residents?


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## jojo (Sep 20, 2007)

hhhmmm, not as straight forward as it once was and I dont know the correct answers - hopefully someone with a head for this stuff will be along and clear it up. But in the meantime heres a few previous posts that may help, or give you some ideas. Do feel free to discuss with each other on here anything that might be relevant that you've gleaned from these

http://www.expatforum.com/expats/sp...hould-i-pay-tax.html?highlight=tax+employment

http://www.expatforum.com/expats/sp...7-tax-residency.html?highlight=tax+employment

http://www.expatforum.com/expats/sp...n-tax-situation.html?highlight=tax+employment

http://www.expatforum.com/expats/sp...hly-appreciated.html?highlight=tax+employment

Jo xxx


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## KIP1958 (Aug 2, 2014)

jojo said:


> hhhmmm, not as straight forward as it once was and I dont know the correct answers - hopefully someone with a head for this stuff will be along and clear it up. But in the meantime heres a few previous posts that may help, or give you some ideas. Do feel free to discuss with each other on here anything that might be relevant that you've gleaned from these
> 
> http://www.expatforum.com/expats/sp...hould-i-pay-tax.html?highlight=tax+employment
> 
> ...



Thanks JoJo, the threads confirm what I had initially assumed.
The company stays registered soley in the UK.

I would take my income and declare it as a Spanish Tax resident, thus paying Spanish tax and NI on the amounts.

I'm sure when I move I can talk to a Spanish accountant/gestor to Iron out the finer details.


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## StewartL (Sep 5, 2013)

Here is the link to the new UK - Spain Double taxation convention.

http://www.hmrc.gov.uk/taxtreaties/in-force/spain-dtc.pdf

Director fees are covered by Article 15 (previous convention was Article 16 and same text)

Therefore even thought the director may never enter the UK their fees are likely to be taxed under PAYE rules in the UK. As such the company does not need to register itself in Spain to pay its director.

You would then need to declare your UK earnings on your Spanish tax return for any year which you are a Spanish tax resident. As Spain has a low tax free personal allowance it is likely there would be some additional tax to pay.

As always the best advise is to seek independent advise from a qualified and good tax professional with knowledge of UK and Spanish taxation who can review your specific situation with all the facts and figures. I appreciate that this will be an upfront cost but in the long run the valuable advise should pay for itself even if only from the peace of mind.


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## CapnBilly (Jun 7, 2011)

Couple of points to bear in mind.

Firstly National Insurance - this is payable on either a "salary" or " fees". Under EU legislation you should pay your national insurance where you normally live, in this case Spain. The correct procedure is for you to ask HMRC and they will tell you where you should be paying NI. If it is Spain, which it will be if you work in Spain the majority of your time (75%) then they will issue you with a Form A1, and your company will need to register this with the Social Security in Spain.

Secondly - Fees are taxable in both countries, as Stewart L says, salary may be taxable in both countries, depending where your actually work. If you work predominantly in Spain,which is what I think you are saying, then it will be taxable in Spain. If you carry out part of your work in the UK, then some of it will also be taxable in the UK. Where it is taxable in both countries, you will be able to offset tax paid in the UK

Thirdly - Dividends that you receive from a UK company are taxable in Spain. However, you can offset the tax credit (10%) against tax due in Spain. Be aware however, that as pointed out above, tax on dividends is levied at the savings rate. Currently this is 21% upto €6,000 and 25% upto €24,000, and then 27%. For this year you receive an exemption in Spain on dividends upto €1,500, however, this will be abolished next year, but the rates are being reduced, and will start at 19%, but still significantly more than the UK.

Finally, although the company is based n the UK, and does not have a permanent establishment in Spain, if you regularly establish contracts on behalf of the company, the spanish authorities may consider that this constitutes a permanent establishment, and as such will want to tax you on the profits earned as a result of these contracts. There are some exceptions to this rule, but I suspect they don't apply.

On the basis of the above, you may want to seek professional advice, to ensure you setup is the most effective for your circumstances.


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## preeny (Aug 9, 2014)

StewartL said:


> Here is the link to the new UK - Spain Double taxation convention.
> 
> Director fees are covered by Article 15 (previous convention was Article 16 and same text)
> 
> Therefore even thought the director may never enter the UK their fees are likely to be taxed under PAYE rules in the UK. As such the company does not need to register itself in Spain to pay its director.


That sounds great, I have to say I'm not familiar with the difference between director fees and salary, but if it avoids having to register as a Spanish employer and pay the thirty something percent social security it sounds like a good way to go!


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## Lucykr (Apr 21, 2014)

*Income tax in Spain*

Does anyone know what the tax consequences would be of living in Spain but working for a UK registered company (and still being paid into a UK bank account).


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## thrax (Nov 13, 2008)

Well, basically if you are a tax resident here (in excess of 182 days) you are required to inform the Inland Revenue that you have moved abroad and you will declare your earnings here and pay tax here.


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## ddrysdale99 (Apr 3, 2014)

If you live in Spain for more than 183 days in a calendar year then you are a tax resident and pay tax in Spain. Not sure how you get your UK employer to recognise this unless you become a contractor rather than an employee.


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## brocher (Mar 21, 2011)

It's quite simple. you'd continue to be taxed at source in the UK, but will be Spanish tax resident meaning you must fill in a Spanish tax declaration each year, listing all worldwide earnings, interest on savings etc. If you are due more tax according to Spanish allowances, you must pay the extra in Spain (or get a refund if you're due less). You won't pay the same tax twice as there is a reciprocal agreement between the two countries. You can easily find Spanish tax allowances by googling.

As you won't be paying Spanish NI contributions, you won't qualify for state healthcare, so you'll need private insurance. You won't qualify for NHS care either as you won't be UK resident.


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## CapnBilly (Jun 7, 2011)

If your work is based in Spain, then you should apply to be paid gross of tax, and declare all your earnings in Spain. The Double Taxation Agreement only allows you to offset tax if it is taxable in both countries. In any case if you do offset, and have paid more tax in the UK (unlikely) you do not get a refund in Spain.

In addition, if the majority of your work is in Spain, then you should apply to HMRC for a decision on where you should pay social security (national insurance). It is probable they will say Spain, and they will issue you with a Form A1, and your company should register you for social security in Spain.


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## ssbn02 (May 16, 2013)

preeny said:


> Hello,
> 
> Here is my problem, I am currently director of my own UK company. I will be moving to Spain in a couple of months and want to continue to take a salary (it will be a small salary, around 800€ per month). Can anyone advise on what I need to do so this is done legally in Spain and all social security and income tax is paid?
> 
> ...


Can i just ask why you dont just take the income in the uk??


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## preeny (Aug 9, 2014)

ssbn02 said:


> Can i just ask why you dont just take the income in the uk??


Hi, as I will be living permanently in Spain this will mean I am a resident of Spain and not UK


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## ssbn02 (May 16, 2013)

so a non uk resident director, resident in a eu country receiving a salary in the uk that is not liable for tax as its under all tax bands. do u own the company.


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## preeny (Aug 9, 2014)

ssbn02 said:


> so a non uk resident director, resident in a eu country receiving a salary in the uk that is not liable for tax as its under all tax bands. do u own the company.


Yes, I own the company


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## Supercod (May 22, 2014)

Hi Preeny,

Will start with saying of course when you turn up in Spain seek out professional advice, you can also ask your UK accountant if they know what you do from the UK side. Don't just take advice from forms, great that they are unless someone says I am fully registered accountant, then they will get some things wrong as no doubt I will in my reply.

Here is what I have been told in Spain and I have since had it check how that works in the UK.

Option 1 - Start a new Limited company in Spain, costs €3,002 to be in a bank account but after opening (several long months) you can take it all back out again (I have more than one company in the UK so this is attractive to me) and invoice from this company to the other companies for work done. Both I and wife would also need to become Autonomo (Self Employed) and we would then have our own individual tax credit amounts +plus you get some per child you have also (you have the choice to use your wife's and purely a decision based on the level of income you expect to get) but works out cheaper if you are in the €30k to €50k area (yes lucky you if you are, but you worked for it so well done). You both need to pay Social Security that will be around €300 a month each (told you get a discount for the first year that slowly goes up to the €300 rate), this will cover your health care, pension etc. Every company and self employed person in Spain charges IVA (VAT) from the 1st Euro, in the UK it's only when you reach £81,000 turn over that you need to. When you invoice the UK Company for the work you have done for it via your Spanish company, assuming that it's VAT registered then you need to display the UK Company VAT number and the Spanish Company IVA number and you would show IVA/VAT as zero. If of course your UK Company is not VAT registered than you need to show the full amount and that means a loss of 21%. You then invoice your Spanish company for the money for the work you have done, pay your taxes and social security etc.

Option 2 - Is just like option 1 only you forget the Limited company in Spain and just do it self-employed. It's more straight forward, you invoice your company etc for the work and pay your taxes and social security here in Spain and probably best if you only have 1 source of income but again check if your better for you and your wife (sorry just assuming you might be married so if not ignore that) to invoice the company.

Your Spanish Accountant will be looking for €100 to €250+ a month depending how complicated your set up is, if it's just self employed invoicing 1 company a month, then expect to pay €100 a month that seems to be the minimum when I was asking about. They will do all your paper work, and a good will also get you fully legal with town hall, supply a translator etc because they want to keep you as a client when in Spain.

Now you're still liable for corporation tax in the UK (not something you need to declare in Spain as your Spanish company wouldn't need to do in the UK, paid in the country that company is setup). When you get your accounts done in the UK a related party notice will be added to money out the way showing that £x was paid to a company you control in Spain or to you as self employed in Spain, this I am told is a book keeping style entry to explain why you go from having a column in your accounts called "Directors Salary" to "Directors Services", your UK account will explain that better, I only found out about this 2 days ago LOL

Now from what I have researched and been told, come 182 days you're a resident in Spain for tax anyway and depending on the number of years you have to retirement you can build up a pretty good (in terms of comparing to UK state pension) Spanish pension, you will have access to SIP card and (still need to check this as I don't believe it) you get unemployment benefit as well, should you find yourself with a few months with no work (but I think you need a fair few months to qualify for that) basically you will be treated the exact same as if you are Spanish.

Taking a Dividend seems to be a massive no, no both from your UK Company and from a Spanish company if you set one up. Basically Spanish Company Administrators (Directors) get taxed the highest and is why it would seem they are self employed and invoice their company for work, that all seemed rather strange to me and had to check it was all legal in Spain but I been told from two sources this is indeed the way things are done, my number 1 priority is to stay fully legal and ensure my wife and children have all the same rights as other Spanish tax payers.

Not sure if this all helped, gives you some food for thought and maybe sparks a few more questions to ask your Spanish Tax advisor. I have more to ask mine when I move over in September.. have until January 2015 before I need to become fully registered in Spain based on the number of days I would have been over.


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## ssbn02 (May 16, 2013)

Supercod said:


> Hi Preeny,
> 
> Will start with saying of course when you turn up in Spain seek out professional advice, you can also ask your UK accountant if they know what you do from the UK side. Don't just take advice from forms, great that they are unless someone says I am fully registered accountant, then they will get some things wrong as no doubt I will in my reply.
> 
> ...


all good points above, all very valid. but...but....i was going to suggest the offshore route, its cheaper to set up, cheaper to run, dont need accountants etc but for the amount of salary you are earning would not be worth it. 

if i was you on the salary you are looking to take i would talk to your uk accountant and he may suggest the easiest route which is prob not to be mentioned on this forum, its legal but would ruffle to many feathers....speak with a uk accountant first. just an idea.


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## Supercod (May 22, 2014)

Edit as posted on wrong thread ;-)


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## preeny (Aug 9, 2014)

Supercod said:


> Taking a Dividend seems to be a massive no, no both from your UK Company and from a Spanish company if you set one up. Basically Spanish Company Administrators (Directors) get taxed the highest and is why it would seem they are self employed and invoice their company for work, that all seemed rather strange to me and had to check it was all legal in Spain but I been told from two sources this is indeed the way things are done, my number 1 priority is to stay fully legal and ensure my wife and children have all the same rights as other Spanish tax payers.


Thanks Supercod! 

The company is not vat registered as at the moment is below the vat threshold and most clients are not vat registered so not really something I want to do until it is necessary. This would probably mean setting up a spanish company or indeed invoicing the UK company as autonomo would not be beneficial as I would be giving away the 21% IVA.

It is interesting what you say about dividends, my understanding is the tax rates on dividends are: 

€0 - €6.000 21%
€6.000 - €18.000 25%
more than €18.000 27%

and you can also claim the 10% tax credit that is issue with dividends in the UK so would effectively be 11%, 15% and 17% (obviously this is not the true rate as corporation tax has already been paid on it so in total would be looking at 31%, 35% and 37%). Although this is not great, it is something I would be content to pay or maybe I have understood the dividend taxation wrong?

Interesting what you say about being autonomo and invoicing your own company, this is obviously a big no no in the UK so I just assumed it would not be allowed in Spain. This is certainly something I could do for the 5000€ tax free allowance (even if I am losing the 21% IVA)

I was wondering, do you have any UK or Spanish accountants you can recommend? I have a UK accountant, but to be honest I do question their understanding of non-resident taxation.


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## Supercod (May 22, 2014)

Hi Preeny,

This is all new to me also, won't be until January before I have to be registered as a tax resident. I am based in Glasgow, so my accountants are up here, they had been upfront that much of this is new to them and had to research things from this side, still have some unanswered questions that I am waiting to hear back from. For example we are keeping our UK home and we have another we will be renting and so we need to pay tax in the UK on the rental properties and then declare this income in Spain also, we also have to complete a tax return every year in the UK because of this. Still to discuss the whole what tax I pay in Spain for the rent income in the UK, told this is high but need that confirmed.

I can recommend someone based in Torrevieja if this is close to the area your moving, otherwise seek out someone local to you, ask other ex-pats that have a business who they use etc but make sure who ever you get speaks English or has a Translator on staff.

Equally in one of my companies if everyone votes for a dividend I will have no choice but to take it and suffer the tax, the kind of rates I have been told is around 40% but this is based on my having other income outside of just the dividend, I think if you just get money via Dividend then it follows the normal you get personal allowances and deductions to take in to account like any income. But like I said, not as yet doing it and everything I been told has been at meetings without any formal assessment of my situation with regards to Spanish Tax.

I expect to pay a little more tax in Spain than the UK, but I am looking on this as the price you need to pay for sunshine and a better life style ;-)

Sorry I can't be more exact, I am sure I am in for a few surprises and you can always be sure what you have been told is never exactly spot on... ah the joys of trying to understand a foreign tax system when you don't even fully understand the one in the UK ;-)


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## sunstroke (Jan 9, 2014)

To *Preeny and KIP1958*;

I am Stephen.

I see that contributors to your question are going too in-depth. You have your income in the UK. From your posts you seem not to have any desire to earn money here in Spain. 

You seem to pay tax in the UK on your earnings..... why not continue to do that without involving the Spanish system?

If it helps you I will outline my circumstances:-

I was a Policeman for 25 yrs in Belfast, (Government worker) in UK until 2005. I retired and moved to Spain with a private pension (1400gbp per month) and I´m taxed on my pension earnings in the UK.

I don´t need to declare this in Spain. Each month, (for the last 9 yrs) I move about 1000€ to my account in Spain or I might choose just to use a bank's "hole in the wall" to withdraw cash. It depands on the interest rate at the time.

Why don`t you just continue to earn your money in the UK and withdraw what you need from a street bank? 

I am not registered for work here because I have no desire to work here. You can relax. No need to pay the extra 250 euros per month.

Spain`s tax recovery system is aimed at the BIG GUYS not for people like you and me. Spain is still part of Europe, as is the UK. [too many people forget that the UK is part of Europe]. 

An income of 800€ is small fry for the Spanish system. 

My advice is to continue to let your earnings go into your UK bank, (already taxed), and withdraw, as you need, from a "hole in the wall" in Spain.

The National Insurance question is different. I get medical attention courtesy of my wife´s employer. 

I can recommend a very good Accountant, if you wish. She is English, but fully conversant with Spain and it´s complications. In fact I would recommend her to all who are following this thread...I used her for a venture that my son sought. I have no affiliation with her or her company. I recommend her only on my own dealings with her and her company. If you contact her mention Stephen McDaid in Rupit, Barcelona.

Deborah Smith

ADVOCO Deborah Smith ACMA
Spanish Tax in English
advoco.es
0034 958 999 121


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## baldilocks (Mar 7, 2010)

sunstroke said:


> To *Preeny and KIP1958*;
> 
> I am Stephen.
> 
> ...


*WRONG* As soon as he has been here for more than 182 days in any year (or sooner if the tax people think otherwise) he will be tax resident and be taxed on his *world-wide* income and that includes what he is getting in the UK or anywhere else.

If what you are saying is what your accountant is saying, then get a new accountant because this one is talking rubbish.


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## Supercod (May 22, 2014)

I think the confusion here is that sunstroke has a government pension and they are liable only to UK tax and are not taxable in Spain however any other income would be, and of course this year the new double taxation treaty came in to force that if I remember correctly said you now have to declare the non-taxable government pension and this is now counted towards your total earnings and anything else will be taxable. Anyway I would get it check sunstroke as it might be this is the year things have changed for you, but then I am in my 30's an know very little about pensions other than I might actually be working enough years in Spain when I come over to qualify for theirs and I am told it's better than the UK standard one.


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