# Tax on UK earnings whilst in Spain



## amaninavan (Mar 13, 2015)

Hi All

Quick tax question

I run an online business in the UK and all my clients are in the UK I get paid in pounds into a UK bank. It is a limited company.

Will I have to pay tax on all the profits of the company or just my wages from the company?

Also, in the UK we have a personal allowance of £10000 before you are liable for any tax. does such a thing exist in Spain?

Obviously I will seek professional advice nearer the time but I am just trying to get a feel for how the system works in Spain

Thanks 

Paul


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## Horlics (Sep 27, 2011)

1. You pay tax on your income. Your limited company is not you.

2. There isn't the same personal allowance, the publish tax rate for 0 to 12,450 Euros is 20% (although I think it falls to 19% next year).


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## Chopera (Apr 22, 2013)

Te UK government is considering removing the personal allowance for non-residents anyway

https://www.gov.uk/government/consu...ents-entitlement-to-the-uk-personal-allowance

Although the last I heard was that nothing will change until at least 2017


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## CapnBilly (Jun 7, 2011)

amaninavan said:


> Hi All
> 
> Quick tax question
> 
> ...


You need to be careful. Based on your post it sounds like you carry out all your business in Spain. In that case it is likely that you will be considered to have a permanent establishment in Spain, and therefore your profits, as well as being taxed in the UK, are subject to taxation in Spain under the DTA. This is the relevant extract :

"where a person - other than an agent of an independent status to whom paragraph 6 applies - is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise".

In addition there may be cross border VAT issues.


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## amaninavan (Mar 13, 2015)

Thanks Guys

This is something I am going to have to fully research before we take the plunge.

It is not a massive problem as we do not earn an awful lot but if you don't earn very much you win out in the UK because of the personal allowance.

We will get hit harder in Spain I think

Paul


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## Horlics (Sep 27, 2011)

Tax at 20% on the first 12,450 Euros you earn = 2490, in GBP = 1,750

My council tax in UK = 1980

My council tax in Spain = peanuts.

Winner.



amaninavan said:


> Thanks Guys
> 
> This is something I am going to have to fully research before we take the plunge.
> 
> ...


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## amaninavan (Mar 13, 2015)

Horlics said:


> Tax at 20% on the first 12,450 Euros you earn = 2490, in GBP = 1,750
> 
> My council tax in UK = 1980
> 
> ...


I'm no fixed abode in the UK so I have never paid council tax in my life

It would be a lot easier if I could afford to buy land and live on it in the UK but there is little chance of that so Spain will be cheaper in the end even if I do end up paying more tax etc

paul


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## larryzx (Jul 2, 2014)

amaninavan .
I think the easiest way to know for sure is to call HMRC and speak an someone who is conversant with the double taxation agreement between Spain and UK. 

Not all ‘inspectors' are aware of all the intricacies, but if you insist on an expert you will always get the person who can give you a straightforward answer, albeit they will probably not advise you how you might arrive at the best situation for you, i.e to pay the least tax.

I called HMRC recently re claiming tax stopped at source by a bank. It was when I spoke to the right person that I was referred to the new DTA signed 2013, which came into force in 2014. Until then I was not aware there was a new DTA.


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## alborino (Dec 13, 2014)

amaninavan said:


> I'm no fixed abode in the UK so I have never paid council tax in my life
> 
> It would be a lot easier if I could afford to buy land and live on it in the UK but there is little chance of that so Spain will be cheaper in the end even if I do end up paying more tax etc
> 
> paul


As Horlics said you are not your company. The company in law is seen as a person in its' own right and as you say it is registered in the UK and does its' business there then the Spanish have no rights to it in any form. However you are presumably a share holder of said limited company so take care if you company has (or could be seen to have) a value.

But the great thing with a company is you can extract money as salary, as a third party invoicing the company, or as dividends. And if you have no cashflow issues you can of course control when (in which tax year) the money is paid. Sadly as a director (I assume you are) you cannot take a loan. 

You say "nearer the time" but be aware it may take a couple of years to position yourself so that you only pay a reasonable amount of tax and do not get ripped off. That said of course the spanish authorities do not know themselves how the tax system will work in the coming year and spanish advisers are at best suspect and you can get as many views as advisers you visit.

Can only advise keep as many options open as you can and ensure you know which year you may be considered tax resident in Spain (especially if you truely have no UK fixed abode).

But good luck 

ps of course the elections at the end of the year might at last bring some honest people with half a brain to power. We can but hope


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## alborino (Dec 13, 2014)

Chopera said:


> Te UK government is considering removing the personal allowance for non-residents anyway
> 
> https://www.gov.uk/government/consu...ents-entitlement-to-the-uk-personal-allowance
> 
> Although the last I heard was that nothing will change until at least 2017


Interesting read but as I see it it is suggesting restricting levels to those of other countries. So I think removing is a little strong


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## alborino (Dec 13, 2014)

Horlics said:


> 1. You pay tax on your income. Your limited company is not you.
> 
> 2. There isn't the same personal allowance, the publish tax rate for 0 to 12,450 Euros is 20% (although I think it falls to 19% next year).


There are allowances in Spain but not as generous as the UK. This is offered by Spain Accountants- Tax and accounting services in Spain

Personal Allowances for Spanish income tax- minimo personal 2015

Personal allowance

Under 65 years old	5,550 Euros
65+	6,700 Euros
75+	8,100 Euros

Then there are other add on allowances: for kids, caring for an elderly relative, being married (makes sense if one non earner)..............


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## Bevdeforges (Nov 16, 2007)

PMJIH, but the general rule applied across international borders is that you are deemed to be working in the country in which you are located whilst doing the work. It matters not where the company is located, nor where or how you are paid.

By that standard, you will be working in Spain - and as an "employee" of your online company, you'll need to have the appropriate business registration to pay yourself on the company payroll. 

I'm not familiar with the business laws in Spain, but that can mean that either you have to register a "branch" of your UK company in Spain - or your company may have to set itself up in Spain. There is then the question of how Spain taxes small companies. (In several European countries, the big difference is whether the business pays its own taxes, or if the owner declares and pays the taxes as part of their own personal income taxes.)

You probably need to do some research on business rules in Spain.
Cheers,
bev


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## Dragonfly800 (Mar 13, 2015)

Greetings everybody - 

I am in a similar quandary & finding info hard to find quickly & easily would appreciate any hard knowledge anyone has

I run a small ltd company based in uk - as I am at present (plan to move as kids free up) Bank accs in uk & customers from all over Europe so little passing via Spain HOWEVER the activity I market is carried out in Spain.

Under UK VAt it is 0 rated activity (great I thought) however as I need to get a license in spain I am now wading through getting NIE & thereafter a license to operate - which I think should happen - I have been told I may need to set up a branch or representative office to do the above. 

I understand double tax should not happen but getting very conflicting views on whether spain will want its share of (non existent as far as I am concerned) IVA or not.

Any thoughts gratefully received.


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## alborino (Dec 13, 2014)

Dragonfly800 said:


> Greetings everybody -
> 
> I am in a similar quandary & finding info hard to find quickly & easily would appreciate any hard knowledge anyone has
> 
> ...


We, a small ltd company, are investigating VAT in Spain at the moment but after several meetings with the authorities we do not have any consistent answer. (Ours is a little further complicated by an element in the Canaries). 

Presumably you cannot export from Spain your services or whatever to the UK company and reclaim the VAT/IVA (or in fact not even charge VAT by agreement as normal between say Ireland and the UK)? 

I'd be very grateful if you'd share your findings and we'll do the same


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## baldilocks (Mar 7, 2010)

Chopera said:


> Te UK government is considering removing the personal allowance for non-residents anyway
> 
> https://www.gov.uk/government/consu...ents-entitlement-to-the-uk-personal-allowance
> 
> Although the last I heard was that nothing will change until at least 2017


I have just been having a read of that document and found this part very interesting:



> 6.6 Pensioners
> Pensioners who live overseas are a significant group of British national expatriates, estimated by DWP at around 1,200,000 individuals. Most UK national pensioners living overseas would not be affected by any restriction on non-residents entitlement to the Personal Allowance. This is because:
> 
> some are still resident in the UK for tax purposes and so would not be affected by any change
> ...


If that is the case how come I pay tax on my pensions - OAP, two occupational and one private pension? Yes the OAP is taxed because that is deducted from your personal allowance so you pay full whack on the other pensions. If the OAP was tax-free, then one's personal allowance would cover the other pensions.


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## Horlics (Sep 27, 2011)

It gets easier for people who have grown-up kids or family they can trust. You register them as directors so that you are seen as an employee taking a salary.

The point is this, as the other poster said, as the owner of your own business rather than a PAYE employee, you have a whole range of options open to you when it comes to accounting for a paying tax on earnings. But really, you need to seek professional advice. 

Here's the thing, if you do move to Spain you'll probably need a professional to do your tax (almost everybody who isn't fluent in Spanish or who hasn't been here a decade does) and the extra charge for advice about the best way to deal with your earnings isn't going to cost a lot.



alborino said:


> As Horlics said you are not your company. The company in law is seen as a person in its' own right and as you say it is registered in the UK and does its' business there then the Spanish have no rights to it in any form. However you are presumably a share holder of said limited company so take care if you company has (or could be seen to have) a value.
> 
> But the great thing with a company is you can extract money as salary, as a third party invoicing the company, or as dividends. And if you have no cashflow issues you can of course control when (in which tax year) the money is paid. Sadly as a director (I assume you are) you cannot take a loan.
> 
> ...


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## StevejR1 (May 21, 2013)

I am in a very similar position to the OP....

I am hopefully moving to Spain very soon, and although I have taken financial advice in Spain, have not really got to the bottom of the issue, so this thread has been of interest.

I have a UK registered limited company, of which I am the only employee. I draw a low wage, which is subsidised by dividends.
For the first few years I will continue to commute to the UK to carry out my existing work, and then retire when the time is right. So I will do all the work directly in the UK, in person.

I have spoken to my accountant in the UK, who obviously isn't a specialist in Spanish taxation, and he suggested that the taxation I would be liable for, would only be on my wages and dividends, but obviously judged on the Spanish personal tax allowances in the double taxation system.

I would be a tax resident in Spain, and most likely a personal resident too (as my only residence/home would be in Spain)

Reading this thread that seems to be both confirmed and disproved.

Can anyone give me any advice on my situation?

I am going to take up the suggestion of calling the Revenue in the UK...I would never have thought they would give you Spanish based advice, and that is impressive.

Many thanks.


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