# Tax Advice



## TinaP (Jul 9, 2008)

We are moving to Spain hopefully end of September. I'm due to speak to my MD in the next few weeks to discuss this move and see if he agrees!

At the moment I work remotely at home in the UK so will continue doing the same job but based from the villa in Spain.

Can anyone advise me how to work out the tax difference on my annual salary between being resident in Spain and resident in the UK? If it works out that the UK is better then we may look at staying less than the 183 days in Spain to retain uk residency.

What are the tax allowances for income tax in Spain? Also how does my employer pay my salary - normal UK bank account in sterling or spanish bank account?

If I become tax exempt in Spain does my employer just pay me my gross monthly salary and I pay tax at the end of the spanish tax year.?

Confused??!! Sorry but this is why I never went into accounts and did recruitment instead lol!

Any advice or referral to websites would be fantastic. PM me if you need salary details/tax codes etc


----------



## coachfiona (Jul 21, 2008)

The tax rate for a normal employee in Spain is around 15% but is dependent on how much you earn. If you are earning money from the UK and it is being paid to you in the UK then you can pay tax there. There are several ways of registering for tax here. You can register as an autonomo (freelance) but your company pays the tax or you can register as completely freelance which means that you have to do a tax return and pay your own taxes dependent on what you are earning.

(SNIP)

Hope that helps.

Fiona


----------



## SunnySpain (Jul 30, 2008)

Hello TinaP

I would be very interested to know similar information, as I am also thinking
about relocating to Spain. I also work in Recruitment, but am self-employed

Information I have acquired already is as follows:

Income tax in Spain is higher than the UK
If you become a resident in Spain, you can no longer access the NHS

I also think that dividends are classed as Income in Spain, not all dividends
in the UK are classed as such. If anyone knows the answer please help !


----------



## TinaP (Jul 9, 2008)

Hi

I've just spoken to my MD about moving to Spain and he's willing to give it a go to see how it works out.

We discussed the tax implications etc and he's going to speak to his Accountant and let me know the best way forward. As soon as I know more I'll let you know.

I was sure that the tax in Spain is lower than the UK but have no firm evidence of this ...

What recruitment sector do you work in? Looking for any help??!!!


----------



## chris(madrid) (Mar 23, 2008)

SunnySpain said:


> If you become a resident in Spain, you can no longer access the NHS


As a paid up resident - You'll have access to The Spanish NHS - which imo is in many ways better!


----------



## SunnySpain (Jul 30, 2008)

Thank you Chris from Madrid !

In reply to Tina P

I work as a self-employed Recruitment consultant in the Engineering sector

To be honest I have been doing alright on my own for several years now,
but I might consider taking someone on in the future, depends really

Be nice to keep in contact with you either way.

I think my tax problems are slightly different to yours, as I don't pay
NI or income tax in the UK, only Corporation tax based on profits

They call it company tax in Spain and its paid at a higher rate of 25%,
whereas in the UK its payable at 21%

My question is whether I can continue to pay CT in the UK and become
a legal resident in Spain. Chris from Madrid has kindly answered the health
insurance part of my question, whereby it seems I need to register as self-employed and pay 238 Euros a month, which would cover an entire family

I would be living with my partner and our soon to be born daughter, so that information is much appreciated and thank you very much, Chris.

Please let me know anything you can find out about tax issues and residency
as we really want to live in Spain. We have spent several months looking at different areas of the country and have a good idea where we want to live.

Regards, Dave


----------



## TinaP (Jul 9, 2008)

Hi Dave

This is a really helpful forum and I've found lots of people willing to share their expertise.

Your tax is different to mine in that I'm PAYE for a UK company but I work remotely from home so will continue doing the same but in Spain.

Any info I find out though I'll put on here just in case it's any use in the future

My line of recruitment is Occupational Health so if you know of any big UK clients that might be interested let me know !!

Might venture into overseas recruitment in the future when I'm fully fluent in Spanish - occupational health is taking off so much overseas.

Anyway I'll be in touch when I have any more info

Tina


----------



## chris(madrid) (Mar 23, 2008)

Dave - iirc if you're AUTONOMO which you'll need to be to get that 238 rate - you'll need to ALSO show earnings eventually and declare TAX/VAT every 3 months. It's improving I believe but still a PITA. 

Also be careful when registering that your partner is understood to be your (albeit common law) wife. Have seen one or two "disputes" over dependencies in the past.

There is a way maybe of having a Sociedad Limitatada Unipersonal registerred but that requires an employee (you?) on the books. 

SLs certainly had a different flat rate on earnings - SLU's I believe was different again - but I've been out of it for several years now. It was about 20% when I was involved.

Serious recommendation is that you look out a VERY GOOD financial advisor who knows Spain and UK ins and outs.

Most regional "Camara de Comercio" offer good sound advice - but Generally only in Spanish. They do booklets on what you need to do to establish yourself business wise. Maybe you'll find they'll even have incentives for overseas investment and "employment creation" - depends region to region.


----------



## SunnySpain (Jul 30, 2008)

Hi Chris,

Yes I think its going to have to be a visit to an IFA

The only IFA I know has no knowledge of the ins and outs in Spain

I have read and re-read the double tax treaty, but my situation dos not seem to be covered, as I am self-employed and my company is registered in the UK

I don't want to commit to Paying Corporation at the higher rate in Spain
and the dividends and drawings I take from the business would also be taxable under Spanish law. So its a tricky one thats for sure !

Going back to health cover. My partner was born in Venezuela, although she is classed as Spanish as her parents are both from Spain. However because she is out of work and has never paid into the Spanish system they are saying to her that she is not entitled to medical cover either.

Finding the relevant information is certainly not easy.

Regards, Dave


----------



## Sharon J (Jul 31, 2008)

*Ifa*

Hi Dave,

My partner is an IFA in Spain and works for a firm that is regulated under the spanish authorities. You didn't say what region you are thinking of moving to so if you let me know he may be able to put you in touch with someone.


----------



## SunnySpain (Jul 30, 2008)

Hi Sharon,

We are looking at a possible move to Asturias

Any advice would be much appreciated


----------



## Stravinsky (Aug 12, 2007)

SunnySpain said:


> We are looking at a possible move to Asturias


You may have to change your screen name then


----------



## Barry Davys (Aug 2, 2008)

TinaP said:


> We are moving to Spain hopefully end of September. I'm due to speak to my MD in the next few weeks to discuss this move and see if he agrees!
> 
> At the moment I work remotely at home in the UK so will continue doing the same job but based from the villa in Spain.
> 
> ...



Hi Tina,

You will love it out here I am sure and one of the secrets of success for many people is to live here but gain their income from elsewhere.

The tax for you is quite simple. You will be taxed in the UK if your income is paid to you on a PAYE basis from the company you work for in recruitment. It is likely that you will stay a tax resident in the UK because one if the tests that applies is "where is your centre of interests?". It is not just the 183 days/average 90 days for the UK that determines residency. If you still have interests such as property in the UK OR you get your income from the UK it is likely that you will be a UK resident, even if you spend more than 183 days in Spain.

Residency is often determined on a case by case basis however, Spain and Britain have a Double Taxation agreement. The idea of this agreement is that you will not pay tax twice on the same income. The treaty is also used in situations like yours to determine which country has "control". 

A good IFA is a very good idea ( I would say that wouldn't I ) . You might also need a UK accountant if you have other income apart from employment.

Kind regards

Barry


----------



## Stravinsky (Aug 12, 2007)

Barry I'm really suprised (but not necessarily disbelieving) in what you say because it flies in the face of what I have been told by an international tax consultant, a UK accountant, and a Spanish tax gestoria plus my abogado. Also what most people on the forums I speak to every day have been told by their tax consultants

Do you know something they dont? 



Barry Davys said:


> Hi Tina,
> If you still have interests such as property in the UK OR you get your income from the UK it is likely that you will be a UK resident, even if you spend more than 183 days in Spain.


----------



## rjnpenang (Feb 20, 2008)

I read some months ago an Englishman who had lived abroad for over 20 years wasl judged as a British resident because he still had his golf club membership in the UK!. Rob


----------



## Barry Davys (Aug 2, 2008)

Stravinsky said:


> Barry I'm really suprised (but not necessarily disbelieving) in what you say because it flies in the face of what I have been told by an international tax consultant, a UK accountant, and a Spanish tax gestoria plus my abogado. Also what most people on the forums I speak to every day have been told by their tax consultants
> 
> Do you know something they dont?



Stravinsky,

Not as surprised as people who are caught out by this. 

I quote from the HMRC "The terms "residence" and "oridarily resident" are not defined in the Taxes acts". In other words, what many take as gospel is in fact just a starting point. It is true that the 183 days and 90 days average are significant. HOWEVER, the no of days are only the starting point for the assessment. You will also note that the position is complicated by resident and ordinarily resident. It is possible for someone to be non resident but ordinarily resident.

The 183 day/ 90 day rules have no statutory force. They are for guidance only. Whilst important it is not a definite answer to the question "am I resident?" Case history also relevant such as Shepard and Gaines-Cooper. 

What tends to often happen with tax advice is someone asks a specific question. If the question is about the number of days so will be the answer.

These are becoming increasingly important issues. QROPS are only effective if a client is non resident for 5 years. With massive amounts of money now heamorrhaging from the UK pension system via QROPS the HMRC will try to prove that clients are, in fact, resident. This will lead to more case law for them to rely upon.

Tax planning around people moving to Spain has in the past been non specific. "Lets see if we can get away with this" has been put in black and white. This is no longer the case. The Hacienda is becoming more professional and proactive. "El crisis" will make this situation worse as Spain struggles to raise revenue in this difficult economic environment.

You should also be aware that the HMRC now has an office in Spain.

Spain is not a bad place to be taxed. BUT for all those of us who have UK income, even if we are non UK resident and Spanish resident, we will be taxed in the UK on our earned UK income. True, we will have to account for it here but the double taxation agreement will mean that we do not have to pay it twice. In a simple example, if we have UK tax deducted at source of 100 € and our Spanish tax on that income is 100€ there will be no more to pay. If our Spanish tax bill is 101€ we will pay just 1€ tax in Spain, the rest being a credit from the UK.

Hope this helps a bit but EACH case will be looked at individually and if you own a Ltd company in the UK there is a slightly different situation to the one on this thread.

Kind regards

Barry


----------



## Barry Davys (Aug 2, 2008)

*Residency and the Golf Clubs*



rjnpenang said:


> I read some months ago an Englishman who had lived abroad for over 20 years wasl judged as a British resident because he still had his golf club membership in the UK!. Rob


Hi Rob,

Excatly the point. It is these sorts of issues that the HMRC will try to exploit and they will do it on a case by case basis.

Then there is the issue of Domicile. Does anyone want me to give brief explanation of domicile and how this affects UK Inheritance Tax??

Barry


----------



## SunnySpain (Jul 30, 2008)

Does anyone want me to give brief explanation of domicile and how this affects UK Inheritance Tax?

Yes please, would be much appreciated - lol


----------



## rjnpenang (Feb 20, 2008)

Barry Davys said:


> Hi Rob,
> 
> Excatly the point. It is these sorts of issues that the HMRC will try to exploit and they will do it on a case by case basis.
> 
> ...


Barry, I believe if you were born in the UK and wish to be considered non domicile in the UK you have to abandon ALL links, correct?, even if you stay in the same bedroom of your daughters house every time you visit the UK you will be considered a UK resident, however, I think if you buy a burial plot in your new country HM MIGHT believe you!.
BTW, not many people know this but the UK is considered a tax haven (if born outside the UK), correct??. Regards Rob.


----------



## Stravinsky (Aug 12, 2007)

Barry Davys said:


> Stravinsky,
> 
> Not as surprised as people who are caught out by this.
> 
> ...


I know you're quoting HMRC rules, but the tax man in Spain doesn't really care about HMRC does he!  He wants what is his.
I "earn" in the UK, but pay tax here .... I didn't have a choice. I'm aware the HMRC have offices here

But again, I'm still confused because as I said, working on advice from many different sources for many different people that says that you have to pay tax here if you live here, why is your advice different


----------



## chris(madrid) (Mar 23, 2008)

Stravinsky said:


> But again, I'm still confused because as I said, working on advice from many different sources for many different people that says that you have to pay tax here if you live here, why is your advice different


YOU WILL HAVE TO DECLARE INCOME IN BOTH PLACES. I pay tax on one or two things in the UK. This is then deducted from my Tax bill here.



> Spain is not a bad place to be taxed. BUT for all those of us who have UK income, even if we are non UK resident and Spanish resident, we will be taxed in the UK on our earned UK income. True, we will have to account for it here but the double taxation agreement will mean that we do not have to pay it twice. In a simple example, if we have UK tax deducted at source of 100 € and our Spanish tax on that income is 100€ there will be no more to pay. If our Spanish tax bill is 101€ we will pay just 1€ tax in Spain, the rest being a credit from the UK.


----------



## Barry Davys (Aug 2, 2008)

chris(madrid) said:


> YOU WILL HAVE TO DECLARE INCOME IN BOTH PLACES. I pay tax on one or two things in the UK. This is then deducted from my Tax bill here.


Thanks Chris. 

My reply above was in response to Tina's question. Stravinsky, You are quite right though that the Spanish want their share. The question that comes from your comment is "Don't the UK Revenue want their share too?". They do, which is why there is the double taxation agreement.

This thread highlights an issue with tax planning. Each person's circumstances are different and whilst, on the surface, things may appear similar you should have someone look at your own, particular, situation.

To help out your professional adviser tell him or her fully what your circumstances are. Try to avoid jargon because what you mean by "domicile" for example and what your professional adviser knows to be the definition can often be very different. On the flip side an adviser worth his salt should spend time getting to know your circumstances before advising you.

I will add some definitions to this thread later which may help. I will also do a separate part on Domicile and Inheritance Tax later too.

Regards

Barry


----------



## Barry Davys (Aug 2, 2008)

*Resident (or Not?)*

Following on from the previous posts here are a few pointers. They are no more than that but they may help to clarify some points regarding residency.

Spain



You can be resident if you spend more than 183 days in Spain in any one year. They do NOT have to be consequtive days


BUT if you move to Spain and show an intention to stay permantly you will be treated as resident from the day after your arrival


If your centre of interest is in Spain you will be resident. Ie, do you get your main income in Spain, do you have a house here, does your spouse live in Spain


Residency is used to determine liability to all taxes including inheritance tax

UK



If you spend more than 183 days in the UK in any one year. They do NOT have to be consequtive days


If you spend on average 91 nights a year in the UK in any 4 year period.


If you do not demonstrate by your actions that you will be out of the UK for at least 3 years


If it appears to the UK Revenue that you have not severed your links with the UK, including, do you still have a house in the UK


If your primary source of *earned* income is still in the UK



Residency for the UK ONLY covers liability to income tax and capital gains tax but NOT inheritance tax (IHT). Domicile, a completely different concept, determines liability to IHT


Points to Note




You CAN be resident in both UK and Spain at the same time


You can not rely upon the number of days only to determine residency


Each person's situation is different which is why both Spain and UK determine residency on a case by case basis.


When seeking advice, get advice about BOTH countries not just one

These are only general pointers and if you are unsure of your situation you should seek qualified advice.

Barry


----------



## chris(madrid) (Mar 23, 2008)

Barry Davys said:


> Following on from the previous posts here are a few pointers. They are no more than that but they may help to clarify some points regarding residency.
> 
> Spain
> 
> ...


That deserves a sticky IMO. 

When I left the UK - for a while I was classified as NOT RESIDENT FOR THE PURPOSES OF TAXATION. Had to do this this, as 'twas at the start of the infamous poll-tax. 

Yet was still accepted as resident for the purposes of marriage 3 years later.


----------



## Trevor Titterton (Jun 18, 2008)

You would be better to visit a Spanish tax adviser as it is complicated, at least you would get proper advice.
Trevor


----------



## Barry Davys (Aug 2, 2008)

OK, so now I am showing my ignorance. What is a sticky IMO?


----------

