simonbear

Just successfully made the move to Spain (permanently hopefully), wife and I registered as autonomo. We have 2 UK companies, one of which has 4 employees (including us), the other just 2 for now (us).

Our residency was granted with us being autonomo, and we planned to invoice one of our UK companies for our services as autonomo in order to get paid. Our UK accountant says we can't do this and must pay salaries and dividends instead. Our Spanish accountant, however, says we can and that they have many clients doing just that.

Who's right?

In the mean time, I've asked our accountant in Spain if we can continue to pay autonomo fees with zero quarterly returns if we're forced to be paid with salaries and dividends... feels a bit messy!

dfjordan

I dont see how you could invoice your UK company for services, if you are an employee of that company ? I imagine as you are an employee, you have an employment contract, which normally would state your remuneration? It would be more logical for you to receive a salary from that company, pay whatever taxes are due in the UK, then declare that income in Spain, and use double tax relief. There’s always the possibility that the UK tax authorities will question how you can be an employee if you perform no duties in the UK, and may deem the payments made to you, are in effect dividends. I suggest you take the advice of your UK accountant

missile

When you become tax resident in Spain you will be liable for Spanish tax

EuroTrash

Some of the points mentioned in this thread might also apply to you
Limited Company while living in Spain

There are right ways and wrong ways of doing things. The right way often tends to be more complicated in the short term but the wrong way sometimes turns out more complicated in the long term if you fall foul of the authorities by having ignored the rules. With 2 UK companies I would read the tax treaty very carefully to see whether the tax authorities are likely to consider that either or both of these companies have a "permanent establishment" in Spain (noting that a "place of management" constitutes a permanent establishment; if you manage the company, and you live in Spain, is Spain a "place of management?).https://assets.publishing.service.go...-_in_force.pdf

simonbear

So far I've had 2 Spanish accountants say I can do and a Spanish Tax Lawyer, vs my UK accountant and a mix of threads on different forums all conflicting... so if anyone knows for sure, that'd be useful! I don't mind which country I'm paying tax in.

Moses2013

No idea but if you are an employee in Spain the Spanish law applies, if your company is registered in the UK then UK law applies. As you are resident in Spain, you must declare all income. At the end of the day you'll be taxed personally in Spain but the UK laws apply when it comes to your business.

EuroTrash

Well that is why I suggested reading the Spain-UK tax treaty, because no matter what your UK accountant or your gestor or anyone on this forum says, it's what the treaty says that will count in the event of a tax investigation.

missile

You may not be aware(?) that if your accountant suspects you are doing something you ought not, he is obligated to inform HMRC.

EuroTrash

Had you thought of closing the UK business and setting up as a Spanish company? It would save a raft of confusion...
Trying to keep a foot each side, running a business in the UK and living in another EU country, was never plain sailing, and with the Brexit fallout and depending on what your business is (cross border trade in goods? cross border provision of services?) there could be all kinds of new regulatory obstacles that won't even be known until the final deal/no-deal outcome has been decided.

quixote

I'm facing the same problem (looking into this for my wife). I was amazed that I couldn't find any accounts online of people doing this successfully because working in this way is so common in the UK.

I spoke to some lawyers and they seemed very sceptical that it could be done so I finally got round to reading the tax treaty and I wasn't happy with what I found -- it's not that long so have a look at it.

Basically, it turns out there are two problems: (1) taxation of the directors/owners and (2) taxation of the company.

Taxation of the company - permanent establishment

The second is what they lawyers were most worried about -- the treaty sets out the conditions under which a corporation registered in one of the states (say the UK) is deemed to have a permanent establishment in the other (say Spain) -- the most important thing is that if effective control (management, especially concluding contracts) is exercised in Spain, then the company can be treated as being a permanent establishment, a non-resident Spanish operation and subjected to accounting obligations and corporation tax as if it was a Spanish company. There might be a way around this, i.e. making sure there are UK based directors, having minuted meetings in the UK where decisions are made etc. But presumably these arrangements would have to be very genuine to stand up in an investigation.

If your company is treated as non-resident then as far as I can understand it, it's subject to Spanish reporting obligations (quarterly or monthly accounts) and will then be subject to corporation tax on Spanish operations -- how does one apportion activities between UK & Spain?! Then it looks as though if you want to send money back from your de facto Spanish operation to your UK co so you can pay yourself, you will be taxed again through a withholding tax -- I think that was 19% if I remember correctly. Perhaps you could get out of your co being taxed again in the UK for corp tax by invoking the treaty to avoid double taxation, but I'm not sure. At first I thought that having directors in the UK and most activities in the UK would be enough to avoid Spanish obligations -- someone suggested that on another forum somewhere -- but it looks to me now that if any effective control is exercised in Spain then the activity it's associated with is taxable in Spain.

One thing I've been looking into is whether changing the structure to a partnership (e.g. LLP -- you can't change it would be a question of restarting with a new LLP) would solve the problem -- perhaps it would because it looks as though Spain treats British partnerships as transparent for tax purposes. See (in Spanish): https://www.boe.es/eli/es/res/2020/02/06/(1)

Taxation of the directors and of the company as an employer of the directors

The second problem seems to be that by working for the company *in Spain* the directors might be deemed to be employees of the company, which would mean that the company could again be liable, this time for registration as an employer in order to pay national insurance. Maybe if the first problem is dealt with then this is not so serious -- directors register as autonomos and invoice the UK co. But if you invoice for management work in Spain, that seems to raise the first problem. There's also the risk of being treated as a falso autónomo, which I understand is something like the IR35 issue in the UK.


For our situation, the only lawyers who seemed to have a clue want to charge me 900EUR x 2, once for a company analysis and once for a personal analysis. Given that their answer could well be 'that's impossible' I don't think it's worth the investment at this point (expected turnover next year will be 40-60kGBP). So the obvious thing to do would be to stop invoicing through the UK co and make it dormant or shut it down, and for my wife to register as autonoma and invoice her UK clients from here. A bonus of Brexit (one of few!) is that invoicing UK from Spain for services carried out in Spain will not require VAT (as I understand it, INAL, DYOR!). That's probably what she'll do. However, we are just beginning to employ someone in the UK, and there would be no way to do that from Spain without some kind of UK presence, so we'd like to avoid that if at all possible.

I've heard rumours on forums that people make this work, and I'd love to hear about how they work it out.

quixote

^^ Sorry, that's basically what I meant, but in fewer words!

Moses2013

I suppose the answer is that you just pay the taxes you have to pay and speak to the local tax offices. There might be people who find ways around things but eventually they all have to pay, or might even be fined. If it makes sense to run the business in Spain or UK is personal choice but you can't change the law. Even Lionel Messi was found guilty of tax fraud but he had the VIP bonus.

EuroTrash

quixote You have obviously done your homework well, thank you for the detailed post.
Unfortunately people will choose to disbelieve/ignore it because it is not the answer they want.
Of course, with all of this the devil is in the detail. Just because one person on a forum was able to take a certain route with their UK Ltd Co, does not mean that every UK Ltd Co can follow that route. A UK Ltd Co with a manufacturing/assembly plant in the UK and a fully staffed head office in the UK with a sales dept, an accounts dept etc and one of its several directors living in Spain, is in a totally different situation from a one-man UK Ltd Co with no atual presence in the UK whose sole director runs the whole operation from his home in Spain.

quixote

Yes, it definitely wasn't the answer I wanted! I was reassured by some of those forum posts and should have looked into it further then but we made the decision to move rather abruptly and with a ticking clock. Those examples in the forums were about single owner or husband/wife directorships, and the more I look into it the more I think what they were suggesting (and what their gestores were allegedly suggesting) was not legit. I wouldn't risk doing that in the UK let alone in an unfamiliar jurisdiction.

For us it's not about paying less tax, we're moving here and accept we have to pay Spanish tax (more than it would be in the UK) on our incomes, which would have been 100% salaries taking as much as possible out of the company each year, leaving not much corp tax to pay in the UK so the Spanish tax office would have been getting its full allocation. The advantage of keeping the existing structure is that it would have been nice to be able to use the UK co as a vehicle to employ the woman we've been speaking with about working part time on a project. Unfortunately the complexity, expense and risk is clearly not worth even considering for business on the scale we currently have in mind. Maybe it will be worth it one day...

astera

Simon, you haven't mentioned one important aspect: where are your customers based? Depending on the answer you might be able to convert to a LLP to save a lot of hassle.