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Questions on running a Ltd company as a Spanish resident

Questions on running a Ltd company as a Spanish resident

Old Oct 4th 2018, 11:29 am
  #31  
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Default Re: Questions on running a Ltd company as a Spanish resident

Originally Posted by PH79
Thanks for the updates. So the best approach would be to pay all the company profits as a salary (in order to avoid UK corporation tax) and to then pay income tax on this salary in Spain? Does anyone know if the company would still be liable for UK employer's NI on this salary if the director is permanently based abroad?
No that I can´t answer - You would need to speak to your UK accountant for that.

I make sure that we each take a salary of 700pounds a month, so I can´t comment on the UK NI side of things from our situation.
It really depends on how much you wish to earn. From my point of view, we have a Spanish business as well - a salary of €25000 each is very cost effective and on balence less tax is paid here than the UK. Once you go over this figure the tax balence starts to change.
We prefer to pay the corperation tax and have the money in the UK company account to drip feed the UK salary for years.
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Old Oct 4th 2018, 11:40 am
  #32  
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Default Re: Questions on running a Ltd company as a Spanish resident

Originally Posted by PH79
So the best approach would be to pay all the company profits as a salary (in order to avoid UK corporation tax) and to then pay income tax on this salary in Spain?
If you are married or have a partner - it is really more cost effective to use your company to pay you both a salary

I think all this depends on your work profile, how much the company makes and does this change from one year to the next.
The recent Tory government have made it much more expensive to take say 25K in dividends, which would have been the norm a few years ago to make up the salary in the most cost effective way.
So I would say you need to be creative - If you are single can you employ a relative?
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Old Oct 5th 2018, 11:16 am
  #33  
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Default Re: Questions on running a Ltd company as a Spanish resident

Originally Posted by Smithy73
If you are married or have a partner - it is really more cost effective to use your company to pay you both a salary

I think all this depends on your work profile, how much the company makes and does this change from one year to the next.
The recent Tory government have made it much more expensive to take say 25K in dividends, which would have been the norm a few years ago to make up the salary in the most cost effective way.
So I would say you need to be creative - If you are single can you employ a relative?
Ok, thanks a lot for the advice.
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Old Jan 8th 2019, 7:11 pm
  #34  
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Default Re: Questions on running a Ltd company as a Spanish resident

Originally Posted by melocoton
As an update to this thread, I've just returned from the asesoria after another meeting to discuss my case. I explained that I am receiving a salary from a UK company, and also dividends as I am a shareholder, as well as a few other unrelated income streams. She advised me that once I apply for the residencia I will come on the radar to the Spanish tax authorities (Hacienda), and that 183 days after that I would become liable for income tax in Spain (from the day of residencia application onward). She said that if I applied for the residencia in early 2019, then I would need to submit one annual tax declaration (Decleración de la Renta) for the 2019 tax year by June 2020. There were no concerns raised about receiving a salary from a UK company while living here, nor receiving dividends. Merely that I would need to submit my annual figures and she would do the calculation. Obligatory social security payments linked to my employee status were not mentioned. I am going to ask her to run two predictions of my tax burden based on my 2018 income: a) with my £700 salary and the rest in dividends, and b) with a higher salary and lower dividends. This seems to be relevant as if I am no longer tax resident in the UK, and the NI threshold no longer applies, then it may be more sensible to draw a larger (but still reasonable) salary. I have to say that this unfolded pretty much as Smithy73 reported. This forum and the advice flowing through it has been immensely helpful.
Hi Melocoton and Smithy73, I am in a similar situation to you. This is my first post here! I am soon incorporating from a sole trader into a UK ltd and planning to move to Spain in Autumn this year with my family. My small business has a physical presence in a commercial space in the UK offering a self-service to local customers and I hire a caretaker for any maintenance of the facility and do all admin work remotely.

I've recently paid for some financial advise from an accountant in Barcelona who advised the same conclusions you have drawn above and to take salary in full rather than any dividends to avoid the uk corporation tax. I am to file a tax return in Spain declaring the income as a salary of a foreign company in order to pay the correct tax. He said that setting up a spanish branch or SL was too expensive and complex for my case. He said the only way for me to start contributing to the social security in Spain would be to also register as self-employed, even if I wasn't doing any additional work, just as a means to get healthcare and pension.

I was just wondering how you've been getting on Melocoton? Any updates on the social securities side of things? I had read elsewhere on the internet that foreign employers should register with Tesoreria General (The agency where you apply for a social security contribution account number) as an employer and pay social securities. But I did bring this up with my adviser at the time and he didn't shed any light on this and said I simply need to file the tax return and pay the tax.

I do plan on either finding part-time employment or working as autonomo in Spain once settled there so will eventually start paying into the social security system that way. Just want to make sure that there's no obligation to pay social securities on the UK ltd income also.

Thanks
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Old Jan 10th 2019, 6:26 pm
  #35  
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Default Re: Questions on running a Ltd company as a Spanish resident

Originally Posted by rhythms88

I was just wondering how you've been getting on Melocoton? Any updates on the social securities side of things? I had read elsewhere on the internet that foreign employers should register with Tesoreria General (The agency where you apply for a social security contribution account number) as an employer and pay social securities. But I did bring this up with my adviser at the time and he didn't shed any light on this and said I simply need to file the tax return and pay the tax.

I do plan on either finding part-time employment or working as autonomo in Spain once settled there so will eventually start paying into the social security system that way. Just want to make sure that there's no obligation to pay social securities on the UK ltd income also.

Thanks
You will be receiving a salary from a UK company, since you will be residing in Spain and a Spanish tax payer, the Spanish authorities will just want you to declare the salary and pay tax on it in Spain. Why would you be paying social security on an income derived from the UK?You will find being Autonomo useful as it gives you and your family access to healthcare and a pension after 15years of paying in.Let’s hope that that Britain doesn’t drop out of Europe in March and scupper your plans
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Old Jan 10th 2019, 6:46 pm
  #36  
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Default Re: Questions on running a Ltd company as a Spanish resident

Just to add to Smithy73's advice above, I spoke to HMRC last year about my existing pension contributions and how these would be affected if I became a Spanish resident. I was told that there would still be an option for me to continue making annual NI contributions towards my UK pension, but that the amount would depend on my circumstances (he gave the example of someone taking early retirement in Spain and thus not working (high NI contributions required) vs someone working in Spain (lower contributions)). Of course, if you start paying the Autonomo in Spain then you are contributing into the Spanish SS system and may opt for those years accumulating + the years you have already accumulated already in the UK.

The runes seem to suggest that the cliff-edge Brexit in March may well be diminishing. Let's hope sanity prevails and you can proceed with your plans. Good luck!
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Old Jan 11th 2019, 12:29 am
  #37  
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Default Re: Questions on running a Ltd company as a Spanish resident

Originally Posted by Smithy73
You will be receiving a salary from a UK company, since you will be residing in Spain and a Spanish tax payer, the Spanish authorities will just want you to declare the salary and pay tax on it in Spain. Why would you be paying social security on an income derived from the UK?You will find being Autonomo useful as it gives you and your family access to healthcare and a pension after 15years of paying in.Let’s hope that that Britain doesn’t drop out of Europe in March and scupper your plans
Thank you to both of you for your replies. I was thinking that I would have to pay spanish social security for the same reasons that I'd have to pay my taxes in spain (after 183 days). I thought you had to pay social securities to the country where you are legally resident. Just wasn't sure if you had to pay the social security to Spain from income derived from another country.

I've only accrued 8 years of UK pensions (I am 30 yrs old!) so will need to look at whether its worth doing the whole voluntary UK National Insurance thing. The Autonomo seems like a good plan in terms of healthcare in Spain and Pension if we are to be there long term. I should have mentioned that my wife is actually Spanish so that should help with settling in Spain no matter what the Brexit situation. Brexit just makes things tricky for my wife returning to the UK if we're in spain longer than 5 years.

However I do hope that Brexit doesn't get in the way of me remunerating myself from the UK ltd. Fingers crossed for us all!
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Old Feb 2nd 2019, 5:44 pm
  #38  
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Question Re: Questions on running a Ltd company as a Spanish resident

Hey guys

This is a very interesting topic and one I'd love to hear from you melocoton and Smithy73 if you're still ok with this arrangement? I am very similar, have a UK Ltd company and have recently moved to Spain, going Residencia (with the initial 1 year private healthcare and opening spanish account showing some money in there). This will be the 'self supporting' visa initially and we just assumed that after 6months I would have to go Autonomo and start paying the eye watering costs per month etc.

Since hearing about this double taxation treaty between Spain and the UK (plus others)...(currently)... can I confirm I understand what is being said on it? I must still pay my Corporation tax on the UK Ltd Co. I have been taking a very small salary for me and my husband monthly, to keep below the NI threshold/tax of £500 per month. Should I stay in this arrangement and continue to pay myself and my husband this small amount as a salary and I would not be taxed on it in spain? or I would still be taxed on it in spain? The dividends bit I dont fully understand as it sounds like you'd have to pay the same rate as a salary anyway in spain?

If I'd gone Autonomo, I assumed I'd have to register as self employed in Spain, close my Ltd Co. Sounds like a nightmare to open an SSL (?) in Spain anyway. I'd have monthly costs with Autonomo of (after 18months), Euro 330 a month, Plus Gestor of Euro 60, plus some tax due too. Wouldnt have any Spanish activity or customers so no IVA due. Assumed Id have to get the European Tax Number as 90% of customers are in the UK. But by my calculations, it worked out to be something like 26% overall tax (autonomo and tax) here in Spain.

Surely if im keeping the company in the UK and paying 20% corporation tax, if I then pay myself and my wife a small salary/dividends here in Spain, I'd still have to pay tax on it? And furthermore, to access the healthcare here in Spain, i'd still either have to be Autonomo Euro330 per month and pay a Gestor...so it wouldnt make any difference? Or indeed, pay for a private healthcare annually, which in my case is EUR 1200 per year, or about EUR 100 per month for my family?



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Old Feb 2nd 2019, 8:00 pm
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Default Re: Questions on running a Ltd company as a Spanish resident

Originally Posted by Smithy73
Why would you be invoicing the company?

The requirement is that if you are living in Spain, you become a tax resident and pay taxes here.... The are no requirements on how you are employed!

I don't know how much you wish the Ltd company to pay you - re earnings

In Spain, salary or dividends are treated the same.

In the UK the tax is different for salary and dividends - You pay corporation tax of 20% on dividends - Then you used to be able to get £5000 in dividends personal tax free, but that changed this tax year. The allowance is now £2000 and then you pay a dividends tax of 7.5% on anything above, until the higher rate of tax.

The most tax efficient way of doing this, is that you would pay yourself and a partner/spouse a small salary each and a small amount of dividends.
For example if you pay yourself £700 (£701max) in salary a month. This is the upper limit of getting the NI stamp without contributions - remember as a LTD company you pay the employers and the employees NI which when added up becomes really expensive.
You can pay yourself a higher salary, but the NI employers contribution is 13.8% and the employees is 12%

So on a salary of £700 each to yourself and your partner - There is no tax to pay or NI in the UK
Your UK accountant on producing your real time PAYE will produce you a basic pay slip, all of which you give to the Gestor as proof of earnings for them to work out the tax calculation.
I make the assumption that your partner has a NI number in the UK - if not take the rest of the money that you need as a dividend.

Dividends are seen as the same as salary here in Spain. You could pay yourself a dividend - the company pays the corporation tax and you would claim back the personal tax on the dividend in the UK, as you are a tax resident in Spain. You then pay the tax due on whatever dividend you decide to take.

My accountant here in Valencia calculated that if I wanted to receive €25000 in a salary and dividend from the UK, there was something in the region of €2200 in tax to pay
Hi Smithy,
This is so helpful, thanks so much for posting. I have a very similar situation. Would you be able to give me the contact details of your accountant? This is exactly what I would like to do and I would like to discuss my case with him/her.
Thank you,
Jana
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Old Feb 4th 2019, 1:15 pm
  #40  
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Default Re: Questions on running a Ltd company as a Spanish resident

Originally Posted by TJHook
Hey guys

This is a very interesting topic and one I'd love to hear from you melocoton and Smithy73 if you're still ok with this arrangement? I am very similar, have a UK Ltd company and have recently moved to Spain, going Residencia (with the initial 1 year private healthcare and opening spanish account showing some money in there). This will be the 'self supporting' visa initially and we just assumed that after 6months I would have to go Autonomo and start paying the eye watering costs per month etc.

Since hearing about this double taxation treaty between Spain and the UK (plus others)...(currently)... can I confirm I understand what is being said on it? I must still pay my Corporation tax on the UK Ltd Co. I have been taking a very small salary for me and my husband monthly, to keep below the NI threshold/tax of £500 per month. Should I stay in this arrangement and continue to pay myself and my husband this small amount as a salary and I would not be taxed on it in spain? or I would still be taxed on it in spain? The dividends bit I dont fully understand as it sounds like you'd have to pay the same rate as a salary anyway in spain?

After paying yourself a small salary, if you have any profit left in the limited company you would have to pay the UK corporation tax on that in addition to the spanish personal tax in Spain. So you 'd be better of to just take all the available profits as salary in full to avoid paying any UK corporation tax. Going on what's been said in this thread previously, if you are tax resident in Spain you won't have to pay any UK National Insurance. So you will just be paying the Spanish tax for your UK salary.

If I'd gone Autonomo, I assumed I'd have to register as self employed in Spain, close my Ltd Co. Sounds like a nightmare to open an SSL (?) in Spain anyway. I'd have monthly costs with Autonomo of (after 18months), Euro 330 a month, Plus Gestor of Euro 60, plus some tax due too. Wouldnt have any Spanish activity or customers so no IVA due. Assumed Id have to get the European Tax Number as 90% of customers are in the UK. But by my calculations, it worked out to be something like 26% overall tax (autonomo and tax) here in Spain.

Surely if im keeping the company in the UK and paying 20% corporation tax, if I then pay myself and my wife a small salary/dividends here in Spain, I'd still have to pay tax on it? And furthermore, to access the healthcare here in Spain, i'd still either have to be Autonomo Euro330 per month and pay a Gestor...so it wouldnt make any difference? Or indeed, pay for a private healthcare annually, which in my case is EUR 1200 per year, or about EUR 100 per month for my family?

Yes in order to access healthcare, pension, benefits etc you could become Autonomo as a seperate entity to your UK limited company. You may not end up doing any work as Autonomo but it would be a way of getting spanish social security. Alternatively you could just pay for private healthcare as you mentioned but I guess the downside is you won't have the additional pension benefits etc accrued.
See my comments in red above
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Old Mar 7th 2019, 9:45 am
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Default Re: Questions on running a Ltd company as a Spanish resident

What a fantastic thread! I have been going around in circles over my similar situation and this thread has been the most informed

I am about to complete my first Modelo 720 (declaratio of assets). My Spanish accountant says I must declare the shares in my UK LTD company (I have others bonds pushing that 'pot' over the 50,000 Euros declaration limit).

I have no issue with this, however she says we have to declare the value of the shares on 31/3/2018. Are they still worth the 50 x £1 = £50 as when I incorporated, or are they now worth the balance in the bank account?

She says we also have to declare the value of the company which is calculated on the average profits of the past 5 years x 5....which values the company at a riduculous price, particularly as it is now running at a loss and will be closed in June! Does this sound right, my UK accountant isn't co-operating as says that a UK LTD company is a seperate entity to myself and therefore the value of which has nothing to do with Spain.

Any ideas? Thanks
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Old Mar 7th 2019, 11:55 am
  #42  
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Default Re: Questions on running a Ltd company as a Spanish resident

Be careful with this. You need a really good accountant who is familiar with UK company law and UK investments you also need someone well versed in the 720 in respect to Spain. The questions you ask should be answered by them not by people here. Not that people don't know but the fines for even the most basic mistake can be very big. If your accountant is simply asking you stuff and not requesting papers etc ditch them. I declared my assets last year and had a Spanish firm do it however they failed to realize the some assets were joint owned and ticked the wrong boxThis will now result in an eyewatering fine.
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Old Mar 7th 2019, 2:42 pm
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Default Re: Questions on running a Ltd company as a Spanish resident

Thanks for your reply. I am worried about getting the Modelo 720 wrong! I do seem to finally be in contact with a Spanish accountant who seems to know what they are talking about. Fingers crossed!

I am winding down the company in June and to be honest I will be glad to get rid. Living in Spain and having too many links back in the UK has proved one of the most stressful things in my life!
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Old Mar 11th 2019, 10:25 pm
  #44  
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Default Re: Questions on running a Ltd company as a Spanish resident

Hi all,

Fantastic thread, really informative.

I am just hoping if someone would be able to clear up a few things for me. I have just set up a UK company where I invoice my clients in the UK also. I moved here 18 months ago and have recently set up as Autonomo to avail of the social security services. From reading above it appears that I will be liable to corporation tax at 20% on all profits in the UK company. I am wondering if it is better to take a salary or dividend from the company being a Spanish resident? And what would be the most tax efficient way to do it?

I have read that it may not be possible to take a salary from the company as an Autonomo as I am meant to be classified as a freelancer and I am worried that I may be classified as a false Autonomo? Is this correct?

If this is the case I presume I will have to extract dividends from the company and pay the Spanish income tax on this? Am I liable to any UK tax on the dividend? Are Autonomos allowed to receive dividends?

Another option would be to invoice my UK company with services as an Autonomo? Is this possible? I have also read that if I as an Autonomo only invoice one company I could be deemed as an employee or false Autonomo also?

Would really appreciate any help or clarity on this matter. Thanks everyone.
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Old Apr 24th 2019, 10:43 pm
  #45  
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Default Re: Questions on running a Ltd company as a Spanish resident

Originally Posted by JanaP
Hi Smithy,
This is so helpful, thanks so much for posting. I have a very similar situation. Would you be able to give me the contact details of your accountant? This is exactly what I would like to do and I would like to discuss my case with him/her.
Thank you,
Jana
Hey JanaP

I have been following this thread over the last few months and have found it super helpful, did you ever get the name of Smithy73 's accountant? I'm in the Valencia region and I'm at the point where I could do with speaking to one now.

Thanks!
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