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Spanish or UK Tax
Hello
We are moving to Spain this year. I will work from our Spanish home for a UK company on UK projects. How will my tax arrangements be made - do I pay my tax to the UK or to Spain? We will be permanent Spanish residents. Thank you for your thoughts and comments in advance. |
Re: Spanish or UK Tax
You will pay tax in both countries, but you can deduct UK tax paid from the Spanish tax due.
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Re: Spanish or UK Tax
Originally Posted by chslh66
(Post 12629200)
Hello
We are moving to Spain this year. I will work from our Spanish home for a UK company on UK projects. How will my tax arrangements be made - do I pay my tax to the UK or to Spain? We will be permanent Spanish residents. Thank you for your thoughts and comments in advance. |
Re: Spanish or UK Tax
Originally Posted by Fred James
(Post 12629218)
You will pay tax in both countries, but you can deduct UK tax paid from the Spanish tax due.
On a similar subject, what will we need to do in order to access the Spanish healthcare system? |
Re: Spanish or UK Tax
Originally Posted by chslh66
(Post 12629278)
Thank you Fred. We assume we will need to register in some manner with the Spanish tax authorities?
On a similar subject, what will we need to do in order to access the Spanish healthcare system? This UK Gov summary has just been published - https://www.nhs.uk/using-the-nhs/hea...care-in-spain/ Situation after 29th March in the event of "No Deal" remains very confused . You will probably need private healthcare |
Re: Spanish or UK Tax
Originally Posted by chslh66
(Post 12629278)
Thank you Fred. We assume we will need to register in some manner with the Spanish tax authorities?
On a similar subject, what will we need to do in order to access the Spanish healthcare system? You can fill in a form to declare that you are tax resident but it doesn’t really achieve anything. |
Re: Spanish or UK Tax
Thank you loafing along and Fred - very helpful, thank you.
In your experience Fred is there normally a shortfall of tax to pay in Spain - indicating that Spanish tax is higher than UK tax? Difficult to judge I know - just asking your experience or perception? |
Re: Spanish or UK Tax
You will probably pay more tax in Spain as the personal alllowances are less than in the UK. The tax bands are more complicated and the middle income bands can be higher than in the UK where there are fewer bands. So it is unlikely that the UK will cancel out the Spanish tax entirely. |
Re: Spanish or UK Tax
Thanks again Fred, appreciated
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Re: Spanish or UK Tax
Fred
I have checked with a gestor. They say I must become a sole trader in Spain and invoice the UK company instead of recieving a salary. This means I will eventually pay 300 euro per month for social security as well as tax - which is ok. Problem is I want to remain employed directly by the UK company (for complicated insurance reasons). Gestor suggested / advised if I did any salaried work for UK company I need to do it in the UK. What's your thoughts and/or experience here? Thanks |
Re: Spanish or UK Tax
Sorry, I have no experience in this area apart from knowing it is very complicated. A good gestor is your best advisor.
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Re: Spanish or UK Tax
Originally Posted by chslh66
(Post 12629344)
Thank you loafing along and Fred - very helpful, thank you.
In your experience Fred is there normally a shortfall of tax to pay in Spain - indicating that Spanish tax is higher than UK tax? Difficult to judge I know - just asking your experience or perception? |
Re: Spanish or UK Tax
Chris jolly - thank you.
Can I ask - are you in a similar position to me? Tax resident in Spain but work remotely for a UK company with a UK salary - I don't want to become a sole-trader invoicing the UK company (as some advice has suggested) |
Re: Spanish or UK Tax
Originally Posted by chrisjolly
(Post 12634235)
In my experience I pay more tax here in Spain on the same income as I did in the UK. You need to go to a tax adviser.
Any recomendation for a tax adviser? My case would be a 5 days in the UK , the rest of the month in Spain. I am hoping I can keep my UK contract, doing remote work from Spain the rest of the month, but make it look like all my work is being done in the UK. My understanding is that if your work is done in Spain, you should be registered as an autonomo, but if you were working only in the UK, but living in Spain, you can declare how much you have been paying in the UK and pay the difference in Spain. I am just wondering how risky this is, or what other solutions are available. Thanks for the time. |
Re: Spanish or UK Tax
I think that it is irrelevant where you work if your tesidential base is deemed to be Spain. If you work in UK for 25 % of the year but live in Spain the rest then you declare in Spain not UK. You can't select where you pay. On the whole the tax is higher in Spain as you don't have the same personal tax free bands as uk
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Re: Spanish or UK Tax
Originally Posted by 1sexsmith
(Post 12634267)
I think that it is irrelevant where you work if your tesidential base is deemed to be Spain. If you work in UK for 25 % of the year but live in Spain the rest then you declare in Spain not UK. You can't select where you pay. On the whole the tax is higher in Spain as you don't have the same personal tax free bands as uk
I understand that works that way, but I want to cause as less issue to my company as possible. As far as I understand, that would involved - Be a posted worker (with max time allowed). With Brexit, this might not be a chance. - Declare as an autonomo (contractor) and bill my company. - Ask my company to get a tax code in Spain. Which would be inefficient since they would need to pay for an accountant. The other possibility is, if I am correct, to make Spain believe that I only work in the UK 5 days a month, and don't state that I work from Spain, but that I live in Spain. Spain could not know if I do it, since I am working from home. My income would be paid in the UK, and then paying the tax difference in Spain, so I can be a legal resident in Spain. In order to pay SS, I could open an autonomo account an make the monthly contributions, but dont declare any profit. I heard this in this forum before but some people said its not necessary. I am not trying to avoid to pay taxes, but to create head aches to my company. |
Re: Spanish or UK Tax
Just understand the basic rules. All income earned in the UK is subject to UK tax irrespective of the tax residency of the earner. If resident in Spain for more than 183 days in a calendar year you are tax resident in Spain. If Spanish tax resident, you pay Spanish tax and then deduct any UK tax paid on the same income. These three rules cover 90% of all circumstances. |
Re: Spanish or UK Tax
Originally Posted by wirt0
(Post 12634275)
Hi 1sexsmith, thanks for the reply.
I understand that works that way, but I want to cause as less issue to my company as possible. As far as I understand, that would involved - Be a posted worker (with max time allowed). With Brexit, this might not be a chance. - Declare as an autonomo (contractor) and bill my company. - Ask my company to get a tax code in Spain. Which would be inefficient since they would need to pay for an accountant. The other possibility is, if I am correct, to make Spain believe that I only work in the UK 5 days a month, and don't state that I work from Spain, but that I live in Spain. Spain could not know if I do it, since I am working from home. My income would be paid in the UK, and then paying the tax difference in Spain, so I can be a legal resident in Spain. In order to pay SS, I could open an autonomo account an make the monthly contributions, but dont declare any profit. I heard this in this forum before but some people said its not necessary. I am not trying to avoid to pay taxes, but to create head aches to my company. I'm in an almost identical situation. I want to retain my UK salary but work from Spain. I actually have no problem paying Spainish social security and tax BUT I want to remain employed by UK company - because if not I need to purchase my own (expensive) insurances! I've taken some advice and they said setup as a sole trader and invoice UK company (is this just their easy "off the shelf" solution ...) which I don't want to do. Question - is Spanish social security compulsory for tax residents (and not an autonomo)- why can't I just purchase private healthcare? What's wrong with just declaring my UK salary and paying tax on it!? I've got lots of people working on this to find a solution so it would be interesting to hear how your situation progresses. |
Re: Spanish or UK Tax
Hi Fred,
Thanks for your reply/ Of course I want to pay taxes in Spain, but as you say. If Spanish tax resident, you pay Spanish tax and then deduct any UK tax paid on the same income. If there is any other method please let me know, I would appreciate it a lot. Regards, |
Re: Spanish or UK Tax
Correct. If tax resident in Spain tax is paid on your worldwide income. My point was that the Spanish taxman has priority and you pay him first and then deduct the UK tax. Doing it the other way round might be to your advantage and we can’t have that, can we!!
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Re: Spanish or UK Tax
Hi Fred, but Spanish Tax is higher than the UK tax, so there would be nothing to pay to the UK. I would then need to ask my company not to put me any tax code, then pay taxes in Spain and tell the UK how much taxes I have paid in Spain.
There is a treaty between Spain and UK to avoid double taxation, so I should not be paying both times for the same amount, just the difference. Not sure if I am being clear or if I am missing some basic point. Thanks for taking your time. |
Re: Spanish or UK Tax
Originally Posted by wirt0
(Post 12634382)
Hi Fred, but Spanish Tax is higher than the UK tax, so there would be nothing to pay to the UK. I would then need to ask my company not to put me any tax code, then pay taxes in Spain and tell the UK how much taxes I have paid in Spain.
There is a treaty between Spain and UK to avoid double taxation, so I should not be paying both times for the same amount, just the difference. Not sure if I am being clear or if I am missing some basic point. Thanks for taking your time. You are correct in all that BUT - please read back my earlier posts. In our situations (they are similar) my current advice says - we must set up as a sole trader (autonomo) in Spain and invoice the UK AND pay social security €300 pcm. its not as simple as Fred is implying! I'm still researching so will post any developments. In my particular situation it's expensive and complicated for me because if I were not directly employed by UK company and a sole trader I'd need to purchase my own (expensive) insurances!! Additionally I personally can see no problem with declaring to Spain my UK income - paying the tax and buying personal healthcare. There's is the double taxation agreement AND means of declaring to UK tax that you don't want tax deducted at source anyway! BUT as I said current (Spanish) advice says this isn't possible - autonomo is the only route! |
Re: Spanish or UK Tax
No, you cannot deduct the Spanish tax from the UK tax - it's the other way round. You do end up paying no UK net tax, but you have to do it that way round as Spain has the primary claim on the tax.
Yes, there is a tax treaty, recently revised - you can read it here - https://assets.publishing.service.go...-_in_force.pdf Very few UK incomes are covered directly by this, the best example is UK state pensions which the treaty says will ONLY be taxed in Spain and they can be paid tax free in the UK. Other income comes under the terms I have mentioned. |
Re: Spanish or UK Tax
Sorry guys I need to make this post in order to submit links in the next post.
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Re: Spanish or UK Tax
Fred, chslh66,
Thanks for the information, now it has sense to me. I saw that you replied previously this questions Fred, (https://britishexpats.com/forum/spai...salary-916082/) and I appreciate a lot your time invested into replying this. I have seen many websites with contradictory information but this one is the one that has more sense to me. I will put here a Q&A list, hopefully we can avoid people finding information quicker. There will be many information missing, but I try to update it as I find more information. Where do you pay taxes? In the country of tax residence. How do you I know which one is? You’re considered a Spanish resident for tax purposes if you meet one of the following criteria:
You would need to declare your worldwide income / renta mundial. More information: https://www.agenciatributaria.es/sta...eino_Unido.pdf (SPANISH) (If someone can find an English link send me a PM). How much is the tax? According to: https://www.spainaccountants.com/tax-rates#rates_1 0 - 12450 - 19% 12450 - 20200 - 24% 20200 - 35200 - 30% 35200 - 60000 - 37% 60000 - 45% This information MIGHT not be correct, as it could apply only to spanish incomes. Do I need to pay taxes in the UK? You would need to declare the taxes that you paid in Spain and contact the HMRC (I dont have clear yet how to do this). In order to avoid paying taxes in your payslip, your company will need to put you in a Nil Tax Code (https://harrisonbrook.co.uk/apply-fo...-nil-tax-code/) How to get medical coverage in Spain? You would need to register yourself as an autonomo (contractor). The base is 283,30 euros per month, but there are discounts. The discounts are: 0 - 12 months - fixed 60 euros months 12 -18 months - 50% (141,65) 18 - 24 months - 30% (198.31) 24 - 283,30 per month. I am currently reading the following website https://www.expatica.com/es/finance/...1614/#TaxSpain It seems to be covering this topics. |
Re: Spanish or UK Tax
A couple of points. The option to tell HMRC that you are now tax resident in Spain to get a nil tax rating only applies to pensions paid in the UK. It does not apply to earned income. The article you linked to makes this clear. The tax rates you quote are a generalisation as tax rates are also determined by the autonomous region that you live in. They are not massively different but they can be significant. Andalucia, for example, has an extra two tax bands. |
Re: Spanish or UK Tax
Originally Posted by Fred James
(Post 12634428)
A couple of points. The option to tell HMRC that you are now tax resident in Spain to get a nil tax rating only applies to pensions paid in the UK. It does not apply to earned income. The article you linked to makes this clear. The tax rates you quote are a generalisation as tax rates are also determined by the autonomous region that you live in. They are not massively different but they can be significant. Andalucia, for example, has an extra two tax bands. I could find that information here: https://www.gov.uk/tax-uk-income-live-abroad The country where you live might tax you on your UK income. If it has a ‘double-taxation agreement’ with the UK, you can claim tax relief in the UK to avoid being taxed twice. https://www.gov.uk/tax-uk-income-liv...ad/taxed-twice You may be taxed on your UK income by the country where you’re resident and by the UK. You may not have to pay twice if the country you’re resident in has a ‘double-taxation agreement’ with the UK. Depending on the agreement, you can apply for either:
https://www.gov.uk/government/public...ain-individual (Please let me know if there is a way to edit my previous post, so it can be easier to read). Otherwise I have created a Google Doc that I can edit as I find more information: https://docs.google.com/document/d/1...it?usp=sharing |
Re: Spanish or UK Tax
Originally Posted by wirt0
(Post 12634589)
Thanks James, tried to edit my previous post but as far as I can see this is not allowed.
I could find that information here: https://www.gov.uk/tax-uk-income-live-abroad and https://www.gov.uk/tax-uk-income-liv...ad/taxed-twice And the form https://www.gov.uk/government/public...ain-individual (Please let me know if there is a way to edit my previous post, so it can be easier to read). Otherwise I have created a Google Doc that I can edit as I find more information: https://docs.google.com/document/d/1...it?usp=sharing https://www.gov.uk/government/public...ain-individual does not make any mention of wages - it refers to pension, annuities and interest .... |
Re: Spanish or UK Tax
Originally Posted by chslh66
(Post 12634598)
However, this form:
https://www.gov.uk/government/public...ain-individual does not make any mention of wages - it refers to pension, annuities and interest .... Looks like Im back to square one!. |
Re: Spanish or UK Tax
Originally Posted by wirt0
(Post 12634605)
You are right chslh66, most of the information that I've gathered is about pensions or interests over property / bank accounts, no mention to wages.
Looks like Im back to square one!. As I can see this means paying no UK tax. But means you are not directly employed by the UK company - which brings disadvantages .... in my case, as a professional person, means me having to have my own personal insurances. |
Re: Spanish or UK Tax
The autonomo way looks quite complicated too, since I guess that you would have to, on top of pay the IRPF + Social Security, the VAT(IVA) of the bill.
I am not an accountant so I am not sure about this, but seems like a lot of money would be skimmed along the way. If it wasn't for brexit, we could be considered as posted workers up to 2 years, and then take the autonomo route. |
Re: Spanish or UK Tax
Originally Posted by wirt0
(Post 12634610)
The autonomo way looks quite complicated too, since I guess that you would have to, on top of pay the IRPF + Social Security, the VAT(IVA) of the bill.
I am not an accountant so I am not sure about this, but seems like a lot of money would be skimmed along the way. If it wasn't for brexit, we could be considered as posted workers up to 2 years, and then take the autonomo route. |
Re: Spanish or UK Tax
Thanks chslh66, thats why one Tax advisor in Spain told me, because there is no goods moving across borders. Would this change with Brexit? I'm hoping no!.
Still would like to find a way to do it being a employee of my current company. Are you sure it would be a 0% VAT? So only paying IRPF + Social Security? What about the IR35? I guess that because you live abroad it wouldn't be a fraud, correct? |
Re: Spanish or UK Tax
Originally Posted by wirt0
(Post 12634615)
Thanks chslh66, thats why one Tax advisor in Spain told me, because there is no goods moving across borders. Would this change with Brexit? I'm hoping no!.
Still would like to find a way to do it being a employee of my current company. Are you sure it would be a 0% VAT? So only paying IRPF + Social Security? What about the IR35? I guess that because you live abroad it wouldn't be a fraud, correct? IR35 - not familiar with that .... is that a UK or Spanish thing? If UK it won't apply. Agreed, I'd prefer to stay a UK company employee and can't see why not provided the tax is paid to Spain and I took private healthcare - but this isnt what current advice is saying! |
Re: Spanish or UK Tax
Originally Posted by chslh66
(Post 12634619)
The gestor I took advice from said it's 0% after Brexit.
IR35 - not familiar with that .... is that a UK or Spanish thing? If UK it won't apply. Agreed, I'd prefer to stay a UK company employee and can't see why not provided the tax is paid to Spain and I took private healthcare - but this isnt what current advice is saying! |
Re: Spanish or UK Tax
Originally Posted by wirt0
(Post 12634623)
IR35 its a UK thing, meant to avoid employees being hired as a contractors (and thus avoiding paying higher taxes).
I'd assume not applicable to us as we'd be Spanish tax resident. |
Re: Spanish or UK Tax
Thats why I would still like to know if its possible the way James is describing.
Hopefully I can get in contact with a lawyer / accountant soon, I have send some emails but no response yet!. |
Re: Spanish or UK Tax
I've tried Malaga Law as they have Malaga and London offices and appear experienced according to website. Also my UK accountant looking at it.
Will let you know once I hear - if you could do the same please. Let me know email and I'll forward you my email conversation with Andalusian gestor which you might like to read? |
Re: Spanish or UK Tax
Originally Posted by wirt0
(Post 12634615)
T
Still would like to find a way to do it being a employee of my current company. If you carry out your work in the country of your employer you are a cross border worker https://europa.eu/youreurope/citizen...s/index_en.htm and you need HMRC to issue you with the relevant paperwork. If you carry out your work remotely in your home country then either you are a posted worker but more likely HMRC would not agree to that. https://ec.europa.eu/social/main.jsp?catId=471 The general rule in the EU is that your employer pays social security contributions in the country where you carry out the work. I know how it works in France, and this How To Guides - Working For A Uk Employer In Spain | Tumbit How To Guide suggests that it works pretty much the same in Spain but it is an old thread so things may have changed. I would have thought that if you need to prove you've been exercising freedom of movement correctly in order to get a residence permit, it would be better to stick to the rules to cover your back. I know that for carte de séjour applications in France, if you are claiming "worker" status under FoM they look at where your income comes from and what social contributions you have paid, and if you're not paying into French social security and don't have an S1, they would reject your application straight away. I know Spain interprets things differently but if there is a deal and if the EU decides what criteria countries should apply, what will happen. I don't know but to me, if you're seriously considering a move at this late stage you need to have the right paperwork to back you up. If you're not working in Spain, how will you make a case for being resident. Spain isn't the centre of your economic interests and you haven't got time to get in 183 days residence before 29 March so what's different between you, and someone who lives and works in the UK and just happened to be spending a few weeks on holiday in Spain just before Brexit? |
Re: Spanish or UK Tax
Originally Posted by EuroTrash
(Post 12634722)
I don't know about Spain, but the EU has rules for workers who live in one country an employee of a company in a different country.
If you carry out your work in the country of your employer you are a cross border worker https://europa.eu/youreurope/citizen...s/index_en.htm and you need HMRC to issue you with the relevant paperwork. If you carry out your work remotely in your home country then either you are a posted worker but more likely HMRC would not agree to that. https://ec.europa.eu/social/main.jsp?catId=471 The general rule in the EU is that your employer pays social security contributions in the country where you carry out the work. I know how it works in France, and this How To Guides - Working For A Uk Employer In Spain | Tumbit How To Guide suggests that it works pretty much the same in Spain but it is an old thread so things may have changed. I would have thought that if you need to prove you've been exercising freedom of movement correctly in order to get a residence permit, it would be better to stick to the rules to cover your back. I know that for carte de séjour applications in France, if you are claiming "worker" status under FoM they look at where your income comes from and what social contributions you have paid, and if you're not paying into French social security and don't have an S1, they would reject your application straight away. I know Spain interprets things differently but if there is a deal and if the EU decides what criteria countries should apply, what will happen. I don't know but to me, if you're seriously considering a move at this late stage you need to have the right paperwork to back you up. If you're not working in Spain, how will you make a case for being resident. Spain isn't the centre of your economic interests and you haven't got time to get in 183 days residence before 29 March so what's different between you, and someone who lives and works in the UK and just happened to be spending a few weeks on holiday in Spain just before Brexit? Thanks for your contribution in this post. I have read about posted workers, but I have assumed that this will end after Brexit, with out without hard brexit (unless if there is a separated agreement). I think that as a posted worker, where you pay taxes depends of how long you have been posted for. As a posted worker, you will continue to be covered by the social security system of your home country for a maximum of 2 years. Find out what formalities you need to carry out. You can only extendi it more than 2 years under special circumstances Can you stay longer than 2 years?In some exceptional situations, your employer may ask for an extension of your initial posting period until your planned work has been completed:
Source:https://europa.eu/youreurope/citizen...s/index_en.htm So that would not be a long therm solution, if possible anyways, due to the departure of the UK from the EU. |
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