Reply to: Contracting from Spain

[doconline]

Me again. I can't seem to get this bee out of my bonnet and the situation has changed since the last post.

I'm currently on a contract between my UK Ltd and my UK client, usual kind of stuff, except I now work from home 3 days a week and at the client site 2 days a week. This opens up a whole lot of opportunity to work from the Spanish place, though the tax implications worry me. Also, I'm not getting any younger and neither is the missus. I find myself living/funding/maintaining 3 properties. It's madness and I need to simplify things, i.e. sell the UK home and move to Spain. Move out of the London apartment and into a hotel for the 1 or 2 nights I'm there. It's no more difficult or expensive flying from Malaga to London and back than it is the North of England to London and back on the train.

There seems like a LOT of work on the current gig so I could be there a while hopefully. When it ends I have my eyes set on a technology park in Malaga that houses some 650 companies and is only 20 mins from my place, although contracting isn't big out there (and neither are the rates!). I guess I'd have to do this as an 'autonomo' or something.

Of course, yesterdays triggering of Article 50 clouds the issue even more.

Guess I just need to grow a couple of balls and just do it and see where it goes. We have no kids or family ties to speak of anymore and I'm growing disillusioned with the UK.

Best thing really is to be speak to a Spanish accountant. If you already have a place over there, do you not have a fiscal representative for sorting out your SUMA and other property related stuff or do you do this yourself? Sounds like you need to simplify a bit and if you get the opportunity to live in Spain full time with a couple of days a week here I would say go for it. Quality of life will be much better there, just a bit tiring with the weekly commute, but the sunshine and cheap cost of living will help.

I think your setup with your limited company will stay the same whilst you are contracting to the UK based client, but you will need to work out the most tax efficient way to get your money out. May well not be with dividends, the Spanish accountant will help here.

Also, I wouldn't worry about Brexit too much. If you are a high earning individual like most contractors are and have the right private insurances in place and pay your taxes, I'm sure the Spanish government will welcome you with open arms.

I would say definitely go for it though. Life is too short. Do you want to get old and look back and think what if?

[oliverson]

Me again. I can't seem to get this bee out of my bonnet and the situation has changed since the last post.

I'm currently on a contract between my UK Ltd and my UK client, usual kind of stuff, except I now work from home 3 days a week and at the client site 2 days a week. This opens up a whole lot of opportunity to work from the Spanish place, though the tax implications worry me. Also, I'm not getting any younger and neither is the missus. I find myself living/funding/maintaining 3 properties. It's madness and I need to simplify things, i.e. sell the UK home and move to Spain. Move out of the London apartment and into a hotel for the 1 or 2 nights I'm there. It's no more difficult or expensive flying from Malaga to London and back than it is the North of England to London and back on the train.

There seems like a LOT of work on the current gig so I could be there a while hopefully. When it ends I have my eyes set on a technology park in Malaga that houses some 650 companies and is only 20 mins from my place, although contracting isn't big out there (and neither are the rates!). I guess I'd have to do this as an 'autonomo' or something.

Of course, yesterdays triggering of Article 50 clouds the issue even more.

Guess I just need to grow a couple of balls and just do it and see where it goes. We have no kids or family ties to speak of anymore and I'm growing disillusioned with the UK.

[oliverson]

The contract will probably be direct between my UK Ltd company and their UK company, but if there was an agent involved it would also likely be a UK company.

The way I'm seeing it, nothing much changes unless I live over half-the-year in Spain.

[doconline]

so, I have a very real prospect of picking up some work in Spain but I'm not sure how to play it.

Looking at the tax over there, it seems quite onerous. If I contracted through my UK Limited company servicing their UK operation but carried out my duties at their Spanish offices, would the tax situation be the same as if I was working from their UK offices? I'd like to keep things as simple as possible.

Are you direct or through an agency?

IANAA but if you are being paid by a UK company to your UK company, the corporation tax etc should stay the same with your company liabilities staying the same. however, your personal tax situation will change if you are over in Spain for an extended period of time. How long will you be there for? Regarding your personal tax situation, it would be better to speak to an accountant in Spain about it, and find out the best way for you to set up.

[oliverson]

so, I have a very real prospect of picking up some work in Spain but I'm not sure how to play it.

Looking at the tax over there, it seems quite onerous. If I contracted through my UK Limited company servicing their UK operation but carried out my duties at their Spanish offices, would the tax situation be the same as if I was working from their UK offices? I'd like to keep things as simple as possible.

[m0n1k3r]

It is actually quite simple. If you are using your Ltd overseas you simply register in the country where you are doing your business and pay tax there. Plenty of German companies use the Ltd rather than the GmbH as it is cheaper. Just go and see an accountant as you would in the UK and let him set it up for you. There is no tax to pay in the UK.

... or was. Nowadays Germany have the UG company that only requires €1 in share capital (although they are typically set up with a minimum of €1000 or more) and can be converted to a GmbH once the capital in the company exceeds €25000.

[BlasterBates]

But as I understand it if it is managed from overseas then the company is tax resident overseas, which means paying Spanish CT. I don't know how that works but it sounds like it would be complicated. Presumably you'd need to still file accounts for Companies House, but file something with HMRC to say you're exempt from UK CT.

It is actually quite simple. If you are using your Ltd overseas you simply register in the country where you are doing your business and pay tax there. Plenty of German companies use the Ltd rather than the GmbH as it is cheaper. Just go and see an accountant as you would in the UK and let him set it up for you. There is no tax to pay in the UK.

[m0n1k3r]

But as I understand it if it is managed from overseas then the company is tax resident overseas, which means paying Spanish CT. I don't know how that works but it sounds like it would be complicated. Presumably you'd need to still file accounts for Companies House, but file something with HMRC to say you're exempt from UK CT.

If it is run overseas then it should be registered as a 'foreign branch' in that country and maintain a separate bookkeeping for the branch and have a separate bank account for the branch.

It works quite well with UK companies. UK limited companies can apply for foreign branches to be taxed only in the country the branch is registered in, and if there is no UK business going on then the UK part is largely considered being dormant.

However if the purpose of the company is for a non-UK resident to contract in the UK then you either need to be able to evidence that all company management, meetings etc takes place in the UK (and some foreign tax authorities still won't accept that), or have a deep dive into double-taxation treaties between the UK and Spain to figure out what should be declared and taxed where.

[DimPrawn]

But as I understand it if it is managed from overseas then the company is tax resident overseas, which means paying Spanish CT. I don't know how that works but it sounds like it would be complicated. Presumably you'd need to still file accounts for Companies House, but file something with HMRC to say you're exempt from UK CT.

Thank goodness everyone being in the EU cuts through all the complexity, confusion and paperwork.

[VectraMan]

A UK company can be owned by someone that lives overseas, the registered office just needs to be in the UK

But as I understand it if it is managed from overseas then the company is tax resident overseas, which means paying Spanish CT. I don't know how that works but it sounds like it would be complicated. Presumably you'd need to still file accounts for Companies House, but file something with HMRC to say you're exempt from UK CT.

[m0n1k3r]

A UK company can be owned by someone that lives overseas, the registered office just needs to be in the UK, your accountant will probably allow this for a charge. Some Spanish folks I used to work with used to fly in on a Monday and fly out on a Thursday, doing 5 days hours in 4 days, so it is possible, think this (along with holidays etc) got round the 183 day rule, but they were Spanish Nationals. Don't know if they were using a UK LTD but they were contractors. Setting up a Spanish Ltd can be a pain.

Although living in Spain and having a Spanish business set up to provide services to clients in the UK is perfectly legal, most UK recruitment agencies won't work with anything else than UK Ltd Co's and pay into UK business bank accounts.

[m0n1k3r]

91 days is quite a lot. If you have left, then apart from a few weeks a year visiting family, why would you be in the UK that much? You live and work in Denmark, why would you be in the UK 25% of your time?

To go to Blackpool on holiday of course. They have lots of holidays in Denmark.

[BlasterBates]

The thing is that regardless of where you're resident, you pay tax for any work you do in the country that you do the work. Not being resident doesn't mean you don't pay tax. There is a myth that if you're not resident you don't pay tax.

So if you work in Spain remotely then it's Spanish taxable income, if you travel to the UK every week to work and return to Spain at the weekend then it's UK taxable income. The 183 day rule is irrelevant in this regard.

Now if you live in Spain and travel to the UK during the week and your wife and family are in Spain, you will not be UK resident even if you spend more than 183 days in the UK, but of course you will be paying tax in the UK on your UK income. That means worldwide income will be taxed in Spain including UK income, but the double taxation treaty means effectively because the UK income was already taxed, t won't be taxed again, though in reality sometimes there is a bit extra to pay.

HMRC will expect you to be filling out tax declarations and you need to claim exemption based on the fact that your worldwide income is taxed in Spain. i.e. investments, CGT and so on will be taxed in Spain and you need to send the necessary documentation to HMRC.

When I was living in Germany and working in Switzerland I submitted tax returns in Germany and Switzerland, I actually declared all my income in both countries, but in Switzerland I enclosed a letter and proof of German residency. That involved a lot of checks from the Swiss as I was in Switzerland for more than 183 days a year. I had to have proof of travel back to Germany. "Tax Residency" isn't something where there's an official document, it's something that has to be accepted by the tax authority for every tax return you submit.

If you live and work remotely in Spain then you will have no UK tax obligations, even if you use a UK Ltd company.

[oliverson]

Thanks for your input everyone.

[doconline]

I'm giving serious consideration to selling up in the UK and moving full-time to our place in Spain. The objective is to reduce costs, work less, at least on other companies projects, and have a better quality of life.

My question is what would this new direction look like from a contracting perspective (I'm a developer), irrespective of whether I worked 100% remotely or jetted into London and contracted half-the year? Can I still do this through my UK Limited Company? Would it be better to set up a Spanish equivalent company? What does the tax situation look like? Are there other lucrative markets than the UK for overseas contractors?

I know I have significant work to do to research all of this but is there anybody out there who has done the same kind of thing and if so what are your findings?

A UK company can be owned by someone that lives overseas, the registered office just needs to be in the UK, your accountant will probably allow this for a charge. Some Spanish folks I used to work with used to fly in on a Monday and fly out on a Thursday, doing 5 days hours in 4 days, so it is possible, think this (along with holidays etc) got round the 183 day rule, but they were Spanish Nationals. Don't know if they were using a UK LTD but they were contractors. Setting up a Spanish Ltd can be a pain. My parents lived over there and had a business, they were registered as 'Autonomo'. They didn't pay much tax and seemed like a very good deal, paid about 350 per month social security whether they worked or not though. This gives Spanish state pension, access to other services etc. Your best bet would speak to your accountant here, and also speak to one in Spain, you will find an English speaking one through expat forums, try and get a recommendation.

By lucrative markets, do you mean places you can work directly or remotely? If remotely, you are competing with Asia and all the other 3rd world countries who are willing to work for a few $ per hour. I think the best way is build your contacts / network here, and use that.

I'm not an accountant / lawyer so this may be all wrong, so maybe speak to your accountant first about your tax situation etc?