Reply to: Ltd in UK, living in Belgium, first contract in Spain :)

[SueEllen]

Can take a month to obtain, that if you manage to find a handful of people who are allowed to do it.

Spain is using all sort of tricks to keep the money - for example they've got two different VAT numbers: internal for Spain, and those that are external and could be used for VAT free trade within EU, obviously it's done to make it harder for other EU members to sell stuff to Spain. EU should have dealt with this bulltulip long time ago.

I remember reading on another forum about the trick Belgium did a few years ago to ensure foreign companies paid VAT e.g. they charged you taxes when you moved goods into Belgium and until you paid the tax you couldn't sell the goods or pass them on.

In short if countries have issues with foreign companies not paying VAT they change the law to ensure they do so.

[SueEllen]

Dear BlasterBates,

Are you really saying that a company which operates internationally has to set up another local company in every country where it sends its representatives on an assignment? I am sorry, but this sound absurd. It would be impossible to operate in this way. Do you have a reference / link to a legislation that demands this?

Thank you

It's not that straight forward.

It depends on the length of time the person is working there, the size of the company, where the company has had normal operations e.g. the location of previous contracts, and where the person(s) with control of the company currently reside whether temporarily or permanently.

In your case your company is Spanish.

[AtW]

this isnt required if the uk tax man will provide a certificate of tax residency. These are not always easy to obtain.

Can take a month to obtain, that if you manage to find a handful of people who are allowed to do it.

Spain is using all sort of tricks to keep the money - for example they've got two different VAT numbers: internal for Spain, and those that are external and could be used for VAT free trade within EU, obviously it's done to make it harder for other EU members to sell stuff to Spain. EU should have dealt with this bulltulip long time ago.

[clearedforlanding]

@tomtomagain : yes i actually questioned that myself. That is something that makes me feel that what i am saying is totally wrong

@blasterbate: ok if this is the case i will likely open a ltd in Spain (it is called SL) then. Hopefuly i can do it while living a bit in belgium ... problem is that after this project i shall work most of time in uk... what a pain to have to tie company to a specific location. Specially nowdays where mobility is key for software engineer.

Still i am confused about the
"The general rule is you pay tax where your business activity is"
=> i thought this applied to the income tax, not corporate?

blaster could you elaborate on the interesting:
"have a separate set of accounts and place of registration for each country you are in" ?
what is an account and a place of registration ?

The only benefit I know of an SL in Spain is for those who plan on going on the dole there after the contract. I am non resident English, with a home in Ixelles and contract in Spain frequently. Your business in Spain can run in parallel to your UK Ltd, but I don't see any benefit of using it because you are going to end up as an "Autonomo", there is no compliant way out.

Get a NIE, but don't pick a Residencia because the rules now require you to declare your global income as a resident.

The cost of living in ES compared to BE is so dramatically different that you'll probably not grumble too much about the Autonomo taxes and like everyone else you'll be expensing like a mad hatter anyway.

[Confounded]

A company is not like a person with a tax residency, it is expected to have subsiduaries wherever it is doing business. These subsiduaries are then run as independent businesses rather like a multinational.

IBM is a US company, but it is expected to have IBM UK and so on.

Dear BlasterBates,

Are you really saying that a company which operates internationally has to set up another local company in every country where it sends its representatives on an assignment? I am sorry, but this sound absurd. It would be impossible to operate in this way. Do you have a reference / link to a legislation that demands this?

Thank you

[DimPrawn]

That's the great thing about the EU. It just makes doing business so easy.

http://euvataction.org/key-facts/

[BlasterBates]

@tomtomagain : yes i actually questioned that myself. That is something that makes me feel that what i am saying is totally wrong

@blasterbate: ok if this is the case i will likely open a ltd in Spain (it is called SL) then. Hopefuly i can do it while living a bit in belgium ... problem is that after this project i shall work most of time in uk... what a pain to have to tie company to a specific location. Specially nowdays where mobility is key for software engineer.

Still i am confused about the
"The general rule is you pay tax where your business activity is"
=> i thought this applied to the income tax, not corporate?

blaster could you elaborate on the interesting:
"have a separate set of accounts and place of registration for each country you are in" ?
what is an account and a place of registration ?

In simple terms Spain will want both corporate tax and income tax on your revenue in Spain as you will be working in Spain. Therefore you will need to calculate the profit on your contract in Spain subtracting costs from the revenue (what your agent pays you for your Spanish contract), this is what I mean by a set of accounts. You will need to get a tax registration number from a local Spanish tax office (place of registration) and arrange to pay VAT, corporate tax and income tax.

Probably it will be easier to let a Spanish accountant set things up for you.

When you return to the UK you need to go and see a UK accountant.

I think it will be easier to have a separate company for your Spanish contract.

[ASB]

In Europe you can do this with one legally incorporated entity but you are still expected to have a separate set of accounts and place of registration for each country you are in.

I never bothered over 25 years and most of europe. Didnt have issues save for the one with potugal. But more and more places have withholding taxes.

I doubt I was properly legal though.

[Tiresias]

@tomtomagain : yes i actually questioned that myself. That is something that makes me feel that what i am saying is totally wrong

@blasterbate: ok if this is the case i will likely open a ltd in Spain (it is called SL) then. Hopefuly i can do it while living a bit in belgium ... problem is that after this project i shall work most of time in uk... what a pain to have to tie company to a specific location. Specially nowdays where mobility is key for software engineer.

Still i am confused about the
"The general rule is you pay tax where your business activity is"
=> i thought this applied to the income tax, not corporate?

blaster could you elaborate on the interesting:
"have a separate set of accounts and place of registration for each country you are in" ?
what is an account and a place of registration ?

[BlasterBates]

A company is not like a person with a tax residency, it is expected to have subsiduaries wherever it is doing business. These subsiduaries are then run as independent businesses rather like a multinational.

IBM is a US company, but it is expected to have IBM UK and so on.

In Europe you can do this with one legally incorporated entity but you are still expected to have a separate set of accounts and place of registration for each country you are in.

A German accountant pointed this out to me a long time ago .

[SueEllen]

I just had a quick look. Spain operates a withholding tax regime. 24.75% of the gross invoice value should be withheld.

this isnt required if the uk tax man will provide a certificate of tax residency. These are not always easy to obtain.

Won't work for the OP as the UK taxman needs proof that the business is normally based in the UK not just incorporated here.

[ASB]

I just had a quick look. Spain operates a withholding tax regime. 24.75% of the gross invoice value should be withheld.

this isnt required if the uk tax man will provide a certificate of tax residency. These are not always easy to obtain.

[BlasterBates]

Corporate tax shall be done in UK (20%)
Income Tax in the country where the project is (spain),

I dont think there is any issue here but obviously i will need an accountant and some expert,
(the double tax relief shall also work, but for this 3 parties schema i am less than sure ... i would expect only to pay income tx in spain and corporate in uk, but who knows)

You will not be paying corporate tax in the UK, you will be paying that in Spain. You need to register your business in Spain and you need to keep a set of accounts for your Spanish business activities.

You need to see a Spanish accountant.

A business can register itself in several European countries, and needs to pay corporate tax on earnings proportional to business it does in each country.

If you have for example a UK contract and a Spanish contract lets say 50% of turnover in each country, you will be expected to pay UK corporate tax on 50% of your earnings and Spanish corporate tax on the other 50%.

The general rule is you pay tax where your business activity is, and there is no way around that.

If you develop the software in the UK, i.e. you travel to the UK and do the work there and simply deliver what you have produced to your Spanish client, then it is a UK based business subject to UK tax, but that would also apply to your PAYE.

[tomtomagain]

Corporate tax shall be done in UK (20%)
Income Tax in the country where the project is (spain),

I dont think there is any issue here but obviously i will need an accountant and some expert,
(the double tax relief shall also work, but for this 3 parties schema i am less than sure ... i would expect only to pay income tx in spain and corporate in uk, but who knows)

Funny isn't it. You want to live in Belgium for the lifestyle. Spain for the work and the UK for tax purposes.

If you don't live in the UK and don't wish to contribute to the Belgium or Spanish tax authorities why not register in the Cayman islands and pay 0%?

[ASB]

Why do you think the company will be uk resident.? From your description that is unlikely. Under self assessment you are expected to get it right.

dtas can have unexpected consequences and there can be holes in then.

an example is my corporate invoices had 20% withholding taxes handed over. The Portuguese authorities issued a certificate for that amount as personal income tax paid by me.

however I didnt have any personal income which was taxed, since most of it was dividend income to claim that against.

I am not saying you will have a similar issue. Just pointing out unexpected thjngs can happen.