Opening a new business in Guernsey, Jersey or Isle of Man - any potential issues?

[sadlybroke]

I have a UK-based limited company that provides online services. I own 75% and my wife owns 25%. I am the sole director. My clients are based all around the world. I lived in the UK until 18 months ago, when I moved to Spain. I now have a Spanish Ltd (SL) company through which I pay the social security here. I have a dual UK/EU citizenship.

I just paid a £50k+ bill for corporation tax for the UK company which made me think... I don't live in the UK, I don't get a salary there any more, I have no employees... My business can probably be registered anywhere where there is no corporation tax, such as Jersey, Guernsey or the Isle of Man and I could save those £50k. I still pay the income tax here in Spain for dividends that I draw from my companies and that's fine.

I can gradually transfer all existing clients to the new and Spanish companies easily over a year or so and wind down the UK company. My clients know my services and don't care where the company is based.

Corporation tax in Spain is 25% so I'd rather limit the volume of business that I do through my Spanish company to a minimum.

Before I contact accountants in the Channel Islands, I am wondering if there is anything that I am missing, that could be a serious show-stopper. Has anyone done this? Thanks.

 

[eteb3]

As in all things international, you need specialist advice.

But a quick check of the PWC tax summaries suggests Spain will tax you on your Channel Islands income - assuming you’re not leaving it in the company to retire on later.

Spain - Individual - Taxes on personal income

Detailed description of taxes on individual income in Spain

taxsummaries.pwc.com

PS and when I once investigated something similar, I found I needed an Islander to be a director or secretary or similar and the costs were bonkers: no tax but lots of business for company agents.

Estonia and Ireland have low CT last I looked, though coming under pressure to harmonise with their EU peers

 

[sadlybroke]

But a quick check of the PWC tax summaries suggests Spain will tax you on your Channel Islands income - assuming you’re not leaving it in the company to retire on later.

That's fine, I don't mind paying income tax where I live.
Thank you for your input.

 

[Paul Kelly ICHYB]

That's fine, I don't mind paying income tax where I live.

So use the Spanish company?

 

[Newchodge]

I have a UK-based limited company that provides online services. I own 75% and my wife owns 25%. I am the sole director. My clients are based all around the world. I lived in the UK until 18 months ago, when I moved to Spain. I now have a Spanish Ltd (SL) company through which I pay the social security here. I have a dual UK/EU citizenship.

I just paid a £50k+ bill for corporation tax for the UK company which made me think... I don't live in the UK, I don't get a salary there any more, I have no employees... My business can probably be registered anywhere where there is no corporation tax, such as Jersey, Guernsey or the Isle of Man and I could save those £50k. I still pay the income tax here in Spain for dividends that I draw from my companies and that's fine.

I can gradually transfer all existing clients to the new and Spanish companies easily over a year or so and wind down the UK company. My clients know my services and don't care where the company is based.

Corporation tax in Spain is 25% so I'd rather limit the volume of business that I do through my Spanish company to a minimum.

Before I contact accountants in the Channel Islands, I am wondering if there is anything that I am missing, that could be a serious show-stopper. Has anyone done this? Thanks.

Are you tax resident in Spain?

 

[sadlybroke]

So use the Spanish company?

I'd have to pay 25% corporation tax in Spain on top of the income tax.

 

[sadlybroke]

Are you tax resident in Spain?

Yes. I don't mind paying income tax in Spain. I am trying to find a solution when my company doesn't have to pay corporation tax.

 

[Newchodge]

Yes. I don't mind paying income tax in Spain. I am trying to find a solution when my company doesn't have to pay corporation tax.

As I understand it, any income you receive from wherever in the world would be taxed in Spain. So you can set upa company in a tax haven, paying no corporation tax, but when the company pays you it will be taxed in Spain.

 

[sadlybroke]

As I understand it, any income you receive from wherever in the world would be taxed in Spain. So you can set upa company in a tax haven, paying no corporation tax, but when the company pays you it will be taxed in Spain.

That's absolutely right. Let me illustrate my point though:

Imagine a company has a profit of €200,000. In Spain, the company has to pay 25% corporation tax, so the government takes €50,000. If I draw the remaining profit as dividends, I will get €91,700 after tax.

Now, if the company didn't have to pay any corporation tax and I decided to draw all profits (€200,000) as my income, I would get €119,300 after all income tax is paid.

With this very rough calculation, it seems that if my company was registered in a tax regime with 0% corporation tax, I personally could be €27,600 better off.

 

[IanSuth]

As in all things international, you need specialist advice.

But a quick check of the PWC tax summaries suggests Spain will tax you on your Channel Islands income - assuming you’re not leaving it in the company to retire on later.

Spain - Individual - Taxes on personal income

Detailed description of taxes on individual income in Spain

taxsummaries.pwc.com

PS and when I once investigated something similar, I found I needed an Islander to be a director or secretary or similar and the costs were bonkers: no tax but lots of business for company agents.

Estonia and Ireland have low CT last I looked, though coming under pressure to harmonise with their EU peers

When i was at uni there was a guy from Guernsey sharing a house with a mate - he got several small lump sums as soon as he turned 18 for being the "local" name when people registerred companies.

He seemed to think no downsides so I assume there were many they just hadn't told him as a naive 18 year old

 

[Frank the Insurance guy]

With this very rough calculation, it seems that if my company was registered in a tax regime with 0% corporation tax, I personally could be €27,600 better off.

Setting up a company in a tax haven is not free. You may find it costs more than the €27,600 you think you will be saving!

From my understanding these tax havens work well for large businesses, not ones with turnover of €200k!

 

[fisicx]

When I looked at doing this the cost for doing so were in excess of £100k. All sorts of broker fees, director fees and various registrations. As already suggested, you need to be a big company for this to have value.

 

[SillyBill]

When I looked at doing this the cost for doing so were in excess of £100k. All sorts of broker fees, director fees and various registrations. As already suggested, you need to be a big company for this to have value.

I can vouch for this. We looked at the IoM for some business interests. I was taken aback by the complexity (and the potential consequences for getting it wrong were also worrying) and my conclusion was you'd need to have millions sloshing around to justify doing it. And be quite happy to write large cheques to lawyers and accountants in perpetuity to manage it. I was looking at saving a few tens of £k in tax I thought the U.K. wasn't really entitled to, in the end I'm paying it all here as its not worth the aggro to do otherwise.

 

[sadlybroke]

Thank you for your replies.