Set up and run UK business whilst living in Spain

[fishwebby]

Hi,

I'm going to set up a business but I need some advice, hopefully someone can help. I'm from the UK but a few years ago I moved to Spain, and have been working there but now I want to set up my own business. It's going to be web-based and run from home, so I was wondering if I could set it up in the UK but still live abroad. I've looked into setting up a business in Spain but 1) the red tape is horrendous (I do speak Spanish but it's still an arduous process) and 2) right from when you set the business up you have to pay €250 a month to social security regardless of whether you're earning anything or not. Tax on any income comes on top of that so as you can imagine (at least initially until I'm earning enough) I'd rather not do that.

From reading other threads in this forum it seems that there's no problem from a legal point of view having a UK registered company but living in Spain, but how does it work from the point of view of getting paid? We could potentially have customers from anywhere (it'll be an online service), but I assume that all money collected would then go into a UK bank account - at what point would I pay tax on it? In the UK? What would happen in Spain (also how would I pay myself?), would they want to tax me on that income too? I'm not looking to escape income tax but I just want to make sure such an arrangement is possible (and for example Spain wouldn't insist on me setting up the company there).

Could anyone offer any advice on whether it's something I could do? Any help would be greatly appreciated!

Many thanks
Dave

 

[QuickHomeBuyers]

I am not entirely sure but I would have imagined you have to be a UK resident to have a UK bank account.

 

[Big Pete]

Hi,

I'm going to set up a business but I need some advice, hopefully someone can help. I'm from the UK but a few years ago I moved to Spain, and have been working there but now I want to set up my own business. It's going to be web-based and run from home, so I was wondering if I could set it up in the UK but still live abroad. I've looked into setting up a business in Spain but 1) the red tape is horrendous (I do speak Spanish but it's still an arduous process) and 2) right from when you set the business up you have to pay €250 a month to social security regardless of whether you're earning anything or not. Tax on any income comes on top of that so as you can imagine (at least initially until I'm earning enough) I'd rather not do that.

From reading other threads in this forum it seems that there's no problem from a legal point of view having a UK registered company but living in Spain, but how does it work from the point of view of getting paid? We could potentially have customers from anywhere (it'll be an online service), but I assume that all money collected would then go into a UK bank account - at what point would I pay tax on it? In the UK? What would happen in Spain (also how would I pay myself?), would they want to tax me on that income too? I'm not looking to escape income tax but I just want to make sure such an arrangement is possible (and for example Spain wouldn't insist on me setting up the company there).

Could anyone offer any advice on whether it's something I could do? Any help would be greatly appreciated!

Many thanks
Dave

As long as you have elected to maintain taxation etc in the UK and the business and all the banking etc is in the UK The business is registered UK etc .. then your ok..

If you set up a office etc in Spain then you will HAVE to pay them ..so keep it low key and you should be ok

 

[fishwebby]

Thanks for the replies - when you say low key, does that mean that it's not strictly legit? (as in, as long as the Spanish authorities don't find out, it's no problem?)

Cheers
Dave

 

[cjd]

This is the sort of question that really needs professional advice but my guess is that if your actual place of business is the UK and you're paying UK taxes the fact that you live in Spain shouldn't matter. You're a reverse nom-dom

If it's any help, we have a lot of customers doing it - several web designers and SEO types because they can actually be anywhere - they use our UK phone numbers which ring their phones no matter where they are.

 

[fishwebby]

Ah ok, that's good to know - I'll try and find someone that's doing it then see what they can tell me.

Thanks!

 

[Big Pete]

Thanks for the replies - when you say low key, does that mean that it's not strictly legit? (as in, as long as the Spanish authorities don't find out, it's no problem?)

Cheers
Dave

What i mean is the Spanish can be funny buggers .. If you had a warehouse etc , they would argue you should be Spanish registered and pay them..

Legaly its fine but sometimes the Spanish run roughshot over what is right or wrong and there way is,, heres the bill pay it or else ... and arguing with them is a uphill battle.

Thats why i say just be sensible ..

All your business money use the UK bank only . . and working from home on the internet you will be fine ..

loads do it ..

 

[liz342]

If you are a Spanish resident then I think your have to declare your world wide income to Spain not the UK. It doesn't matter where the money is paid to you but it is Spain who will want the tax. That means IVA currently at 16% on your income and then the tax on top

 

[Big Pete]

If you are a Spanish resident then I think your have to declare your world wide income to Spain not the UK. It doesn't matter where the money is paid to you but it is Spain who will want the tax. That means IVA currently at 16% on your income and then the tax on top

Thats why you must keep your British roots .. Rule Brittania and all that

 

[liz342]

I guess it depends on circumstances. If you can keep below the radar great but if not it gets difficult even with a UK address.

 

[Ray_Stewart]

You should have a word with a Spanish accountant about tax immediately. I know in France if you are resident for tax purposes in France then all your worldwide income is subject to tax in France after allowing for double taxation treaties with the other countries your income arises in.

There is a high profile arguement going on here at the moment with a certain peer in the house of lords. He is resident here in the UK but claims he is domiciled in Belize. Under UK tax law this means he only pays tax on his UK income and not on the untold sums in various countries around the world. So if you had a UK company and declared your UK income here you will not be taxed on any other income because you are now domiciled in Spain. But I don't think spain is so accomodating.

It is vital you check up professionally on this or you could easily end up the wrong side of spanish prison bars if you knowingly flout their system.

 

[fishwebby]

That's what my concern is, I want to do things right (but at the same time take advantage of the better conditions for setting up a business in the UK). Would anyone have a recommendation of a professional accountant who might know more about this?

 

[JGOffshore]

You should be allright. The UK company must account for tax in the UK but it can employ you without needing to worry about PAYE/NIC as you don't need to pay that. However you must declare such income in Spain unless you have the five year "Beckham" dispensation. Alternatively you may be able to contract to the UK company if you already have a Spanish business.

You can also receive dividends instead as well as or in place of salary/contract but again you need to declare these in Spain.

 

[yorkshirejames]

Where in Spain are you? (this will dictate whether my man out there is able to assist you).

 

[fishwebby]

I'm in the Basque Country in the north.

 

[supatrainer]

Hello,

My situation is similar : I'm planning on relocating to Spain and setting up a UK LLC. I'm French and I work over the internet as well.

Since I'm not living in France right now I have no reason to set up in France and enter the country's oppressive fiscal system. From my understanding, the Spanish tax systems is no better either. A U.K. setup will work fine for me as it offers good flexibility, minimum red tape and is fully compatible with my U.S.-U.K. customer base. I’m not looking to evade taxes either, just optimize.

My understanding of the situation, based on the information I've gathered so far, is as follows. There are obviously 2 aspects to consider for tax purpose : corporate and personal income.

If you live in Spain more than 183 days a year, then your fiscal residence is Spain. Your company is in the U.K., so its fiscal residence should be considered U.K. About this last point though, care must be given to the issue of 'effective management control' : if you're the sole shareholder / manager then authorities may decide the company's real fiscal residence is outside the U.K. However, that would mean tax losses for the U.K., so there should have little incentive to do so. A U.K. accountant told me that if the company is set up correctly, with a registered office, a bank account, and regular shareholder meetings in the U.K. etc, then this issue should be manageable.

With regards to personal income, anywhere in Europe (and probably in the world), income tax in based on residence. So if residing in Spain (>183 days) you must pay income tax in Spain. So although the company pays taxes on profits in the U.K., you would pay income tax on wages or dividends you receive as an employee and/or shareholder of the U.K. company.

The question I still need to answer is, can you just receive your dividends and pay dividend tax on them as an individual, or do you necessarily need to set up in Spain as an Autonomo as well ? In the latter case, as you said you would need to start paying S.S. (250-300euros/month), and bang, you're dragged right back into the oppressive tax regime… If that’s the case, then you might as well skip the U.K. company and invoice directly from your Autonomo entity in Spain.

If on the other hand, you can just get your income as an individual and pay your taxes on it in Spain, kind of like a pensioner, the question is how much do you pay and what are the other constraints. Also, can you use your U.K. credit card for part of your living expenses instead of transfering all the dividends to Spain ? What happens in this case ?

Cheers

 

[fishwebby]

Hello,

well I spoke to a lawyer based in Spain, and he said that if I was living in Spain, even though I set up a business in the UK, it would be considered a Spanish business because all the work was being done from Spain. So it seems like there's no getting around the 250€ a month (something which lots of other forum posts seem to confirm too). I recently went on a course too here in Spain about setting up a company, and there's so much red tape involved it's almost funny. However alas it looks like I'm going to have to bite the bullet and do it in Spain, although there are advantages to that as I'm living here so the whole social security thing is straghtforward (that's what the 250€ a month are for).

I haven't started the process yet but I'll post back here once I've got things up and running.

Good luck with yours!
Cheers

 

[internetspaceships]

I run a UK company with a spanish office. The employee who works from Spain is a Spanish Domiciled ex pat.

He obtained a "null tax" tax code from the British Tax Office and pays Spanish taxes based upon his earnings.

We pay him gross, with no NI or tax liability to the UK government for his earnings.

 

FAO Fishwebby Dave!

You better make sure HM Revenue & Customs dont investigate your business!!!

Are you based in Barcelona??? John Pawlenko???????

 

[fishwebby]

Hi SpyGirl,

no, not me I'm afraid! I haven't got a business going as such yet, but I am self employed (I've got a year's contract with a company that I was going to work for as an employee, but as I want to start a business we negotiated that I did it as an 'autónomo'). In the end I got a financial advisor to do it all for me, so I all do is keep the VAT receipts for everything and he deals with all the paperwork (which is nice).

Cheers
Dave

 

A bad case of mistaken identity!!!!!

 

[minty75]

Hi,

I just wondered if anyone had worked out the best way of doing this. My wife and I have been running an online UK ltd company for the last 8 years and as this can be run from anywhere in the world we have decided that we would like to move to Spain. We currently pay all our taxes in the UK and our earnings are made up of a small wage each and the rest is paid through dividends. We could easily just be paid through dividends it is not an issue for us.

Our business is run from home so we have no need for business premises and the way our business is set up no one ever knows the location we work from. We have a serviced office and address in London and all our calls are answered by a receptionist and our mail is forwarded on by them.

If we move to Spain I assume as the company is based in the UK and only doing business in the UK we would still have to pay Corporation tax to the UK. Would I be right in thinking if we were residents in Spain we would then have to pay tax on our income from dividends in Spain? Is my understanding of that correct?

Also we have a family member that is also employed by the company that would move with us and would it be easiest to set them up as an Autonomo or can they just be employed by a UK company but pay their tax in Spain?

Also a question I have wondered if spending 183 days in any country makes you resident, how does anyone know that you have spent those days in that country (what with European borders not being monitored anymore?)

Any advice anyone can give is most welcome

Cheers

Minty

 

[fishwebby]

Hi Minty,

running the business from the UK is something I've looked into, as setting it up in Spain is prohibitively expensive at the start (250€ a month just for being self employed, regardless of whether you earn anything or not).

From what I've been told, as far as the UK is concerned, there's nothing wrong at all with running a business but not living in the UK. However, apparently if the Spanish authorities think that your "business activity" is in Spain, then that counts as a Spanish company and should be registered as such.

I don't know about paying income tax in Spain, but I do know there are agreements so that you don't have to pay income tax twice between EU member countries, so that might be worth investigating.

As far as employing someone goes, they can be in Spain but work for a UK company - you can register the UK company with Seguridad Social in Spain so that the UK company would pay the social security for them - I found that out on the Spanish social security website but just had a quick look and couldn't find it. If I come across it I'll let you know.

As for them finding out where you've been living... I suppose borders aren't monitored no, but if they really wanted to I'm sure they could prove you were living in Spain (bank account movements etc.) - whether they had access to this data I don't know, but Spain isn't the most legitimate place anyway when it comes to things like that so I'm not sure I'd risk it.

What you suggest though is something that I thought would be an ideal solution - setting up a company in Spain is too expensive (at least initially), and the red tape isn't too much fun either - so as I'm from the UK, I could set up a virtual office like you have, and as my business would be totally web-based, it wouldn't matter where I was. However I'm coming round to the conclusion that it's not worth the hassle, although that could just be because there's not much information about how to do it / whether it's legal etc.

There's lots of businesses now who's activity is purely web-based, so this must have happened - anyone out there who has done something similar?

Cheers
Dave

 

[Bill Ryan]

I dont know about spain but I have experience of France and it would surprise me if there was any difference.

If you have a UK business you stand to be taxed in the Uk on that. If you are resident in spain as siad before you will be taxed and probably? like France on your worldwide income.

As just mentioned there may be an issue about where you business is actually operating from as well.

You should be able to open a UK Company account but a personal account would be difficult.

Have a serch for spanish internet forums - probably some helpful info on them as there are for France related ones.

 

[minty75]

Hi everybody,
Thanks for the advice so far. I posted the question on both this site and another site specialising in living out in Spain and the general consensus seems to be about the same. On a UK Ltd Company you would pay Corporation Tax in the UK and if you become resident in Spain then your worldwide income would be taxed in Spain.
One point someone did say was they also don't just work out your residence on the 183 day rule; they will also look at where your children live and go to school and again if that is in Spain then you definitely full under their tax regime.
In all honesty you could try and fall under the radar, but I think the easiest for us is going to become resident in Spain and just draw a wage from the UK Company.
I am due out in Spain in July and I am going to organise meeting with a Spanish accountant that specialises in this area. I will post what I find out from that meeting.
Thanks
Minty

 

[Bill Ryan]

The 183 day rule is just one of the tests that are used on decidence where you are resident as you now know.

They will be looking at where you are ordinarily resident. That turns on where your centre of interests lies which includes where your spouse and children live etc.

I think you are on the right track by getting proper advice in Spain.

 

[zerotax]

I'm not sure how it would work with running a UK business from Spain, but the company I work for sets up companies with addresses in Cyprus for people with businesses in the UK. The person with the business can choose to run it from Cyprus or from the UK but it's based in Cyprus due to the tax laws in Cyprus.

If you want more info either take a look at our website (thetaxwizards) or throw any questions at me that you may have and I'll do my best to find out the answers. (It's not my area you see, so I'd have to speak to one of our advisors).

Regards

Ellie

 

[minty75]

Hi Ellie,

Cyprus was an interesting one as it was a country I had looked at previously (Because of the generous tax laws and to see if I could get around Corporation tax). Unfortunately due to the nature of my business it does have to be a UK Ltd company as a lot of our larger clients insist on this so we couldn't get away with it being a Cyprus based company. As soon as you are back being a UK Ltd company you are back in to paying Corporation tax, so the benefits didn't work for us.

I do see how that could work though if it doesn't matter where your company is based.

All the best

Minty

 

[andy's_business]

Hi Dave,

I have just been looking at the thread you started some years ago in regards to having a UK business but being a Spanish resident.

It would be great to hear how you got on, as i find myself in a similar situation now.

Thanks,
Andy

Hi,

I'm going to set up a business but I need some advice, hopefully someone can help. I'm from the UK but a few years ago I moved to Spain, and have been working there but now I want to set up my own business. It's going to be web-based and run from home, so I was wondering if I could set it up in the UK but still live abroad. I've looked into setting up a business in Spain but 1) the red tape is horrendous (I do speak Spanish but it's still an arduous process) and 2) right from when you set the business up you have to pay €250 a month to social security regardless of whether you're earning anything or not. Tax on any income comes on top of that so as you can imagine (at least initially until I'm earning enough) I'd rather not do that.

From reading other threads in this forum it seems that there's no problem from a legal point of view having a UK registered company but living in Spain, but how does it work from the point of view of getting paid? We could potentially have customers from anywhere (it'll be an online service), but I assume that all money collected would then go into a UK bank account - at what point would I pay tax on it? In the UK? What would happen in Spain (also how would I pay myself?), would they want to tax me on that income too? I'm not looking to escape income tax but I just want to make sure such an arrangement is possible (and for example Spain wouldn't insist on me setting up the company there).

Could anyone offer any advice on whether it's something I could do? Any help would be greatly appreciated!

Many thanks
Dave

 

[Ben123]

Hi All

I have a similar scenario. We are moving to Spain soon (with Wife and two small kids). We intend to rent first, then purchase with a mortgage. I guess that if I want to get a Spanish mortgage, I will need to have registered my business in Spain (also work from home online as a sole trader). I want to do things by the book, but I dont want to pay tax twice. I look forward to reading any future posts which might offer me some advice/hints/tips.

Thanks

Ben

 

[Teenie]

I have been following this thread for years and now I find myself today joining the forum as I now find myself in the same position. And I cannot find any answers.

We want to open (due to it´s easier) a UK Ltd company. This will be an online company organising events and teambuilding conferences with 99% of all clients coming from the UK. On behalf of the client we will book their hotels, their activities etc etc, in Spain, france, usa (any where really). All our work will be online but we want to live in Spain and not stay in the UK. All the money we receive will be from UK clients.

Has anybody any experience on living in Spain but running a UK ltd.

Thanks

 

[fishwebby]

Hi,

the only way I can see it being possible is if there's someone in the UK that sets it up for you (or you do it in someone else's name - I know someone that did this, the person in the UK was basically used just for their name and address, although this is somewhat shady). However if you want to legally earn money from that if you live in Spain, you need to be self-employed (autónomo). This isn't too tricky though - you can do it yourself (lots of forms to fill in but the people at the inland revenue have always been helpful) or get a gestor to do it for you. The big downside is the cost, especially if you're income is sporadic or low (hopefully just initially!).

I did consider at one point the possibility of setting it up in Gibraltar, but I never looked into it, perhaps that could be an option?

Good luck if you do try and do something!

 

[fishwebby]

Good point. Not sure how it would all work though. I sometimes get the impression that the rules and regulations for setting up a business aren't flexible (or modern?) enough for internet based businesses, where you can work anywhere. Don't know enough about it though to be able to comment more (although Spain is rather backward for so many things, I'm sure there are people who work in the government who don't even know what ecommerce is!)

 

[PaulJones_1990]

Hi everybody,
Thanks for the advice so far. I posted the question on both this site and another site specialising in living out in Spain and the general consensus seems to be about the same. On a UK Ltd Company you would pay Corporation Tax in the UK and if you become resident in Spain then your worldwide income would be taxed in Spain.
One point someone did say was they also don't just work out your residence on the 183 day rule; they will also look at where your children live and go to school and again if that is in Spain then you definitely full under their tax regime.
In all honesty you could try and fall under the radar, but I think the easiest for us is going to become resident in Spain and just draw a wage from the UK Company.
I am due out in Spain in July and I am going to organise meeting with a Spanish accountant that specialises in this area. I will post what I find out from that meeting.
Thanks
Minty

Hi Minty,

I know it has been a while since you wrote this message. I wanted to ask you how you are getting on with life in Spain and whether you decided to draw an income from the UK company while living in Spain?

I have an online Design and Media company in the UK 'Juan Lopez Limited', which this is also online. I have moved to Spain since January and setting up a new business which will be an online gift shop. I am currently looking at all the possible options.

I originally thought I could run the online site under my Juan Lopez company or even set up a new company in the UK as it's online. I will however be buying stock to Spain to ship out again to where ever the buyers are. This will be operating from my home in Spain however the address that companies house has is a UK based address.

I have recently discovered setting up a company in Spain is expensive. If I were to do this then I may go Self Employed on the module option. How have you managed to get around it? Do you have any contacts that I could use i.e. accountants? oh by the way I live near Benidorm, Alicante if that is relevant. I did go and see an accountant a few weeks ago and she went through all the self employed options and SL options but said I wouldn't be able to run the business under a UK company. Surely there is a way around this if it is an online business?

I would be grateful to hear your experience. Hopefully I will get to hear from you very soon.

Kind Regards

Paul.

E mail: pjones at juanlopezltd co uk

 

[Kelly Willett]

I too am curious as to how it all turned out. I have a Cloud based accountancy and Tax business, i would very much like to move to Spain and continue my business from there. I too can be paid via dividend or salary.