Living in Spain having set up as a UK PLC and paying tax in the UK.. is it possibe? Thread poster: Michael Boone
| Michael Boone Spain Local time: 16:48 Member (2007) Spanish to English
I've heard rumours about this sort of thing, nothing more. Would be interested to know if this is possible. I'm currently living in Spain and paying tax and SS there, so this is not a viable option any time soon. I just wondered if anyone has done this (perhaps I've not used the right terms but maybe something similar to this?). This is purely out of curiosity. | | |
People who do things like this usually have no or very limited understanding of international tax and social security legislation and treaties. I'm not sure what the point would be in Spain, as the Spanish taxation level is not significantly higher than the British. Such manoeuvres are more common in high-tax countries. If you have a company registered in the UK but work in Spain, then you need to establish where that company and its employee(s) are liable for income tax, corporatio... See more People who do things like this usually have no or very limited understanding of international tax and social security legislation and treaties. I'm not sure what the point would be in Spain, as the Spanish taxation level is not significantly higher than the British. Such manoeuvres are more common in high-tax countries. If you have a company registered in the UK but work in Spain, then you need to establish where that company and its employee(s) are liable for income tax, corporation tax, social charges and possibly other charges. The first place to look up is the relevant double tax agreement, in the case of the UK and Spain available on https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/507409/spain-dtc_-_in_force.pdf : '1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.' I.e., if the company carries out activities in Spain, it will be liable for tax in Spain. '1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. ' So if that company pays you dividends, they are taxable in Spain. '1. Subject to the provisions of Articles 15, 17 and 18, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.' So your salary would be taxable in Spain. Then you need to find out where to pay social charges. As a resident of Spain, you must abide by Spanish employment and social security law. You'd just end up with all sorts of legal and fiscal entanglements that could come crashing down if the local authorities found out about it, possibly bankrupting you and your company in the process. I guess people who do such things think they are clever, but they are most likely just committing tax evasion. If you live and work in Spain, you need to follow Spanish law and pay Spanish taxes and social charges, and if you don’t like it, it would be better to go and live in a country that offers the conditions you want. ▲ Collapse | | | As far as I know | Jan 29, 2023 |
It is legally possible if one lives in Spain less than 183 days in one year. However after Brexit I am not sure anymore as this is valid (like in my case) for Europe. | | |
Angie Garbarino wrote: It is legally possible if one lives in Spain less than 183 days in one year. However after Brexit I am not sure anymore as this is valid (like in my case) for Europe. Things are much more complicated than simply applying a global 183-day rule, and any such 183-day rule would apply to a natural person, not a company. Brexit hasn't changed anything about income and corporation tax, as such taxes were never subject to EU law in the first place. If one has income, business, companies, tax liabilities, etc. in or from more than one country, one needs to study the implications carefully to avoid the risk of nasty and ruinous surprises later. One may in many cases stay under the radar, but that doesn't mean it's legal. | |
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Michael Boone Spain Local time: 16:48 Member (2007) Spanish to English TOPIC STARTER Thanks for this - I did think as much and was not really conisdering it seriously, thanks again | Jan 29, 2023 |
Thomas T. Frost wrote: People who do things like this usually have no or very limited understanding of international tax and social security legislation and treaties. I'm not sure what the point would be in Spain, as the Spanish taxation level is not significantly higher than the British. Such manoeuvres are more common in high-tax countries. If you have a company registered in the UK but work in Spain, then you need to establish where that company and its employee(s) are liable for income tax, corporation tax, social charges and possibly other charges. The first place to look up is the relevant double tax agreement, in the case of the UK and Spain available on https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/507409/spain-dtc_-_in_force.pdf : '1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.' I.e., if the company carries out activities in Spain, it will be liable for tax in Spain. '1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. ' So if that company pays you dividends, they are taxable in Spain. '1. Subject to the provisions of Articles 15, 17 and 18, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.' So your salary would be taxable in Spain. Then you need to find out where to pay social charges. As a resident of Spain, you must abide by Spanish employment and social security law. You'd just end up with all sorts of legal and fiscal entanglements that could come crashing down if the local authorities found out about it, possibly bankrupting you and your company in the process. I guess people who do such things think they are clever, but they are most likely just committing tax evasion. If you live and work in Spain, you need to follow Spanish law and pay Spanish taxes and social charges, and if you don’t like it, it would be better to go and live in a country that offers the conditions you want. | | | Tom in London United Kingdom Local time: 15:48 Member (2008) Italian to English Residence for tax purposes | Jan 29, 2023 |
Michael Boone wrote: I've heard rumours about this sort of thing, nothing more. Would be interested to know if this is possible. I'm currently living in Spain and paying tax and SS there, so this is not a viable option any time soon. I just wondered if anyone has done this (perhaps I've not used the right terms but maybe something similar to this?). This is purely out of curiosity. You would still be resident in Spain for tax purposes and would have to declare your income from the UK plc as "foreign income". Additionally if the Spanish (or indeed the UK) tax authorities suspected that you were setting up the UK plc with the intention of avoiding taxes, this would have other consequences. | | | you are right | Jan 30, 2023 |
Thomas T. Frost wrote: Angie Garbarino wrote: It is legally possible if one lives in Spain less than 183 days in one year. However after Brexit I am not sure anymore as this is valid (like in my case) for Europe. Things are much more complicated than simply applying a global 183-day rule, and any such 183-day rule would apply to a natural person, not a company. I misread, for a Company is different. My apologies and Best regards | | |
When I decided for family reasons to move back to Lisbon from Brussels I tried for a while to have my company there while living here in Lisbon (not for tax reasons but because transferring the company was expensive) until a lawyer advised me no to. So, finally I dissolved the company in Brussels and started a new one in Lisbon exactly with the same name… | |
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Kaspars Melkis United Kingdom Local time: 15:48 English to Latvian + ... it can be done | Jan 30, 2023 |
One can set a company in the UK if that makes sense from business perspective, for example, one has many clients in the UK that would prefer working with the UK suppliers. Also, you don't need to pay out all profit as dividends immediately. Sometimes it may make sense to wait and pay out in later years, for example, to avoid hitting the higher tax bracket, if you expect that the income may fluctuate over the years. That is completely legal. I doubt that a single transla... See more One can set a company in the UK if that makes sense from business perspective, for example, one has many clients in the UK that would prefer working with the UK suppliers. Also, you don't need to pay out all profit as dividends immediately. Sometimes it may make sense to wait and pay out in later years, for example, to avoid hitting the higher tax bracket, if you expect that the income may fluctuate over the years. That is completely legal. I doubt that a single translator reaches income that makes such schemes worth the trouble. You may save a grand or two but with the extra headache of all paperwork and risk of doing something wrong and incurring hefty penalties. ▲ Collapse | | | Tom in London United Kingdom Local time: 15:48 Member (2008) Italian to English
I always assume that the tax authorities of various countries would, as a matter of course, be watching these discussion forums.
[Edited at 2023-01-30 12:32 GMT] | | |
Tom in London wrote: I always assume that the tax authorities of various countries would, as a matter of course, be watching these discussion forums.
[Edited at 2023-01-30 12:32 GMT] Like they’d have the manpower🙄 | | | Michael Boone Spain Local time: 16:48 Member (2007) Spanish to English TOPIC STARTER making clear | Jan 30, 2023 |
in that case, maybe I should clarify further that i never had any intention of breaking any laws, or of avoiding of evading tax. I was simply asking a simple question: is it feasible. I now know that it is not. I have no intention of doing it. I will be paying my taxes and my national insurance in Spain. My curiosity now satified. Now let's put this to bed! | |
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Michael Boone Spain Local time: 16:48 Member (2007) Spanish to English TOPIC STARTER Please can we just put this to bed | Jan 30, 2023 |
Tom in London wrote: I always assume that the tax authorities of various countries would, as a matter of course, be watching these discussion forums.
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