- Venetia House
UK Company and Resident in Spain
Many questions are asked about tax in Spain as a resident and earning money from a UK business either self Employed or Ltd
This can inadvertently cause the company to be subject to corporation tax in Spain, so in essence paying double the taxes which is not reclaimable, It is much higher than the UK as it is 25% from earning at the start.
IF it isn't the case after much deliberation you will still be liable to pay the tax and reclaim which can take over a year or more.
The most effective way is to become self employed here (autónomo)
This would make bookkeeping and all tax affairs simple and easier, in most cases no vat(IVA) is charged and you can issue invoices the same, after your initial 2 to 3 years depending on circumstance on the lower regime, it does seem a high amount of social security to pay, but hopefully by the end of this period you will be able to meet these demands and not forgetting that it is tax deductible.
Even if you receive dividends from your own Ltd company, the only advantage you would see is when you are earning over €80,000 tax wise in any case.
If you have a long standing company with a supply chain of clients/customers, staff and suppliers, then yes it can be important to keep this going, in this scenario as suggested by a lot of other accountants, you can take a salary and dividends but the tax does not work the same here in Spain as it does in the UK, you do have to still pay tax on these here, you are already paying tax out in the UK, you are still subject to declaring world wide income on the M720, the Spanish then will want to know how much your shares are worth and this will involve getting the business valued as it has to be detailed information on this form.
So I advise to think long and hard about this and consider if you think its not just easier to become autónomo get the advantages of the health, benefit and pension in place for you and the family.