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Can I be UK self-employed whilst resident in Spain?
Thread poster: Neil Ashby

Neil Ashby
Spain
Local time: 21:29
Member (2011)
Spanish to English
+ ...
Apr 20, 2011

Hi all, hope you're having a good day.

I've recently started getting some translating and editing jobs from companies in various European countries. Now, obviously, I would like to send them that vital piece of paper (or email) - the invoice. However, setting up as an 'autonomo' in Spain is extremely complicated and not very benficial for me. The Agencia Tributaria helped me with the 'autonomo' and VAT part but had no clue whatsoever regarding income tax (IRPF) when billing EU countries. Afterwards, to be 100 % legal I would have to pay ~250 euros/month Social Security - simply it is not viable.

Anyway getting to my question; I've decided that I can probably set up as a self-employed person in the UK (I'm a British citizen, but not resident for tax purposes as I have lived and worked as a teacher in Spain for 5 years).

??Can anyone help me on this one - is it OK do that - to be self-employed in the UK without even living or working there? Is it easy? (I've read lots of very helpful and simple langauge UKgov.org information and it appears to be very, very easy - that's what worries me!)??? I would merely charge to my English bank account.

Any advice would be greatly appreciated.

Neil


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Louisa Berry
United Kingdom
Local time: 20:29
Member (2009)
German to English
+ ...
Call HMRC and ask Apr 20, 2011

In general, being self employed in the UK is very easy. Whether you are allowed to be if you are living in Spain is a whole other question I'm afraid I dont know the answer to.

However HMRC have a helpline for the newly self-employed and those thinking about going self-employed. I have used them myself and they are very helpful. I'd expect they would be able to answer your question

0845 915 4515

taken from

http://www.hmrc.gov.uk/startingup/


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Giles Watson  Identity Verified
Italy
Local time: 21:29
Italian to English
Have a word with a Spanish tax advisor Apr 20, 2011

Dr Neil wrote:

Anyway getting to my question; I've decided that I can probably set up as a self-employed person in the UK (I'm a British citizen, but not resident for tax purposes as I have lived and worked as a teacher in Spain for 5 years).

Neil


The local tax authorities may not have the same perspective, though.

Please consider hiring a Spanish tax advisor, preferably one with some experience of self-employed clients and their international business.

That's what I did here in Italy twenty or so years ago when I was in a similar position to yours. I'm still with the same firm of accountants and I have to say their (tax-deductible) advice has proved invaluable on many occasions.


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NR_Stedman  Identity Verified
France
Local time: 21:29
French to English
Technically quite difficult Apr 20, 2011

Hi Dr Neil
I'm not sure about the exact situation in the UK but as laws in different European countries are now relatively similar I can tell you a bit about the equivalent situation in France.
It is possible to have a freelance activity in France and be a resident (i.e. live more than 183 days per year) and pay income tax in another European country provided you can prove that you have what they a "fixed base" in France. This means an office, telephone number and French clients and if possible French roots (family members). You then pay non-resident tax on your earnings in France and a top-up income tax in your country of residence.
This situation may not be as advantageous as it may seem, in particular as regards your health insurance. You may find yourself having to pay social security contributions in two different countries. Also you must always be capable of proving to the Spanish tax authorities that your centre of vital interests is the UK rather than Spain.
As you say that you previously worked as a teacher in Spain and are therefore known to the authorities in that country probably the least risky course would be to become a Spanish Freelancer despite the difficulties!


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SBlack
French to English
+ ...
Six of one... Apr 20, 2011

In other countries, you pay as you go and never feel the pain of contributions being taken off your paycheck like you do when you are the one filing those contributions every month. But it all boils down to the same thing, and you need coverage.

When you are faced with a healthcare issue, or any other reason to call on social security, you remember why the fund exists. If you are in any country for the medium to long term, the benefits of paying into the local social security system outweigh the difficult transition.


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Bea Geenen  Identity Verified
Hong Kong
Member (2008)
English to Dutch
+ ...
Tax advisor worth every penny Apr 20, 2011

Hi Dr. Neil,

I'm a Belgian national, resident in Spain and registered here as self-employed (autónomo).

Forget about talking directly to the Spanish tax authorities - although they are always very friendly, they are usually more concerned about their own euros than yours.
Just go talk to an accountant. Most accountants in Spain will not charge you for an initial (or even for a second) interview, so ask around for references and talk to one you feel comfortable with.
The advantages to you? They will know all the various subsidies that are given to self-employed starters like you (really worth checking out). They will also know more about the various tax scales (I believe that the first € 1500 per month are tax exempt in Spain), and about (legal and fun) ways to avoid them.
Once you have a clearer idea of the numbers, you can still make up your mind what to do. But to be honest, you would be the first person I know who prefers to be tax resident in Britain rather than in Spain - usually it's the other way around.

¡Suerte!

Bea


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Phil Hand  Identity Verified
China
Local time: 03:29
Chinese to English
British tax office: it's all about where you actually live Apr 20, 2011

I was facing a related issue earlier this year, and rang up the tax people in Britain to ask them. They told me it really is all about where you are physically resident. If you don't live in Britain, they won't take your money. You can, however, make voluntary National Insurance contributions.

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Neil Ashby
Spain
Local time: 21:29
Member (2011)
Spanish to English
+ ...
TOPIC STARTER
? Not sure what you mean by the local tax authorities may not have same perspective? Apr 20, 2011

Giles Watson wrote:

Dr Neil wrote:

Anyway getting to my question; I've decided that I can probably set up as a self-employed person in the UK (I'm a British citizen, but not resident for tax purposes as I have lived and worked as a teacher in Spain for 5 years).

Neil


The local tax authorities may not have the same perspective, though.

Please consider hiring a Spanish tax advisor, preferably one with some experience of self-employed clients and their international business.

That's what I did here in Italy twenty or so years ago when I was in a similar position to yours. I'm still with the same firm of accountants and I have to say their (tax-deductible) advice has proved invaluable on many occasions.


Thanks for your help Giles,

However I am not sure I understand "The local tax authorities may not have the same perspective, though." Do you mean the Spanish or Uk authorities?
The accountant I have asked so far didn't even know that VAT did not have to be paid on intracommunity services!

According to the HMRC, the UK government do not class me as resident in the UK for several reasons 1) because I do not spend more than 183 days there 2) I haven't lived there or paid income taxes there for any of the previous 3 taxes years 3) I am paying income tax in Spain.....plus more reasons.

My intention would be to be self-employed in the UK AND pay taxes in the UK ANd pay social security in the UK - more than anyting because th e paper work is easier.
I should mention I would not be doing this full-time and therefore would be exempt from taxes in both the UK and Spain due to low earnings.

Another point: Spain and the UK have Double Taxation Agreements - meaning that if I paid my UK income tax and then transferred the money to Spain, the Spanish tax house would not charge me a second income tax.

Thanks for your input Giles, I will consider the tax advisor / accountant but to be honest the translation community seems to be better informed.

Neil


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Neil Ashby
Spain
Local time: 21:29
Member (2011)
Spanish to English
+ ...
TOPIC STARTER
I just want to avoid Spanish bureaucracy, and pay tax and social security in the UK Apr 20, 2011

NR_Stedman wrote:

Hi Dr Neil
I'm not sure about the exact situation in the UK but as laws in different European countries are now relatively similar I can tell you a bit about the equivalent situation in France.
It is possible to have a freelance activity in France and be a resident (i.e. live more than 183 days per year) and pay income tax in another European country provided you can prove that you have what they a "fixed base" in France. This means an office, telephone number and French clients and if possible French roots (family members). You then pay non-resident tax on your earnings in France and a top-up income tax in your country of residence.
This situation may not be as advantageous as it may seem, in particular as regards your health insurance. You may find yourself having to pay social security contributions in two different countries. Also you must always be capable of proving to the Spanish tax authorities that your centre of vital interests is the UK rather than Spain.
As you say that you previously worked as a teacher in Spain and are therefore known to the authorities in that country probably the least risky course would be to become a Spanish Freelancer despite the difficulties!


Thanks Mr. Stedman,

I understand that what you have informed me about freelance activity, non-resident tax and "fixed base" (indeed my family live in the UK - so I could have a phone number at least!). My intention is to pay tax and social security completely in the UK, no problem, it would be a thousand times easier than to do it in Spain, and cheaper. I would continue to pay Spanish social security through my teaching job. UK self-employment National Insurance is £2.50 / week - much more affordable than the Spanish 250 euro / month.
*****The only thing I wish to avoid is Spanish paperwork and Spanish tax offices that don't even know their own rules.****
BTW if you earn less than ~ 800 euros / month (the interprofessional minimum salary as deemed by the EU) then it is not necessary to pay taxes in Spain or any other EU country.

Thanks once again for your time and advice.
Neil


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Neil Ashby
Spain
Local time: 21:29
Member (2011)
Spanish to English
+ ...
TOPIC STARTER
Thanks Bea, good to know I'm not the only one with little faith in La Agencia Tributaria / Hacienda Apr 20, 2011

Bea Geenen wrote:

Hi Dr. Neil,

I'm a Belgian national, resident in Spain and registered here as self-employed (autónomo).

Forget about talking directly to the Spanish tax authorities - although they are always very friendly, they are usually more concerned about their own euros than yours.
Just go talk to an accountant. Most accountants in Spain will not charge you for an initial (or even for a second) interview, so ask around for references and talk to one you feel comfortable with.
The advantages to you? They will know all the various subsidies that are given to self-employed starters like you (really worth checking out). They will also know more about the various tax scales (I believe that the first € 1500 per month are tax exempt in Spain), and about (legal and fun) ways to avoid them.
Once you have a clearer idea of the numbers, you can still make up your mind what to do. But to be honest, you would be the first person I know who prefers to be tax resident in Britain rather than in Spain - usually it's the other way around.

¡Suerte!

Bea


Thanks for your help Bea.


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Jocelyne S  Identity Verified
France
Local time: 21:29
Member
French to English
+ ...
Which taxes... Apr 20, 2011

Dr Neil wrote:

BTW if you earn less than ~ 800 euros / month (the interprofessional minimum salary as deemed by the EU) then it is not necessary to pay taxes in Spain or any other EU country.

Thanks once again for your time and advice.
Neil


I think you may be mixing up your taxes: the above *may* [I have no idea] apply to regular income taxes (what everyone - self-employed or otherwise - has to pay about once a year) but it doesn't apply to the taxes we have to pay as freelancers (which are different in each country).

In France at least, a freelancer pays taxes from the very 1st EUR earned. These taxes cover retirement, healthcare and a whole slew of other important things; they have nothing to do with the income tax the person will pay once a year based on their overall take-home income.

Otherwise and although not an expert, I would find it very odd that you could be a fiscal resident of Spain whilst having your business based in the UK. I would study the question thoroughly in both countries to make sure that the set-up is indeed legal.

Good luck,
Jocelyne


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Timothy Barton
Local time: 21:29
French to English
+ ...
You pay taxes where you live Apr 20, 2011

I really don't think what you're planning is legal, and you could have problems. You're supposed to pay taxes where you live. It makes sense: the pavement on your street is used by you, so you should be contributing to paying for it.

Although not technically legal, if you're earning less than the minimum wage (about 500€ in Spain I think) you can get away with not paying the social security payments. Technically you should be paying the 250€ even if only earning 50€, but there is jurisprudence to say that people earning less than the minimum wage shouldn't have to pay it.

Regarding your tax obligations, be careful too. When invoicing Spanish clients (companies or self-employed people), you have to include a 15% withholding, which they pay to the tax authorities on your behalf, so you're initially paying 15% tax on all your income (note I say income, not profits). During your first three years, you can apply a 7% withholding instead.

If more than 70% of your turnover includes a withholding (i.e. invoices to Spanish companies and self-employed people), then the only other declaration you have to make is the annual income-tax declaration, at which point you will get all your tax back if the amount you earned was less than the threshold for paying tax, but that will be almost 18 months after you paid withholdings on invoices sent in January.

If less than 70% of your turnover includes a withholding, you have to fill in the quarterly "Modelo 130", which charges you 20% on your profits, less the withholdings you've already made.


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Giles Watson  Identity Verified
Italy
Local time: 21:29
Italian to English
Perspectives Apr 20, 2011

Dr Neil wrote:


Thanks for your help Giles,

However I am not sure I understand "The local tax authorities may not have the same perspective, though." Do you mean the Spanish or Uk authorities?



I mean the Spanish tax authorities, who will have their own criteria for deciding whether you are resident in Spain, the UK or somewhere else. Bear in mind that governments these days tend to be a bit short of the readies. They can and do adjust residence and other criteria to get more money out of more people.



The accountant I have asked so far didn't even know that VAT did not have to be paid on intracommunity services!



If you pay for your advice, you have more leverage to complain about its quality.

AFAIR, you do have to pay VAT on intra-EU translation services but you apply the reverse charge mechanism rather than adding it onto the invoice. Of course, you need to be VAT-registered in your country of tax residence to do this.



My intention would be to be self-employed in the UK AND pay taxes in the UK ANd pay social security in the UK - more than anyting because th e paper work is easier.



I considered that, too, but in the end, it seemed cheaper, and much less stressful, to pay for good professional support than run the risks involved in either doing the paperwork myself or going into "tax exile" from Italy.



I should mention I would not be doing this full-time and therefore would be exempt from taxes in both the UK and Spain due to low earnings.



That's another thing to check with a professional (earnings thresholds etc can change). I don't know about Spain but in Italy there have been several schemes over recent years to simplify tax-related red tape for low earners so your professional friend may also be able to help you with any training schemes, grants or allowances the Spanish authorities have put in place.



Another point: Spain and the UK have Double Taxation Agreements - meaning that if I paid my UK income tax and then transferred the money to Spain, the Spanish tax house would not charge me a second income tax.



There may be very specific requirements that have to be fulfilled for that sort of thing so get good advice. As Bea said, the initial "diagnostic" input could well be free.

G.

[Edited at 2011-04-20 16:23 GMT]


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John Rawlins  Identity Verified
Spain
Local time: 21:29
Spanish to English
+ ...
Do the right thing Apr 20, 2011

I think Timothy Barton has given you some very good advice. He also hints at something that he is probably too polite to state directly. Namely, if you are living in Spain then it is your moral and legal duty to pay taxes in Spain on all of your Spanish income. The excuse that it is 'extremely complicated' is neither here nor there.

That's all - class dismissed.




[Edited at 2011-04-20 16:50 GMT]


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Neil Ashby
Spain
Local time: 21:29
Member (2011)
Spanish to English
+ ...
TOPIC STARTER
I think you mean Social Security payments, Jocelyne Apr 20, 2011

Jocelyne S wrote:

Dr Neil wrote:

BTW if you earn less than ~ 800 euros / month (the interprofessional minimum salary as deemed by the EU) then it is not necessary to pay taxes in Spain or any other EU country.

Thanks once again for your time and advice.
Neil


In France at least, a freelancer pays taxes from the very 1st EUR earned. These taxes cover retirement, healthcare and a whole slew of other important things; they have nothing to do with the income tax the person will pay once a year based on their overall take-home income.

Otherwise and although not an expert, I would find it very odd that you could be a fiscal resident of Spain whilst having your business based in the UK. I would study the question thoroughly in both countries to make sure that the set-up is indeed legal.

Good luck,
Jocelyne


I think you are referring to social security payments (in the UK we don't count that as a tax but as Natinoal Insurance Contributions). I'm not trying to avoid that or tax - just Spanish burueacracy.
IN the UK.gov.org's website, online self-employment registration form there is a question - Are you resident in the UK? yes / no .....
To me it all seems strange as well which is why I'm asking for advice / if anyone has experience of this. I am not physically nor fiscally resident but it appears that I may be able to register as self-employed there.

Thanks for your help and support Jocelyne,

Neil


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