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Taxes freelance translator Spain or UK
Thread poster: Lara Walsh

Lara Walsh  Identity Verified
Spain
Local time: 13:56
Spanish to English
+ ...
Oct 4, 2016

I am from the UK but I have not lived there for the past year as I was traveling. I recently moved to Spain to work part time as a Young Learners ESL teacher and would like to do some translating/proofreading in my free time. Does anyone know if it is best to simply link my PayPal to my UK account and declare taxes in the UK or keep everything within Spain?

Thanks


 

Sheila Wilson  Identity Verified
Spain
Local time: 12:56
Member (2007)
English
+ ...
You need to establish your business where you are resident Oct 4, 2016

Lara Walsh wrote:
I am from the UK but I have not lived there for the past year as I was traveling. I recently moved to Spain to work part time as a Young Learners ESL teacher and would like to do some translating/proofreading in my free time. Does anyone know if it is best to simply link my PayPal to my UK account and declare taxes in the UK or keep everything within Spain?

Are you registered as self-employed in the UK, i.e. have you been paying social security contributions etc as a self-employed person? If so, you can be in Spain for up to three months as a visitor, working from your UK base. But after three months you must apply for residency in Spain if you want to stay here. Then you can set up as a freelancer here (autónomo) here and you'll be taxed here and pay social contributions here. Unfortunately, SS here for autónomos is a set rate of around €250 (plus optional extras). Nowadays though you only have to pay €50 for the first few months and then it increases until you get to the full amount. There are also advantages for young people setting up for the first time.

You don't have much choice of where to set up your business - it's where you're resident. Note that official/physical residency is one thing; tax/fiscal residency/domiciliation can be in a different place, although for 'simple' people it's normally the same once things settle down after a move.


 

Lara Walsh  Identity Verified
Spain
Local time: 13:56
Spanish to English
+ ...
TOPIC STARTER
Thanks! Oct 4, 2016

Sheila Wilson wrote:

Lara Walsh wrote:
I am from the UK but I have not lived there for the past year as I was traveling. I recently moved to Spain to work part time as a Young Learners ESL teacher and would like to do some translating/proofreading in my free time. Does anyone know if it is best to simply link my PayPal to my UK account and declare taxes in the UK or keep everything within Spain?


Are you registered as self-employed in the UK, i.e. have you been paying social security contributions etc as a self-employed person? If so, you can be in Spain for up to three months as a visitor, working from your UK base. But after three months you must apply for residency in Spain if you want to stay here. Then you can set up as a freelancer here (autónomo) here and you'll be taxed here and pay social contributions here. Unfortunately, SS here for autónomos is a set rate of around €250 (plus optional extras). Nowadays though you only have to pay €50 for the first few months and then it increases until you get to the full amount. There are also advantages for young people setting up for the first time.

You don't have much choice of where to set up your business - it's where you're resident. Note that official/physical residency is one thing; tax/fiscal residency/domiciliation can be in a different place, although for 'simple' people it's normally the same once things settle down after a move.


I have residency in Spain and pay social security here, so I suppose that answers my question! Thank you very much Sheila, that's very helpful!


 

Merab Dekano  Identity Verified
Spain
Member (2014)
English to Spanish
+ ...
Company Oct 4, 2016

If you are a sole trader ("autónomo" in Spain), you have no choice but to file your taxes or returns in the country of your residence. In fact, you have to reside in Spain in order to be able to set you up as "autónomo".

However, if you set up a private limited Company in UK, nothing will compel you to set up as "autónomo" in Spain; you will be able to invoice through your UK-based Company. You will have to pay:

1. 20% of Company tax in UK (on income - bills and expenses)
2. 19% on dividends in Spain (if you make profit and decide to draw them)

Bear in mind that dividends paid do not count as an expense (you pay Company tax on them; it's not like a salary).


 

mepossem  Identity Verified
Spain
Local time: 13:56
Dutch to Spanish
+ ...
simple solution with EU Oct 4, 2016

https://e-estonia.com/e-residents/services-and-benefits/

you are not exactly going to invoice millions of euros a year, so this might be a solution.


 

mepossem  Identity Verified
Spain
Local time: 13:56
Dutch to Spanish
+ ...
in the UK, go for the following solution Oct 4, 2016

have a look at rapidformations.co.uk to establish a company in the UK. You can get a company, a UK address, and even a paypal email for the company. You can only charge with a valid VAT number, but that should not be too difficult to obtain (online ...).


Merab Dekano wrote:

If you are a sole trader ("autónomo" in Spain), you have no choice but to file your taxes or returns in the country of your residence. In fact, you have to reside in Spain in order to be able to set you up as "autónomo".

However, if you set up a private limited Company in UK, nothing will compel you to set up as "autónomo" in Spain; you will be able to invoice through your UK-based Company. You will have to pay:

1. 20% of Company tax in UK (on income - bills and expenses)
2. 19% on dividends in Spain (if you make profit and decide to draw them)

Bear in mind that dividends paid do not count as an expense (you pay Company tax on them; it's not like a salary).






 

Michael Beijer  Identity Verified
United Kingdom
Local time: 12:56
Member (2009)
Dutch to English
+ ...
Thanks for all the interesting tips everyone! Oct 4, 2016

I happen to be toying with the idea of leaving the UK and moving to Spain for a few years, but after some cursory googling was shocked and horrified at the way Spain treats its freelancers. I've read reports of having to pay up to 50% in taxes (including Spain's national insurance contributions, etc.), which surely can't be true!? I pay very little taxes here in the UK (less than 15%), and wouldn't even be able to afford to live in Spain if some of what I've read is actually true.

So if anyone reading this has actual experience of living in Spain, and making it work financially/tax-wise (while working full-time as a freelance translator), please report here! Any info on people's effective tax rate, when doing it all by the book, would also be very welcome! I'd very much want to pay taxes if I chose to move to Spain as it is the correct thing to do legally and morally, but I would have to be able to afford to do so.

Michael

[Edited at 2016-10-04 13:55 GMT]

PS: I've used the term "effective tax rate" rather loosely above, as taxes isn't my cup of tea. What I mean is: how much, on average, can a person expect to pay in taxes (of any/every kind), if they earn around €30,000 a year from translation, from companies across the globe? That is, including Spain's monthly national insurance contributions, income tax, etc.

[Edited at 2016-10-04 13:59 GMT]


 

Sheila Wilson  Identity Verified
Spain
Local time: 12:56
Member (2007)
English
+ ...
Nowhere near 50% Oct 4, 2016

Michael Joseph Wdowiak Beijer wrote:
I happen to be toying with the idea of leaving the UK and moving to Spain for a few years, but after some cursory googling was shocked and horrified at the way Spain treats its freelancers. I've read reports of having to pay up to 50% in taxes (including Spain's national insurance contributions, etc.), which surely can't be true!? I pay very little taxes here in the UK (less than 15%), and wouldn't even be able to afford to live in Spain if some of what I've read is actually true.


how much, on average, can a person expect to pay in taxes (of any/every kind), if they earn around €30,000 a year from translation, from companies across the globe? That is, including Spain's monthly national insurance contributions, income tax, etc.

Putting it simply - and no doubt in a very misleading way icon_wink.gif - I'd say the following figures are closer:
- €250 a month social security, unless you want extra cover for unemployment and sickness benefits, insurance for accidents causing loss of limbs etc.
- 20% tax on NET autónomo earnings (after deducting Soc Sec, asesor, all normal business expenses etc), paid quarterly
- 20% tax on any other income (pensions, investments etc) within the family unit, NET of various allowances (although the personal allowance is less than in the UK), e.g. we own a second house and as our tenant uses it as his full-time home we only get taxed on 40% of the net income.

You'll have to do the maths. For my part, it's a heavier bill than I'd have paid as self-employed in the UK, and far heavier than I paid in France. But I'm happiest living where I want to live, and to hell with the taxes. No point wasting your one-and-only life being an unhappy rich person icon_smile.gif.


 

Kirsten Bodart  Identity Verified
United Kingdom
Local time: 13:56
Dutch to English
+ ...
Uhm €250 Oct 4, 2016

Seems to be pretty low to me, especially for someone earning more than roughly €1,000 a month. Without really looking into it, Wikipedia mentions 23.6% of revenue in SS contributions with a minimum reference revenue for post graduates of €1,051.10 which amounts to €248-odd in social security contributions for pension and accidents (excl. unemployment, etc.). This sounds much more realistic to me.

So in all likelihood, you'll be paying €30,000 * 23.6% = €590 per month in SS. Obviously the maximum reference revenue for this is €3,425.70, which means that anything above that will be entirely yours (though your profits will go up, cue more income tax, I guess).

No idea about tax rates after these contributions have been taken off (or before, it depends on which system Spain has), though, but an overall tax burden (that's what I think they call it, Michaelicon_wink.gif) of 50% is not really that uncommon.


 

Michael Beijer  Identity Verified
United Kingdom
Local time: 12:56
Member (2009)
Dutch to English
+ ...
Thanks Sheila/Kirsten! Oct 4, 2016

Just sth I found online while looking into this today:

"Unregistered
Guest

Subject: Spain is a joke, do it in the UK
I'm a Spanish national and live in Spain and think Spain is the worst place ever to do business. My advice is the following:
Setup a UK LTd owned 100% by you.
Put a nominee or a parent of yours as the director. (This way the spanish authorities won't be able to say the company is manged form Spain)
Pay yourself dividend from the earnings of your LTD
Declare corporate tax for those dividends in UK
Declare rendimientos del capital from LTD on your Spanish self assessment.
You'll pay taxes but you'll do everything by the book and be free.
There are small variations possible to that, for example you can bill the LTD for management expenses once a year and pay autonomos only for this month every year.
It looks complicated but I actually is very easy once you do it."


(http://belegal.com/forums/showthread.php?3855-Autonimo-Self-Employed-or-Limited-Company-in-the-UK-or-in-Spain&highlight=autonimo )

Hmm, a lot of people seem to be recommending setting up a UK LTD.

@Sheila: I agree with you that I'd rather enjoy my life than waste my time saving pennies. However, I can't move my family (which currently includes my wife, baby girl and dog, and home + mortgage here in the UK) all the way over to Barcelona, only to quickly find that I can't actually afford to stay there and then need to go back to the UK ASAP. I can just about stomach €250/month for SS + 20%, just not €250/month for SS + 30% or 40%. That just wouldn't make any sense any more.

[Edited at 2016-10-04 16:07 GMT]


 

Kirsten Bodart  Identity Verified
United Kingdom
Local time: 13:56
Dutch to English
+ ...
Well your SS won't be the problem Oct 4, 2016

because you are established, so you will have money coming in unlike those just starting out who need to pay up without earning anything. I've always wondered who thought about such a system.

But I think the real killer would be quarterly tax payments. I'm not sure in Spain but in Belgium you get fined if you don't pay this. Even without fines, you get a client who hasn't paid on time, or you get longer payment terms (we're all seeing this develop, and it will increase) and you're running after your bills. To the point where you can't afford to live, courtesy of the government.

With corporation tax at least you even have 9 months after filing your accounts to actually pay up, so even if your client doesn't pay their last invoice on time, you have 9 months to get that money (and even if that doesn't happen, you can still make it up if it's not that big an amount).


 

Sheila Wilson  Identity Verified
Spain
Local time: 12:56
Member (2007)
English
+ ...
SS is for the whole family's health cover Oct 4, 2016

Michael Joseph Wdowiak Beijer wrote:
@Sheila: I agree with you that I'd rather enjoy my life than waste my time saving pennies. However, I can't move my family (which currently includes my wife, baby girl and dog, and home + mortgage here in the UK) all the way over to Barcelona, only to quickly find that I can't actually afford to stay there and then need to go back to the UK ASAP. I can just about stomach €250/month for SS + 20%, just not €250/month for SS + 30% or 40%. That just wouldn't make any sense any more.

Often people forget that if you come to live in Spain and you don't work for one reason or another (there are a lot of early retirees here, for example), nor do you have a state pension from another EU state, then you are obliged to pay for private health insurance. I don't know how much that costs, but it must be a lot if you want to cover absolutely everything except eyes, teeth and 40% of the cost of prescription drugs for the whole family. That's what the €250/month covers (if your wife isn't working so financially dependent on you), as well as a pension somewhere in the future. And no, tax is 20% of net income at the very most. I pay 20% on my net autónomo income but then generally get a refund at the end of the year when personal allowances etc kick in.

@ Kirsten: Surely longer payment terms don't really have any effect month on month, do they? I mean, it's incredibly hard for the first few months, and there's a higher risk of bankruptcy and free credit amounts going through the roof (which is why I NEVER accept longer than 30 days month end), but money should still come in regularly, just as the taxes go out regularly. In a well-run business it shouldn't be a problem. And it does mean there are no nasty 4-figure bills each year.

BTW, you titled a post "Uhm €250", said that was low, then said €248 seemed more reasonable. I'm sure I've misunderstood something there icon_smile.gif.


 

Álvaro Espantaleón  Identity Verified
Spain
Local time: 13:56
Member (2015)
English to Spanish
+ ...
More options Oct 4, 2016

You don't need to register in RETA if your yearly income is below SMI (that's 655x14).

 

Michael Beijer  Identity Verified
United Kingdom
Local time: 12:56
Member (2009)
Dutch to English
+ ...
private limited company in UK / work done in Spain Oct 4, 2016

Merab Dekano wrote:

If you are a sole trader ("autónomo" in Spain), you have no choice but to file your taxes or returns in the country of your residence. In fact, you have to reside in Spain in order to be able to set you up as "autónomo".

However, if you set up a private limited Company in UK, nothing will compel you to set up as "autónomo" in Spain; you will be able to invoice through your UK-based Company. You will have to pay:

1. 20% of Company tax in UK (on income - bills and expenses)
2. 19% on dividends in Spain (if you make profit and decide to draw them)

Bear in mind that dividends paid do not count as an expense (you pay Company tax on them; it's not like a salary).



Hi Merab,

Just wondering about the legality of setting up a private limited company in the UK, but doing the actual work in Spain.

Also, I suppose I'd still have to pay the monthly contribution for national insurance in Spain (which, by the way, I would gladly do).

Michael


 

Michael Beijer  Identity Verified
United Kingdom
Local time: 12:56
Member (2009)
Dutch to English
+ ...
Thanks Alvaro! Oct 4, 2016

Alvaro Espantaleon wrote:

You don't need to register in RETA if your yearly income is below SMI (that's 655x14).


"Sadly", I earn a lot more than that. Anywhere between £20,000 and £30,000 a year these days, depending on how much quiet time I actually get a day in my rather busy household.

Michael


 
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