Autonimo/Self-Employed or Limited Company - in the UK or in Spain?

I am looking for some advice regarding my employment status as a free-lance scientific editor and teacher currently trying to set up in Spain, and how I might best move forward should I wish to register myself as self-employed in the UK or as an incorporated company in the UK (or indeed if its better to do so in Spain, and what my liabilities are). I'll try to explain my situation a bit more clearly now...Thoughts and suggestions welcome!

I was a PhD scientific researcher in the UK and abroad for years, but now for various reasons I have decided not to continue with that type of work directly. I currently live in Spain, and I do some freelance teaching and general editing/consulting in English, and more specifically for scientists/medics etc. with English as a second language, who require very high levels of “scientific English� for their publications. I'm trying to drum up more business in this area and make it my profession. I am also searching for a part time but fixed English teaching job in a language school which will provide me with a basic income while I get the editing business going. If I find something with a contract they will register me in the Spanish social security system and I will be liable for tax and social security payments, which may or may not cause a problem with the free-lance side of my work.

I would like to build a personal business from my science editing (and possibly private teaching). I have looked into the possibility of registering as “autonimo�, the equivalent of UK self-employed in Spain, so that I can gain access to a range of potential customers in universities etc. who will require me to bill them before I can be paid. There are problems with this however: firstly I will be liable to pay 230EUR/month for Social Security + whatever tax I owe on what I’ve earned, and this is regardless of whether or not I earn that much in a month or not (currently my editing income is significantly less). A contact in the Spanish government tax offices has told me that one solution is to register here only for one or two months and to declare all the work have done over a longer period as if it were done only in those months I was registered, then pay the tax and social security on that lump sum, and later de-register for some months. However this is inefficient, leaves bills and payments lingering and requires me to lie on those bills about when the work was done, so I don’t like this option. Secondly, if I did register “autonimo�, and also worked in a school, I would then be paying my Spanish social security twice, and according to English friends of mine in similar situations here, there is no way to re-claim the double payment back from the government, thoguh I'm not sure about that.

I am already in a situation where I have done some editing work, but I cannot be paid for that work since I am unable to bill as “autonimo�, and if I do register, I will lose money on the transaction. I wonder if it is possible for me to bill using my UK national insurance number?

I had taken other advice that it would be best if I managed all my tax and social security affairs through the Spanish system since I currently live here and so it would be more "official" (or perhaps less complicated), in the case that either the UK or Spanish governments decided to "audit" my affairs. However, I now wonder whether it is feasible (and legal) for me to operate my freelance activities abroad as either a UK sole trader with a registered trade mark, or as a registered limited company in the UK (registered to a residential UK address)? According to advice that Companies House gave me, it is possible to incorporate a limited company and live abroad, providing you have a registered office address in the UK. This would also have the advantage that I could keep my “company� as one entity rather than separate ones that I would have to change if I move to another country (for example, to improve my chances of gaining a supplemental income through English language teaching) or if I return to the UK.

Moving to another country is feasible, since the “company� that I propose would have no physical presence, except for me, and a lot of work would come through and be completed through email correspondence. I also anticipate that work will come not only from Spain, but probably globally. This raises the issue of income, which will be primarily Euros with the possibility that payments could come from the USA, UK, China and maybe other countries, in a variety of currencies. Does this make my situation any more complicated, or is it simply a case of converting the currency through the bank or asking for payment made in my currency of choice or through Paypal? Is it even strictly necessary to have a separate business bank account, and would that be have to be in the UK or in Spain? I think it is unlikely that my services would be considered as a “permanent Establishment�, so I don’t think the laws pertaining to PE’s this would kick in, but I’d be grateful for further advice on this too.

I am aware that I can make voluntary NIC and Student Loans payments, and have looked at the rules outlined on the HMRC website, although paying myself through a PAYE system could be useful if I gain a more steady income. I am also aware that there are European laws that, in theory, prevent double taxation, but it seems that this could be difficult to avoid unless I carefully plan and administer my work, and for this I think I will require an accountant, or a solicitor? I'm also seeking advice (in the case that I am able to legally operate out of the UK) on whether it would be better for me to operate as a sole trader or as a limited company? Although I know that incorporating would effectively protect me from personal bankruptcy whereas a registered sole trader does not enjoy this protection, I think there are similar laws allowing the offsetting of company expenses against income for both UK sole-traders and UK Ltd. Companies? However, would these rules would still pertain to me if almost all my expenses are in Spain? It is certainly possible to make the case that it is useful for me to be abroad to gather and do the work, both for freelance teaching, and editing. Also I’m not sure what types of records I would need to keep and how best to keep them, although I think I only have to make one Tax return to the UK per year? I know here in Spain registered companies are required to make a return 4 times a year, and tax is around 25%.

I think I have explained my situation, I know its a lot of information, but I've trued to be complete. I can certainly provide any information I have omitted, I'm getting to the point where I don't know what to do or where to go next to get this going, and I don't want to give up at the first hurdle! Thanks a lot!!!

Dear Masquette,

Welcome to the belegal forum.

Let me just start by explaining that once you live in Spain for more than 183 days per year, you became a Spanish fiscal resident and that you can only be a fiscal resident in one country; not in two.

Once you become a fiscal resident in one country you are in the obligation to inform the tax authorities on your income all over the world.

In Spain , as in the UK , you can be a salaried worker in a company and work as sole trader at the same time. In this case, there will be two social security contributions and you will be liable to pay taxes for both activities. These social security payments are independent from each other and are not considered a double payment, however, at the end of the year when the self-assessment form is filed, those are expenses fully deductible from any income you may have had on that period.


With regards to issuing invoices with your UK national insurance number, I am afraid that this is not possible. You will need to be a registered sole trader in the UK or here in Spain in order to issue invoices. If you are registered in the UK you will have a VAT number assigned and in Spain a NIF ( Numero de Identificacion fiscal, that is normally the same number as your NIE Number).


I believe that your issue is much simpler than it seems: You live in Spain , work for a Spanish company and in addition you have the chance to get additional income with your extra work.
Establishing an international company ´s structure may be a step you can think of once the business has fully taken off. In the meantime, the easier and cheaper option is to keep your affair within one country , Spain or the UK.

You need to consider that registering a company ( in UK or Spain ) would also mean you have to get assistance from an accountant in the UK that will file accounts at the Mercantile Registry as well as the Inland Revenue and that entails costs.

At this point the main issue you would need to consider is whether to register as a sole trader or create a company, and that will be based on the income you make. If you estimate a net income of over 50.000 euros a year you should start thinking about creating a company; if less than that, to register as a sole trader is the most convenient option.


Regards,

Dear Patricia,

Firstly thanks for your reply, it was very very informative! :D Especially as I keep getting conflicting information.

I totally agree, setting up in one country or another is much simpler, although I don't know how to go about registering my "company" name or trademarks so they won't be copied. I think it should be done in Spain, although it would obviously be much easier for me in English, although I can cope in Spanish! I am also nowhere near making 50,000 a year, infact I have very very little income right now, and actually my income is less than I would have to pay if I registered autonimo, so I'd be loosing money...

Do you know if there is any help for people like me setting up? A friend of mine told me that he thought I didn't have to pay the same amount of social security until I earn 3000EUR. Is this true, or is there any other such help? Also, what, if anything can I offset against profits? Eg. cost of housing? Cost of internet (essential for my business)? Cost of travel to and from consulting work? Do I ask/need a gestura, abogado, assesor?

I also am clueless about how to go about (or where to look for the information) becoming autonimo... How to register? I know that I need to make quarterly tax returns. Again, do I need a gestura, abogado, assesor to do this? Do I also need to make an annual tax return?

Also, a silly question, but kinda important... How do I register my "company" name and logos etc so they don't get copied or re-used? In Spain, in the UK? Is it international?

I'm so very clueless its embarassing! I'm just glad that I am good at what it is I want to do for a living, i.e the Editing!

Thanks a lot for your thoughts, suggestions and ideas!

Confused Maria of Valencia! :)

Hi,
I used to have a company in spain and I would like to warn you it is very expensive to set up, close down and run (you still have to pay the 250 euros SS before earnings)
I am now in a similar situation to you and have decided to register as a sole trader in the UK. Although it is not fully correct to do this I want to do things legally without being robbed by the government. If you are charge before earnings this is nothing but robbery in my book. I also cannot afford to pay 250 euros for the right to be able to earn money.
Also as for claiming costs etc in Spain nobody really nows what they are talking about, including the tax office and the laws are contradictory. When ever I had a tax question I would ask 5 different people (no exaggeration) and I may get three different answers. So I had to choose the answer that got the most people behind it.
Spain is a nightmare to pay tax and do BOOKS in.

Hi, thanks for your reply. Indeed it does sound like you are in a very similar situation to me! Its very frustrating, and as you say, it seems nobody actually knows what they are talking about. I totally agree with you about the "robbery" of paying despite earnings, and also, like you, I can't afford to pay 250EUR+ for the right to earn money honestly! However, I was told that since I live outside the UK more than 180 days in a year I am obliged to sort out all my tax and books etc. in Spain and cannot do it in the UK. I'm still waiting to find out if I can indeed earn up to 3000 EUR with out paying SS and registering with hacienda, just the companies paying the tax... Though I don't know how that would work with the IVA + I.R.PF that I think I have to pay... It seems impossible to get any sound and useful advice!

Hello Masquette,

We are concerned that the amount of information you require might confuse you even more , and it will probably be better to contact us directly or make an appointment with a gestoria around you area to clarify.

In the meantime please read the different areas you will need to consider in order to became a self-employed worker in Spain.

In order to become a self-employed worker in Spain you will need the services of a gestor (similar to an accountant). They will register you with the Agencia Tributaria (Inland Revenue Office) as being self-employed and will do your quarterly and annual accounts. Make sure you choose a professional English speaking gestoria as you will be relying on them to calculate your IVA (VAT) and tax returns each quarter.

As a self-employed you will have to pay by direct debit your social security fees each month. This means that you are entitled to make use of the "national health" system and also receive a pensioners´ benefit when you retire. There are social security discounts and their amount can vary in relation to your age and special circumstances.

You will have to issue invoices for the services you render and you will have to keep proper records of them. If you are invoicing a company as a self-employed you will also have to include Impuesto sobre la Renta de las Personas FÃ*sicas (IRPF).

As a self-employed you pay tax and your IVA (VAT) every quarter. Then, at the end of the fiscal year, that runs from January to December, you need to have your annual accounts done although they are not submitted until June of the following year. You are required to pay 20% tax on your income (after expenses have been taken into account) each quarter.

Note that the expenses that can be offset against your profit must be related to the business so housing costs ( mortages, rental fees ) cannot be included unless the business is run from your house. However, (petrol, maintenance, etc) for most jobs in Spain as a self employed individual and telephone bills, can only be deducted in a 50% of the expense as they assume a 50/50 split between your job in Spain and your personal life.

When invoicing a company you include a deduction of 15% IRPF which means that the company you invoice retains the 15% of the tax on your behalf and pays it at the end of the year. You then need to make up the additional 5% each quarter, however if more than the 75% of your invoicing are related to a company and they deduct the 15% IRPF you are not in the obligation to pay 20%. tax on your income mentioned earlier.

You must hand your invoices each quarter (payments in and out) to your gestoria or tax/fiscal advisor so that they can calculate your IVA bill and your tax bill. This is done each quarter and at the end of the year everything is totalized to find out whether you owe additional tax or are due a rebate.

I hope this information has been useful and please feel free to contact us via our website contact form should you wish to have more specific information.

Best Regards,

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.

Quote:

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Originally Posted by Unregistered

Hi,
I used to have a company in spain and I would like to warn you it is very expensive to set up, close down and run (you still have to pay the 250 euros SS before earnings)
I am now in a similar situation to you and have decided to register as a sole trader in the UK. Although it is not fully correct to do this I want to do things legally without being robbed by the government. If you are charge before earnings this is nothing but robbery in my book. I also cannot afford to pay 250 euros for the right to be able to earn money.
Also as for claiming costs etc in Spain nobody really nows what they are talking about, including the tax office and the laws are contradictory. When ever I had a tax question I would ask 5 different people (no exaggeration) and I may get three different answers. So I had to choose the answer that got the most people behind it.
Spain is a nightmare to pay tax and do BOOKS in.

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It's a complete mess here. We tried to do things right and simply put, it's not worth it. The 250€ a month before you earn is a killer, followed by trying to employ people... a nightmare. We had extra work for our employee which we TURNED DOWN! To pay and extra 250€ to the worker cost us an extra 100€ in Social Security.... AND they had to contribute.

Stay clear until the country enters our century.

I am an artist and am having success selling my work. I have a gallery that want to sell my work for me and I wish to produce posters and prints for them. I too cannot afford the autonomo, it is ludicrous to inflict such a charge in a country with such low wages and high unemployment. Ã* was also thinking of becoming self employed in the UK. Is it easy to do and would I be then able to sell to a wider market, shops, museums etc? How would I put everything through the books if I live here? I doubt I would make more that 20 000 per year.

Hello,

I have a question that I believe belongs to this forum and I hope you might be able to help me.

My girlfriend is a Spanish national (and resident). She is a dentist, but she works as a self-employed person (because she works for various clinics). She comes to UK every week and she is half week in Spain and half week here. She was offered a 1 day job here as a dentist and she decided to accept the offer (as a starting point to have UK experience and to move here permanently and work for more clinics just like in Spain).

So the actual situation would be that she would work Monday-Wednesday in Spain (as a registered self-emplyed) and one day here. What is the correct way to address this situation? I assume she has to register in UK as self-employed as well? If so, does she has to make a Tax Statement in UK as a self-employed person too (or only in Spain)? And in which country should she pay the taxes (to avoid double taxation)?

I assume that the answer is that she has to be registered as a self-employed in UK as well as in Spain and that she has to fill Tax statement in both countries. However in only one to pay tax from both countries incomes (probably Spain as works more there and is a resident there) - or potentially pay tax in UK as well but later ask the tax to be returned so that the same income is not taxed twice.

Can someone advice me on this specific situation please?

Thank you very much.

Lukas

Dear Lukas

Your girlfriend doesn't need to register in both countries. If she is already registered in Spain as sole trader, she only needs to invoice the UK Company for the work she does there.

The income generated will be included in her VAT ( IVA in Spain ) and Income Tax return Declaration ( IRPF ) here in Spain.

Anyhow, if she paid taxes in the UK, she could set these off against her Spanish tax bill. Her accountant in Spain will make all the necessary arrangements.

I recommend her to keep record of the number of days she is out of Spain working as she will get a reduction on her yearly tax.

Regards,

Is this arrangement ok for teaching English in Spain?
I already have UK LTd company owned 100% by myself (since 2002).
My daughter and myself are both directors and she is in the uk. (This way the spanish authorities won't be able to say the company is manged form Spain -IS THIS CORRECT)
I nomally pay myself dividend from the earnings of my LTD
Declare corporate tax for those dividends in UK
Please could you explain?
Are the following 2 different options?
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.
Bill the LTD for management expenses once a year (can this be my accountants fee and my admin fee)
Pay autonomos only for this month every year.
Who or what are the autonomos?
What about social security payments?

Thanks

Hello Julia57,

We are not very knowledgeable in the field of language teaching services and the way they are taxed in Spain. I recommend you to make some research in specific websites about investing and operating businesses in Spain that may be able to offer exact information for your particular case if you contact them; for instance Invest in Spain ( ICEX, public corporation ).

Also, the Office for Economic & Commercial Affairs in the Spanish Embassy in London can offer assitance.

Alternatively, perhaps another forum member can share any information he may have.

Regards,

Hi. I'm an english national living in spain. How would i go about setting up as a sole trader in the uk? I have somebody ready to design my website. I just meed to know all the steps i have to take to register as a sole trader and start paying taxes in the uk rather than in spain

Many thanks

Quote:

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Originally Posted by Unregistered

Hi,
I used to have a company in spain and I would like to warn you it is very expensive to set up, close down and run (you still have to pay the 250 euros SS before earnings)
I am now in a similar situation to you and have decided to register as a sole trader in the UK. Although it is not fully correct to do this I want to do things legally without being robbed by the government. If you are charge before earnings this is nothing but robbery in my book. I also cannot afford to pay 250 euros for the right to be able to earn money.
Also as for claiming costs etc in Spain nobody really nows what they are talking about, including the tax office and the laws are contradictory. When ever I had a tax question I would ask 5 different people (no exaggeration) and I may get three different answers. So I had to choose the answer that got the most people behind it.
Spain is a nightmare to pay tax and do BOOKS in.

---

Hello

Your question is related to Fiscal and Legal issues to be dealt with in the UK and therefore this is not the best forum to raise the question as it is focused on Spanish Law.

I can refer you to an UK accounting office that will be able to answer your questions. Feel free to drop us an email via the contact form to get this information.

Regards,

Hi,
I too have the same problem. I am a UK national living in spain for the past 15 years and currently have a job here. But I also want to setup my own online business doing freelance graphic design work (for global customers using paypal). But becoming autonomo and paying the 250 a month here is spain is crazy if I will only be getting a income of 100 or so a month to start with before business takes of. I would like to know if it is possible to register as a sole trader in the UK (and the taxes from income will be paid there) while I do the work living here in spain. Would it be wise to open a UK bank account and maybe even register the company in a relative who is already living there (how would this affect them if they are already working)?

thanks