Hello everyone,

I have a question (albeit a rather complicated one) about setting up a business in Spain… or not, as the case may be - I’ll explain my situation. I currently live and work full-time in Spain, at the moment for a Spanish company. I do my tax return once a year (my company gives me a “10-T”), I get social security etc. and it’s all straightforward. What I want to do now though is set up my own business. My plan is to stay in Spain as it’ll be an online business so I can do it all from home. However, having researched setting up a business in Spain, it turns out that even to go “autonomo” you have to start paying ?250 a month regardless of whether you’re actually making any money or not, and I don’t think (although it would be nice) that I’ll be making any money while the business is still getting going, so I would be out of pocket from day one. Also, although I speak Spanish, the red tape involved in setting up a business in Spain is, er, let’s say “not fun”.

So… my thought is, as I’m from the UK, I could set up a business there - I’ve spoken to people in the UK and apparently it’s perfectly legal to do that even if you don’t live there anymore, you just need an address in the UK (and there are services to do that). As far as I understand it, I can set myself up as a sole trader for less than ?100 (online too!) and then not have any ongoing payments. I could then pay myself (I need to confirm that) in Spain. I went to the Spanish inland revenue this morning to ask how that works, and I was told that I just declare what I’ve earned in the UK in Spain in my yearly tax return, and that’s it. I wasn’t convinced though (like many Spanish civil servants she gave me the impression that I was interrupting her day, even though it’s her job to work with the public). So I was wondering if anyone else has had experience in this area, from being a sole trader in the UK and moving to Spain to the whole minefield of trying to “do the right thing” and pay tax on your income in Spain even though it comes from abroad. Is it possible to pay income tax and social security and everything with this arrangement?

Any help with this would be greatly appreciated!

Many thanks
D

D

I think most people setting up an internet business as a sideline, whether in the UK or Spain, would not declare/register at all until it began to generate significant sums.  But if you do start running a business from your Spanish home it is a Spanish business and without doubt, if you wish to be above board from the start, you will have to register as autonomo and pay social security, charge Spanish IVA (probably but depends on where clients are, nature of service) and pay quarterly business taxes.  The only way you can live in Spain and run a business but not have it registered as a Spanish business is if there is a minimal Spain component.  Say for example you are a consultant who has clients all over Europe.  If you physically visit the clients to do the consultancy then you could argue that it is not a Spanish business - you just happen to live in Spain but don’t work there.  Your international consultancy could therefore be registered in the UK or anywhere else.  This would free you from having to pay Spanish social security but still any income you earn from the business is declarable in Spain as well as wherever it is registered.  Exactly what you would pay can get a bit complicated as it depends on a lot of factors: where the business is registered, whether it is incorporated, the tax suffered in the foreign country, a tax exemption on overseas earnings, double tax treaties etc etc

Hope that helps clarify things a bit but it’s a complex topic for a quick post.

Hi Advoco,

thanks for your reply. You say if I’m running the business from home it’s a Spanish business - ok, but if all my activity is online, does it really matter where it is? For example if I offer a translation service where the customer interacts with the business exclusively online (that way too I can have customers from anywhere in the world). I know I would be doing all the work from Spain, but does that matter?

I discovered yesterday that you can register (for free) a foreign company with the Spanish social security system so that for example a UK company could pay an employee who was working from Spain and pay social security for that employee. I’m going to speak to social security in Spain to find out more details about this and I’ll post them here when I do.

I don’t necessarily want to avoid setting up a business in Spain as I live here, but as it’s going to be an online business it seems it might be much less expensive to do it in the UK.

I think there are a lot of companies setting up online businesses in Gibraltar as well, mostly for tax reasons as I understand.

There’s something to be said for business nexus being based around the location of the server or host for a website (not relevant for a translation service of course) though, correct?

Ah, that’s something that hadn’t occurred to me, I’ll look into the Gibraltar option. I’m getting the impression from all this investigating that this is something that there isn’t much precedent for, particularly in Spain (a country I unfortunately perceive as still being in 1987 when it comes to the internet <sigh>)

I suggest checking out this article on Gibraltar’s ecommerce and tax situation:
http://www.lowtax.net/lowtax/html/gibraltar/jgietax.html