Income tax and NI paymetns it Spain

I am in a very similar position.

With regard to National Insurance, there are exceptions for short periods of time - 1 year or so, 2 years in exceptional circumstances where you may still pay NI in the UK. You need an E106 form i think it is which gives you cover in Spain for what you pay in the UK. However, generally speaking if you are not a UK resident then you cannot pay UK NI. I am still awaiting a response from the Overseas section of the UK DSS on how to get around this to enable me to get affiliated to the Spanish health service. It may be that you have to become automono (self employed) in Spain and pay your own Spanish National Insurance Contributions. As long as you can show you are trading in or doing something i.e. getting paid then you should be able to do this (you can't just be unemployed and decide to pay the contributions)...however, as i say, i am still waiting.

Income tax is a little easier...or not. From HMRC - "If you leave the UK permanently, you are treated as not resident and not ordinarily resident, subsequent to your departure, if your visits to the UK: -
- Total less than 183 days in any tax year, AND
- Average less than 91 days a tax year"

The advice I received from HMRC was to download and fill in form P85 and "The completed form should be sent, to the tax office handling your UK tax affairs, with a request that they issue code NT retrospective to 6th April and reappraise your liability for the year to 5th April 2008 to reflect that your earnings for duties in Spain are not taxable."

If you can show you have moved permanently (sold your house in the uk, bought a house here etc) there is no need to wait a full tax year to prove you are non resident in the Uk. it should be immediate. Any tax paid this financial year while you are in Spain should be repaid and your uk employer should deduct no further tax. You would then declare your income to the Spanish authorities next year and pay the relevant tax on your income for the preceding year. If you live in Spain (and as an EU national you must register if you live here for more than 90 days) and you have an income, you are liable to Spanish tax straight away not after 6 months. the saving grace is that there is an EU double taxation treaty which means you only have to pay the tax once, and you have done...in the UK. Of course, if you get it refunded in the UK you will then have to pay it again in Spain. Simple. :ahhh:

Of course this might all be different if you have any other source of income in the UK, I haven't.

the websites of HMRC are very confusing but the info above is actual advice from one of their technical advisors based on my info - living permanently in spain, been here 6 months, employed by a uk company with no presence in Spain, working from home, over the internet as an IT consultant, paying UK income tax and NI.

I would be very interested to hear any additional or conflicting advice that anyone else has been given!

Thanks for the info - I must say this is exactly how I understood things to be - My only concern is the 16% IBA that I am being advised I would need to charge to the UK company when I "billed" them for my services and pay on to the Spanish tax authorities
Assume if you are in the same position you would need to do this too ?

I'll be in touch with the UK NI people again soon to try and get an answer. The area is very confusing and I find it strange that there is seemingly only the temporary 12 month to 2 year option to allow continued payment into the UK system to get Spanish cover or the autonomo option that requires the charging and payment of Spanish VAT. This strikes me as against the spirit of the EEC which is supposed to allow the free movement of all its citizens throughout the EEA and give them the right to live and work where they please, presumably enjoying proper healthcare entitlements. I shall post again when I have further info.

Jacko,

Surely the UK company will reclaim the I V A (VAT in UK) so it will make no difference to them?

Just spoken to a very helpful man at HMRC Newcastle upon Tyne (+441912037010) who advises that I should be eligible for a "Workers E106 Certificate" in respect of NI, whereby UK contributions would continue as they are but the Workers E106 would be sent and then used to register in Spain with the local health centre to get "normal" doctor/health facilities. To confirm E106 eligibility you need to get form CA8454, complete it and send it to the address on the form. They will then decide as appropriate. I have seen the E106 info before and was concerned that it was only available for one year or a maximum of two. However, I have been advised that this particular "Workers E106" is renewable year on year, indefinitely, as long as your circumstances are the same.

The form is available for completion and printing or just downloading and printing at www.hmrc.gov.uk. Just do a search for CA8454.

Done mine, posting it tonight. We'll see what happens!

I have spoken to Newcastle and been advised the contrary. If you reside/work in a country outside of the UK you must contribute to that country's social security system to have medical cover. Unless your employer has posted you to that country and is prepared to complete form E101 confirming this. Again this is only a temporary situation and is reviewed annually.
I discussed the fact that I would have to declare myself self employed and lose the security of employment but they were not interested at all. Essentially if that is the "local" Spanish direction then we cannot comment.
Please let me know how you get on with your application.
Having read about the E101 it is only an option if you are "habitually" resident in the UK or outside of the EEA and working for a UK Employer
Back to square one !
:cheese:

It is annoying that different advice is coming out of the same office. I will let you know as soon as I have something more regarding my E106 application. They should have the application by now so it is just a matter of waiting..... I hope the advice I was given is correct rather than yours or, as you say, it is back to square one!

Shaggymon
I see from another posting that we share the same corner of Spain - I am in La Cala also - although moving out to Chaparral shortly
Perhaps we should have a beer and swap notes some time in the not too distant future
My EHIC cards expire in October so I either fiddle the system and renew using my sons address or get things sorted out properly here or pay privately.
As you say it makes a mockery of "work anywhere in the EU".
I too have bank accounts in the UK that stipulate UK residents only - particularly for savings accounts for some reason. I have not closed down yet - still using my old address with a divert on the post. Eventually I will use my sons address I think.
Although I believe tax on savings in Spain is 18% but with the double taxation treaty I don't suppose it matters in the long run.
I'm edging my bets on self employment being the end result on the medical cover. Although your current possibility seems better.
Rather than communicate via this site you may as well use my e-mail address davejacks62@hotmail.co.uk - assuming this is not blocked by the forum
Speak soon

Thank god I'm not the only one out there...

I live in the Valencia Region and have now been employed for nearly 12 months with a UK company, working over the internet and still haven't got anything sorted. I've been advised exactly what you write above, and had letters back from HMRC stating an EU directive 13.2(A) of regulation EEC 1408/71 that living in 1 country and working in another you can pay contributions and be entitled to healthcare in the country you reside in, although upon visiting 2 different seguridad social offices to try and register as self employed they have informed me I cannot do this, as I have an employment contract and also recieve a monthly salary. I wrote to Madrid and they informed me I could pay in Spain but that I needed to register my companies NIF number, which obviously they do not have as they are not registered in Spain!

I just written again to Madrid, the centre for non-residents in Newcastle and also the EU to try and get some clarification, but i don't hold my breath.

This is as far as I have got. The National Insurance people who have done an about turn on their advice and said because I work remotely for a UK company I have to pay NI in Spain. I thought AND they originally told me that this would mean I paid in the UK! However, I have now been repaid all my income tax and NI that I paid since moving out here and my company pays me gross (I set aside an amount for tax in a savings account). The tax refund will have to go to the Spanish tax man next year. I'll set something up privately for my pension (I already have two private pensions and a partial old age one) and I have signed up for private health care.

Becoming autonomo is too complicated, from the Foreigners' Dept at Mijas:

"To be able to register for Social Security (autonomos) you first have to visit the Inland Revenue Tax Office in Torremolinos (next to Mcdonalds restaurant), and register there for your fiscal activities licence IAE. Once you have registered for the IAE you must take this and a photocopy to the Social Security office in Fuengirola.
As there is thousands of different activities, we usually recomend, you see a professional to choose which IAE suits best the activity you are to carry out.
The amount you pay for Social Security per month, depends on the IAE you register for, but you are probably looking at at least 180 Euros a month."

...plus I'd have to invoice my employers and they would have to create a presence in Spain to get a fiscal number.

I also have asked HMRC a lot of questions re income tax and NI which they could not answer, they summed up with the phrase "you're not our problem. You chose to move to Spain"!!!!!!!!

All I can say is that I'm glad I'm in Europe. If they don't care when we are all one happy community it must be hell for those that move outwith the EEA!

well I've had another letter back from madrid and from what i can make out it says that if I go to the hacienda they will give me a specical CIF number, however my fiscal says 'don't hold your breath' so when I next have a free day, I'll be off to Orihuela to give it a go! The IR have also written back to say if I still get no joy, send them the letter from Madrid and they will write to them, Heard nothing from the EU.

:-)

Finally registered with social security number, paying social secuity and tax in spain, working in spain for a UK Ltd company.

After nearly 2 years of writing to various offices etc, the only solution was to write to the EU stating EU directive (Article 13.2(a) of Regulation EEC Number 1408/71) and with my personnel circumstances and they in turn wrote to Madrid who issued me with social security numbers. So in theory Madrid now has the process in place and should be able to deal with foreign workers.

However beware:

Being an employee is NOT the same as being self employed and the costs are completely different to autonomo.

The gross salary is calculated as follows:

Figures taken from forms 'tipos de cotizacion' and boletin de cotzacion a la seguridad social'

Total % Employer % Employee %
28.30 23.60 4.70
7.95 6.30 1.65
0.90 0.90 0.00
1.10 1.10 0.00


Totals
38.25 31.90 6.35

I just convert my gross salary each month into euros (at the rate at the time) and then send this in an email to my asesoria and they do the rest.

Anyway keep in touch and let me know how you get on, obviously your circumstances may be slightly different but now they have a process in place it should be easier for anyone else in this situation. Although I would speak to your employer 1st as they may not be willing to pay 31.90% of your salary, I think its only around 12% in the UK, and therefore the remainder may fall upon you.

> :-)

Finally registered with social security number, paying social secuity and tax in spain, working in spain for a UK Ltd company.

After nearly 2 years of writing to various offices etc, the only solution was to write to the EU stating EU directive (Article 13.2(a) of Regulation EEC Number 1408/71) and with my personnel circumstances and they in turn wrote to Madrid who issued me with social security numbers. So in theory Madrid now has the process in place and should be able to deal with foreign workers.

However beware:

Being an employee is NOT the same as being self employed and the costs are completely different to autonomo.

The gross salary is calculated as follows:

Figures taken from forms 'tipos de cotizacion' and boletin de cotzacion a la seguridad social'

Total % Employer % Employee %
28.30 23.60 4.70
7.95 6.30 1.65
0.90 0.90 0.00
1.10 1.10 0.00


Totals
38.25 31.90 6.35

I just convert my gross salary each month into euros (at the rate at the time) and then send this in an email to my asesoria and they do the rest.

Anyway keep in touch and let me know how you get on, obviously your circumstances may be slightly different but now they have a process in place it should be easier for anyone else in this situation. Although I would speak to your employer 1st as they may not be willing to pay 31.90% of your salary, I think its only around 12% in the UK, and therefore the remainder may fall upon you.



Hi wnt
I have just arrived in Spain and am in a similar situation - I work for a uk company with no presence in Spain, via the internet. I have signed off UK tax and am being paid a gross monthly salary. All the info I have found suggests that I have to register as autonomo etc but according to your last post this may not be so... however, I have know idea where to start with this or how to find a gestoria that knows about these types of situations (everyone I have initially enquired too has said autonomo is the only way...) any advice you may be able to give would be really appreciated as I feel totally lost!

Yes it's definitely possible, but I think I may be the only one currently who has managed to do it, if you can post your email address I'll send another reply, which area are you in?

Thanks - I've pm'd you my email address - thanks for any help you can offer!

Its a messy situation for sure and you would think that with so many of us in this kind of situation - and surely growing - there'd be more clarity and consistency in the advice given.

I was advised to set up a Spanish based SL, to invoice my old employers in the UK - I have to put the IVA on the invoice but they don't actually pay it to me. Found an accountant by recommendation and he tells me what retention tax to pay every 3 months. Awaiting latest confusing correspondence from UK tax office (as I still have small income there from rented property etc). Complicated...? Nah...

Maya

> Its a messy situation for sure and you would think that with so many of us in this kind of situation - and surely growing - there'd be more clarity and consistency in the advice given.

I was advised to set up a Spanish based SL, to invoice my old employers in the UK - I have to put the IVA on the invoice but they don't actually pay it to me. Found an accountant by recommendation and he tells me what retention tax to pay every 3 months. Awaiting latest confusing correspondence from UK tax office (as I still have small income there from rented property etc). Complicated...? Nah...

Maya


This appears to be a whole lot simpler but surely then the IVA that is invoiced (although not paid) is owed in Spain ?? Or is there a situation similar in Spain to that in the UK where VAT is only payable once a certain threshold is reached

I am NOT an expert Jacko so have to take the advice of people who are... to my understanding there are reciprocal arrangements that take place when an IVA-registered SL bills a UK VAT reg company that means neither party has to actually pay the tax to each other (even though the rates aren't the same so god knows how it all gets straightened out). So far as I do understand it, there is no minimum threshold, ie every SL is effectively the equivalent of 'VAT registered' in the UK.

Maya

Dear All,

I moved to Madrid from the UK a few months ago. My UK employer has offered me to carry on working for them but from home. They have no presence in Spain.
They have applied to the UK gov. so that I can carry on paying my NIC in the UK & we are waiting for the outcome of the application.
I'm now wondering about income tax. Until now, I had assumed that the inland revenue will tax my salary directly & that would be it. But I just spoke with the Inland revenue & they told me that I'll actually also be taxed in Spain on my income from outside Spain & that treaties to avoid double taxation are not applied on income from employment.....!!!!!
Can you help?
Cheers

I would think it's probably crossed over into qualified advice rather than forum advice you need at this point! But so far as I am aware the double taxation treaty applies to most income, you should only end up paying tax on it once.

I suspect the Spanish tax authorities would however require you to pay autonomos (NI), if you are living in Spain and using Spanish services, it would seem appropriate to contribute? I expect you can continue to pay voluntary UK contributions if you wish, depending on what your long-term plans are,

good luck!

Hello all,

I've been looking at your posts on the whole working in Spain for a UK company and hoping someone can recommend a gestor/accountant that can advise me further.

I am hoping to move to Spain this summer and continue working for clients in the UK - which I bill via my own UK Ltd VAT reg'd company. I was thinking that I could set myself up as Autonomo in Spain and bill my UK company, which bills my UK clients. Then carry on doing my VAT returns in the UK (for the UK Ltd), declaring the EU/IVA tax on my personal invoices from Spain - make sense?
Then have an accountant in Spain to do my IVA returns and Autonomo taxes. This way I'm contributing in Spain and don't have to pay NIC/PAYE tax in the UK.

However, I've noticed that HMRC are changing their rules on EU VAT and 'place of business' - meaning that for my type of services (design & marketing) it doesn't matter that I'm in Spain, it's where the customer is that deems your place of business and VAT liabilities. I'm not quite sure how this affects my plan.

It's starting to get really complicated now! So I'm really hoping someone can recommend a professional in Spain that can advise me. Ideally in the Denia/Javea area.

Many thanks in advance,

Abi

>

However, I've noticed that HMRC are changing their rules on EU VAT and 'place of business' - meaning that for my type of services (design & marketing) it doesn't matter that I'm in Spain, it's where the customer is that deems your place of business and VAT liabilities. I'm not quite sure how this affects my plan.

Abi


The rules changed at the beginning of the year for what the HMRC call cross border B2B (business to business) services. The new general rule - there are exceptions - is that the VAT is due where the customer is not, as before, where the service was provided. In practical terms for you this means that your autonomo invoices would not include IVA because they are to a UK business. However the UK business would account for the payment as if UK VAT were due on it i.e. even though the invoice doesn't include VAT the company has to add it to its VAT on inputs at the UK rate.

Presumably this VAT would be offset against the VAT your UK company charges on its client invoices so I don't think it would affect your plan too much. The plan itself is perfectly OK but, as you will know, does involve paying the Spanish social security and the costs of running the UK company and the autonomo.

I have seen similar set-ups but sometimes with some added bells and whistles to save tax. For example instead of taking all of your income via autonomo invoices you could get the UK company to pay you a salary and some dividends. I know this will open you up to tax in the UK but due to various allowances and reliefs it can work out in your favour.

I just put a little video called "autonomo basics" on YouTube which covers some of these issues although not the more complicated nuances.

Many thanks for that - I'm loging on to You Tube now!

Thanks again,
Abi