Expenses contracting in Spain Expenses contracting in Spain
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  1. #1

    Nervous Newbie


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    Default Expenses contracting in Spain

    Hi guys,

    I have been offered an IT contracting position in Spain (Madrid) for 6 months.

    I happen to be born and raised in Madrid, so I would be staying with my relatives.

    I have a Ltd. Company based in the UK, and I will be just short of the 183 days rule, so I will be paying all my taxes in the UK.

    What sort of expenses can I deduct while staying in Madrid? (Restaurants, public transport, and so on?)

    I understand this has to be a fairly common question, but I did not seem to find anything in the forum. My apologies if there are similar threads.

    Kind regards

  2. #2

    Fingers like lightning

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    Assuming you are correct about the 183 day rule (which is not necessarily a hard and fast rule that you can automatically rely on for every country, so be warned...), then this is your guide:

    http://www.hmrc.gov.uk/guidance/480.pdf

  3. #3

    More fingers than teeth

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    Just be aware that that the 180 day rule does not apply to running your one man company.

    The risk of continuing to pay your tax through your Ltd

    If you don´t tax your self in Spain there will be a risk, it may be a small one but it´s there. At the end of the day it´s not you who decides where you tax yourself, as one foreign tax official told me in no certain terms "Mr Bates we decide not you!"

    The risk free solution would be to tax your contract in Spain and then declare that in the UK. In then end you´ll almost certáinly end up paying UK tax rates. The added advantage of setting yourself up in Spain is that there will be no problem with extensions or repeat contracts.

    Most tax authorities are getting more strict these days, so always beware that what you might have got away with a few years ago won´t be tolerated in the future.

    Some contractors have run their German contracts through their Ltd or a UK umbrella and in spite of the contract being less than 6 months have got into hot water. These contractors didn´t save any tax by running it through the UK it was just they didn´t know any better.

    As one poster said in advice for someone contracting in Ireland. "If you run it through your UK Ltd, you´ll probably get away with it", just be aware of your risk.
    I'm alright Jack

  4. #4

    I live on CUK

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    Quote Originally Posted by ratiotech View Post

    I have a Ltd. Company based in the UK, and I will be just short of the 183 days rule, so I will be paying all my taxes in the UK.
    The 183 day thing is an arbitary rule.

    Some countries let you do it with some restrictions, and others do not. The consequences for getting this wrong are serious and you could end up in jail

    Firstly confirm Spain lets you do it by reading information from their tax office about employees being seconded abroad.

    Next see how the days are calculated. Some countries count the time you first step into the country to do some work until the time you finally leave including any time you spend back in the UK on holiday.

    Then have a good look to see whether you have to ensure control of the company has to be clearly outside Spain - in other words do you need to ensure that you have more than one director etc. If you do make sure you put these measures in place before signing the contract.

    Finally if you are allowed to do so, you need to ensure that you have completed the correct UK forms to ensure that you are exempt from Spanish social taxes. These should be sent off before you start the contract and go off to Spain as they cannot be back dated. (Hint - You can download them online and put them in the post.)
    "You’re just a bad memory who doesn’t know when to go away" JR

  5. #5

    Contractor Among Contractors


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    A lot depends on the willingness of agent / client to acquiesce. I had a Spanish natural, living in UK for a long time, return to Spain and contract through UK company for many years - no interaction with Spanish tax system, paid everything in UK. His main concern wasn't tax, actually it was (avoiding) National Service.

    Re expenses, booklet 480 is a starting point, but there will be a element of pragmatism. So long as you don't take the Michael you are unlikely to get into serious difficulties.

  6. #6

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    Default Thanks for the responses

    Hi guys,

    many thanks for all the responses. I will definitely look further whether the 183 rules is applicable and how it is calculated. The consequences of getting it wrong seem really scary!.

    Thanks also for the 480 guide. I´m reading it throughfully to have a better understanding of all the claimable expenses.

    Regards

  7. #7

    More fingers than teeth

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    Quote Originally Posted by ratiotech View Post
    Hi guys,

    many thanks for all the responses. I will definitely look further whether the 183 rules is applicable and how it is calculated. The consequences of getting it wrong seem really scary!.

    Thanks also for the 480 guide. I´m reading it throughfully to have a better understanding of all the claimable expenses.

    Regards
    If you´re spanish ring up the tax office and ask them. This is by far the best way, at the end of the day either you do it their way or you would have to face a legal battle, and you really don´t want that. If they say no problem or no way then you´ll know. They might say "it depends", and also ask about signing up for a shorter term, in many countrries this is relatively easy, you simply declare your contract income and it´s taxed, no social security or IR35 queries etc.
    I'm alright Jack

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