Spanish Tax

Spanish Tax

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Limited company –director is sole employee –electrical installation work.
Unregistered for UK VAT but currently registering because now at threshold.
Contract with UK company for the last 6 months. Next phase of the contract - 5 months for a Spanish company belonging to the same group as the UK company.

As the work is being performed in Spain, is there a need to register for Spanish VAT (IVA)? I know that the basic 'place of supply' rule is that the place of supply for a service is the place where the supplier 'belongs' – in other words, where they normally do business. This would usually be the UK but could be in a variety of different countries.

If work overran to more than 182 days in Spain would that imply residency and Spanish income tax?

UK company has recently offered another contract for next year – UK 6 months / abroad 6 months (not Spain). There are no employee rights as far as I can tell. Would there be an IR35 problem if the total contract was deemed to be 2 years with the UK company? Does it make any difference whether invoices are to the UK or the Spanish company in this case?

What is the best way of keeping things simple without contravening any Spanish/UK tax rules?

Thank you for any guidance or suggestions.

Anon

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Euan's picture
By Euan MacLennan
10th Jun 2008 15:12

Need to register in Spain
Electrical installation work is a service relating to land and as set out in para 4 of VAT 741 , the service is treated as being supplied where the land is situated (Spain), regardless of where the supplier or customer belongs. Your company must therefore register in Spain and charge IVA, unless its income from the work will be less than the Spanish registration threshold.

The director will not become non-resident in the UK for personal tax purposes unless he goes abroad to work full-time on a contract that spans a complete tax year. A company registered in the UK is always resident in the UK for tax purposes. IR35 does not generally apply to work done by UK resident workers outside the UK.

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