Owning a company abroad while living in Spain

Key rules

• Test: Spain looks at where the company is really managed, not where its paperwork is.
• Sole owner risk: If you live in Spain and direct a foreign company alone, with no real staff or premises abroad, Spain can treat it as resident in Spain.
• Tax haven companies: A company in a tax haven is presumed Spanish if its main assets or activity are in Spain, unless you prove otherwise.
• Double residence: If two countries both claim the company, the tax treaty between them decides.

Your move can make a foreign company Spanish

Owning a company abroad does not make it Spanish. But if you live in Spain and run it from here, Spain can treat it as tax resident in Spain. The same test applies whatever your nationality: EU citizens, UK citizens with Withdrawal Agreement rights and non-EU citizens are all judged on where the company is really managed.

How Spain decides

Spain treats a company as resident if any one of these is true:

• It was set up in Spain.
• Its registered office is in Spain.
• Its place of effective management is in Spain. This is where the management and control of its activities is centred.

For the third point, the tax authorities look at the facts. They ask:

• Where are the big strategic decisions actually taken?
• Where do the directors live and meet?
• Where does the real day-to-day management happen?

A company with a registered address abroad can still fail the test.

A sole owner who lives in Spain and runs the company from here is the clearest case. Each case turns on evidence of where decisions are made, so keep records that show it: meeting minutes, where directors are based, and who does the work and where.

The tax haven presumption applies if the main assets or rights are in Spain or the main activity is here. You can challenge it with evidence.

What happens if Spain treats it as resident

The company is taxed in Spain on its worldwide income. The general corporate tax rate is 25 percent, with lower rates for small or new companies. It must also:

• Register in the tax census with Modelo 036, which also gives it a Spanish tax number.
• File an annual corporate tax return (Modelo 200) within the 25 calendar days after the first six months following the end of its tax year, which for a calendar-year company is 1 to 25 July, and make instalment payments.
• Keep accounts under Spanish rules and meet reporting duties.

If Spain decides it should have done this earlier, it can go back four years. You would owe the unpaid tax plus interest and a penalty of 50 to 150 percent of the unpaid tax, depending on how serious the case is. Large amounts can also bring criminal exposure.

If two countries both claim the company

A company can end up resident in Spain and in the country where it was set up. A tax treaty between the two countries then decides. Older treaties use effective management as the deciding factor. Newer ones leave it to the two tax authorities to agree between themselves, and the company can ask for that procedure to avoid being taxed twice. The test looks at where key management and commercial decisions are really made.

What to do

Choose before you move, because each choice has a different result:

• Keep management genuinely abroad: real directors and staff abroad take the key decisions, meet there and run the business from premises abroad. The company stays foreign and pays its corporate tax only in its own country. You pay Spanish personal income tax on what you take out of it, as salary or dividends.
• Accept that it is managed from Spain: register the company in the tax census, file Modelo 200 every year and keep Spanish accounts. It pays Spanish corporate tax on its worldwide income, and you pay Spanish personal income tax on what you take out of it.
• Rely on the treaty: if the other country also claims the company, the treaty between the two countries picks one. If it picks the other country, the company is foreign for treaty purposes. If it leaves the choice to the tax authorities, the company asks for the mutual agreement procedure, and until they agree both countries can tax it.

If you hold shares but do not run the company

If you only hold shares and real directors abroad take the decisions, the effective-management test does not make the company Spanish. The company stays foreign. You pay Spanish personal income tax on the dividends you receive and on the gain when you sell the shares, with a credit for foreign tax for tax withheld abroad, and the shares count towards the Modelo 720 report of assets abroad when they exceed 50,000 euros.

If you are a freelancer with a foreign limited company

If you live in Spain and sell your services through a foreign limited company that you alone direct (a UK limited company or an e-residency company, for example), the company is run from Spain, so Spain can treat it as resident here. It owes Spanish corporate tax, files Modelo 200 and keeps Spanish accounts, and you pay personal income tax on what you draw. The alternative is to close the foreign company and register as self-employed (autonomo) in Spain, billing your clients yourself.

Documents you need

• Spanish tax number for the company, needed if Spain treats it as resident and you must register it in the tax census.

• Annual corporate tax return (Modelo 200) for the company, filed with the Spanish tax agency each year it is Spanish resident, together with the instalment payment filings.

• Company accounts kept under Spanish rules, to support the return and meet reporting duties.