An offshore company with multiple directors

[Jlmmmv]

I currently own an SL company in Spain 50/50 (with my brother) and wanted to know the answers on the following questions.

If I move to Andorra, setup a company 50/50 there and we close down the spanish sl and the other owner stays in Spain, would Spain still come after us for taxes on the company? Neither of us are Spanish nationals, we are British.

A few other things to consider are:

We get paid from an entity in Cyprus and Gibraltar only

We have 3 employed staff in Spain.

Everyone else is self employed working remotely from either Spain or the UK.

I would plan to live permanently in andorra and conduct company meetings there only, not in Spain.

Partner is Latina and is applying to yet Spanish passport currently. Not sure if that changes anything.

I would still like to visit Spain when I want but wouldn't want to make the move unless I knew it worked legally and I didn't end up getting Spain chasing me for taxes.

Thanks in advance.

 

[Sols]

If I move to Andorra, setup a company 50/50 there and we close down the spanish sl and the other owner stays in Spain, would Spain still come after us for taxes on the company? Neither of us are Spanish nationals, we are British.

Yes, the company would be tax resident in Spain. Either all of part of its income becomes taxable in Spain.

We have 3 employed staff in Spain.

Especially because of this.

Everyone else is self employed working remotely from either Spain

And this.

 

[Mr Gus]

Is it an online business and location independent? Or do you need to have an office or warehouse in Spain?

 

[Jlmmmv]

We don't need an office in Spain no.

Basically we have an SL in Spain which acts as an administration company to pay people. We are an appointed representative of a financial advisory firm who pays us from cyprus and Gibraltar and we could effectively pay our self employed staff from that entity instead of going through us. This solves one issue.

That would then leave the issue of having 3 staff in Spain who are currently employed by the SL although none of these work from an office, they are all remote. Is it possible to employ these remotely from Andorra? Or they go self employed and work for an andorra company?

If I took a higher share in the andorra company would that change anything?

 

[Mr Gus]

We don't need an office in Spain no.

Basically we have an SL in Spain which acts as an administration company to pay people. We are an appointed representative of a financial advisory firm who pays us from cyprus and Gibraltar and we could effectively pay our self employed staff from that entity instead of going through us. This solves one issue.

That would then leave the issue of having 3 staff in Spain who are currently employed by the SL although none of these work from an office, they are all remote. Is it possible to employ these remotely from Andorra? Or they go self employed and work for an andorra company?

If I took a higher share in the andorra company would that change anything?

Having the 3 employed people switching to working as self employed would be a lot better then having them employed for the Andorran company because that could create PE in Spain potentially, however even if they are self-employed they could be seen as PE because they are factually just employed people, but I have no idea how aggressive Spain is, best thing is just to get in touch with a Spanish tax advisor.

Also I assume the situation between Andorra and Spain would be looked at way more strictly by Spain then for example with an EU country like Bulgaria.

 

[Jlmmmv]

Having the 3 employed people switching to working as self employed would be a lot better then having them employed for the Andorran company because that could create PE in Spain potentially, however even if they are self-employed they could be seen as PE because they are factually just employed people, but I have no idea how aggressive Spain is, best thing is just to get in touch with a Spanish tax advisor.

Also I assume the situation between Andorra and Spain would be looked at way more strictly by Spain then for example with an EU country like Bulgaria.

Thanks for the response. The 3 staff are administrators and we also have an administrator in the UK and recently hired another as a virtual assistant in India. If we kept hiring our future administrators outside of Spain, is that enough to not create PE in Spain?

Let's say it's not, but we close the spanish company and open a company in Andorra. Would they come after my own personal taxes too or just the company taxes?

I've spoken to tax advisors in Spain and Andorra and I have gotten conflicting answers.

 

[Sols]

Spain is not a country to mess with when it comes to taxes. The gist of it is that if you don't like Spanish taxes, don't involve Spain in your structure.

Thanks for the response. The 3 staff are administrators and we also have an administrator in the UK and recently hired another as a virtual assistant in India. If we kept hiring our future administrators outside of Spain, is that enough to not create PE in Spain?

No, it just creates more PEs.

Let's say it's not, but we close the spanish company and open a company in Andorra. Would they come after my own personal taxes too or just the company taxes?

Normally only the company, unless you are personally found responsible and liable.

Having the 3 employed people switching to working as self employed would be a lot better then having them employed for the Andorran company because that could create PE in Spain potentially, however even if they are self-employed they could be seen as PE because they are factually just employed people, but I have no idea how aggressive Spain is, best thing is just to get in touch with a Spanish tax advisor.

Spain is very aggressive. Things slip through the cracks but when they catch someone, they go hard. If caught, the Andorran company would probably end up deemed 100% tax resident in Spain until proven otherwise.

 

[Mr Gus]

Thanks for the response. The 3 staff are administrators and we also have an administrator in the UK and recently hired another as a virtual assistant in India. If we kept hiring our future administrators outside of Spain, is that enough to not create PE in Spain?

Let's say it's not, but we close the spanish company and open a company in Andorra. Would they come after my own personal taxes too or just the company taxes?

I've spoken to tax advisors in Spain and Andorra and I have gotten conflicting answers.

I don't have any experience with Spain nor Andorra but according to @Sols they are very aggressive since you have a location independent business just move everything to Andorra and cut ties with Spain, or stop worrying about paying high amounts of tax.

 

[Jerry1911]

Couldn't he create a middleman company in, say, Cyprus that would be used to hire the staff as freelancers?

 

[Mr Gus]

Couldn't he create a middleman company in, say, Cyprus that would be used to hire the staff as freelancers?

Most advanced tax authorities will probably see trough that as well..

 

[Jlmmmv]

Normally only the company, unless you are personally found responsible and liable.

How do you mean found responsible or liable?

Let's say for example that our employees don't want to move and we maintain the company in Spain and I keep 50% shareholder and move to Andorra myself.

What would happen in the following example:

Company maintains 50% of the profits and pays 25% corporation tax in Spain
I take 25% from Spanish company which is paid to my andorran company and other 25% goes to the other shareholder in Spain where he pays his tax.

Because the PE is in Spain, would the andorran company be able to receive the money, then I pay it to myself without any implications from Spain?

 

[Mr Gus]

How do you mean found responsible or liable?

Let's say for example that our employees don't want to move and we maintain the company in Spain and I keep 50% shareholder and move to Andorra myself.

What would happen in the following example:

Company maintains 50% of the profits and pays 25% corporation tax in Spain
I take 25% from Spanish company which is paid to my andorran company and other 25% goes to the other shareholder in Spain where he pays his tax.

Because the PE is in Spain, would the andorran company be able to receive the money, then I pay it to myself without any implications from Spain?

That would another safe alternative. However you could face exit taxes when you leave Spain. And you will have to sell the shares to your Andorran company.

 

[Jlmmmv]

That would another safe alternative. However you could face exit taxes when you leave Spain. And you will have to sell the shares to your Andorran company.

My understanding is that exit tax only applies if I have been tax resident for more than 10 years in Spain correct? I have been here less than 5.

Also if it did apply, Andorra is an EU state meaning I could apply for an extention of up to 5 years?

You mentioned about selling shares to the andorra company. Why would I need to do that?

If I kept the spanish company and the andorra was purely to receive my own income, doesn't that avoid exit tax?

Otherwise it would seem that Spain would be punishing you just because every shareholder doesn't want to leave Spain

 

[Mr Gus]

My understanding is that exit tax only applies if I have been tax resident for more than 10 years in Spain correct? I have been here less than 5.

Also if it did apply, Andorra is an EU state meaning I could apply for an extention of up to 5 years?

You mentioned about selling shares to the andorra company. Why would I need to do that?

If I kept the spanish company and the andorra was purely to receive my own income, doesn't that avoid exit tax?

Otherwise it would seem that Spain would be punishing you just because every shareholder doesn't want to leave Spain

Andorra is not EU.

Well you own 50% of the shares in a company, the company has a certain value. So the company should be valued to see how much it’s worth. I don’t think the spanish tax authorities would agree for you transfering the shares for free to an Andorran company because they would lose the right to tax, but I don’t know anything about Spain..

Just consult with a local advisor about this..

 

[Jlmmmv]

Andorra is not EU.

Well you own 50% of the shares in a company, the company has a certain value. So the company should be valued to see how much it’s worth. I don’t think the spanish tax authorities would agree for you transfering the shares for free to an Andorran company because they would lose the right to tax, but I don’t know anything about Spain..

Just consult with a local advisor about this..

Thanks will do, the info here has helped a lot