US tax residency + Apartment in Spain

[FixieHartmann]

What do you think about the following setup?
- Rent an apartment in US (east coast)
- Establish an LLC in US
- Use LLC to invoice European company (main / single client)
- Pay taxes in US
- Rent an apartment in Spain
- Spend 7 months per year in US, 5 in Spain, mainly to visit European clients

Would that work or would you get in trouble with Spanish authorities that claim that either you personally or your LLC will become liable for tax in Spain?

From my understanding if you don't spend more than 183 days in Spain, don't have family there and no other ties you should probably be fine on a personal level. However what about the company level - would they claim that you create a permanent establishment?

Anyone has experience with these kind of setups?

 

[Marzio]

would they claim that you create a permanent establishment?

This could be a risk if you are managing a single member LLC from Spain.

5 in Spain, mainly to visit European clients

Especially since it's very clear that you will do business in Spain on behalf of your LLC

 

[FixieHartmann]

This could be a risk if you are managing a single member LLC from Spain.



Especially since it's very clear that you will do business in Spain on behalf of your LLC

Hm, what if I invoice the client directly as sole trader and not through an LLC? Can a sole trader create a permanent establishment?

Just to be clear - my clients will be in another EU country, I won't have any clients in Spain.

 

[Marzio]

Can a sole trader create a permanent establishment?

If he closes contracts on behalf of the company yes.

Just to be clear - my clients will be in another EU country, I won't have any clients in Spain.

it doesn't matter, it matters where you are performing the work.

If your clients are not in Spain why are you staying there for 5 months?

 

[FixieHartmann]

If your clients are not in Spain why are you staying there for 5 months?

Well, I would like to spend a substantial amount of time with the client (e.g. 1 week every month) but preferably not live in the country of the client because quality of life there isn't great and Spain is a lot nicer.

 

[Marzio]

Try to find a way to not have the Spanish yearly apartment rent in your name so Spain will not see any tie to the country.

 

[FixieHartmann]

Try to find a way to not have the Spanish yearly apartment rent in your name so Spain will not see any tie to the country.

Renting it through the LLC would probably make the situation worse, right?

 

[Marzio]

Renting it through the LLC would probably make the situation worse, right?

That would really say "Hey, we are also working from here. Come visit us and bring some sangria"

 

[FixieHartmann]

That would really say "Hey, we are also working from here. Come visit us and bring some sangria"

So, what do you think is the best solution? Simply not rent a flat in Spain / EU at all?

 

[Marzio]

So, what do you think is the best solution? Simply not rent a flat in Spain / EU at all?

You can but i would be staying in AirBnb.

Just find somebody that will do a long term rental through AirBnb, in this way it's not you that are paying the host but Airbnb.

Another option would be to hire somebody in US that works for you so that you can prove that you were not closing contracts but simply doing customer support.

If you are a single member US LLC then you can't say thate you weren't working for five months while in Spain.

Either you avoid any possible tie with Spain or create a stronger tie with US by hiring somebody.

Also: you have this problem when renting in Spain.

https://www.offshorecorptalk.com/threads/spanish-nie.39543/#post-239104

 

[Sols]

Do you have a green card or some other long-stay visa for US? Will you have a SSN?

Having an apartment in Spain puts you at risk of being considered tax resident. Prepare to have to prove your tax residence is in US (and only US), for which an immigrant status US visa and SSN would help demonstrate. Simply voluntarily paying taxes in US might not absolve you of Spanish tax residence.

As mentioned, if you come to Spain to visit clients and the tax authority finds out about this, they can try to make the claim that your business is effectively taking place in Spain since you presumably go back to your Spanish apartment to do work.

This is assuming that Spain finds out about you, which they might never do since the tax authority is quite disorganised. But Spain is quick to dish out tax bills and declare someone tax resident, if they catch wind of something. Secrecy or just evading enforcement by luck aren't strategies I'd recommend. So plan as if the tax authority knows everything.

 

[FixieHartmann]

Well, based on your responses it seems that Spain is not a great place for that kind of setup. I created another thread (How to avoid creating Permanent Establishment in Europe?) to ask for alternatives.

 

[TheCryptoAnt]

Rather use AirBnb if you want to do Spain or choose a different jurisdiction where it dont really matter what you are doing.
Bulgaria, Serbia, Montenegro...

Or you could nomad through the mediterranean.

 

[FixieHartmann]

Rather use AirBnb if you want to do Spain or choose a different jurisdiction where it dont really matter what you are doing.
Bulgaria, Serbia, Montenegro...

Or you could nomad through the mediterranean.

Yes, temporary accommodations via AirBnb etc. would be the alternative.

 

[Radko]

Ok I've read a lot of nonsense, having the apartment rented is not a problem at all, the only potential problem comes if the tax authorities can tell that you are in Spain for more than 6 months, so how do they find out? They look at your electricity bill, water bill, and debit card footprint, if they can see that you've been withdrawing from an ATM for more than 6 months, then you are at risk.
The LLC set up is nice but there's no need for it, although I know a lot of people working in Spain and using an LLC where clients can make payments and wire transfers, so go ahead, if you want to get paranoid, even if there's no need, rent a place in Gibraltar, become a resident there, no taxes on foreign income, the airport is right there and you can cross the border into Spain in no time, thousands of people do it every day back and forth, but no problem renting in Spain either, a lot of foreigner do it, but you'll have to get a NIE as a non-resident to be able to sign the contract unless you use a website to rent, but if you use a Real Estate agency they will ask you to get a NIE (foreign identificación number) or you'll have to find an owner that wants to rent you the place directly.
Hope that help, enjoy!