Category: Uncategorized

Posted on

Finally the system for autónomo contributions has been reformed ! But it’s not going to make many people happy ….

The fixed Social Security contribution system applied in Spain drew much criticism and rightly so. Contributions were fixed regardless of actual income. To pay 250+ Euros a month for a new autónomo who was starting a small business and looking for customers was an incentive not to register and operate their business unofficially. A few years ago the tarifa plana system was introduced which allowed a lower monthly contribution for the first couple of years, which was very welcome to new businesses. But after this initial period, the autónomo was required to pay rate which are very high in relation to most European countries, particularly given the low rates of pay in Spain, and the system in place was still a disincentive for potential new entrepreneurs to start their own business.

From 1st January 2023, the system has been totally reformed and now the monthly Social Security contribution increases in relation to income (non-linear).

The monthly contribution falls in the following range:

Lowest earners (taxable income 670 Euros per month): contribution 230 Euros per month in 2023 falling to 200 Euros in 2025.

Highest earners (taxable income more than 6,000 Euros per month): contribution 500 Euros per month rising to 590 Euros per month in 2025.

The figure of income used for these purposes is the autónomo’s net profit after adding back their Social Security contributions, less a general deduction of 7%.

Previous incentives for newly registered autonomos are still in place but more limited. The monthly contribution is now 80 Euros per month on commencement and lasts for the first year only. After that, the autónomo must switch to the regular contribution regime, unless their income is less than the national minimum wage (SMI), in which case they can make reduced contributions for the second year.

So obviously this is not going to be a very popular reform because pretty much everyone will end up paying more than before !

For more information and assistance in registering as an autónomo and ongoing tax compliance, please visit our website.

Posted on

2022 Declaration des Revenus for the tax year 2021

The annual tax filing system for the French income tax returns (Declaration des Revenus) is due to open on 7th April.

Both residents of France, and non-residents with French income such as from property rental, are obliged to submit an annual income tax return.

The French tax year is equal to the calendar year. The presentation deadlines this year are as follows:

Non-residents

Manual returns: 19th May

Returns filed by internet: 24th May

For furnished properties: The full disclosure tax regime (Regime Réel) is generally favourable and economically viable to register if you have significant rental income, and your rental expenditure is more than 75% of your rental income. Registration for this regime is not simple or straightforward- processing times by the Tax Office are currently around 3 months or more. Also unfortunately it is quite common that online filing passwords sent to the taxpayer by the Tax Office do not arrive, which causes complications.

For the more simplified Micro Regime, in order to benefit from the increased tax allowance available, yourfurnished property should be registered as a tourist rental (Meublée de Tourisme) at the local Town Hall (Mairie).

For assistance with preparing and filing your annual French tax declaration, please visit our website or contact us.

Residents

For manual returns, the deadline is 19th May.

For returns filed by internet;

24th May: Départements 01 to 19;

31st May: Départements 20 to 54; 8th June: Départements 55 to 976.

Returns can be submitted from the following dates:

Online filing: 7th April

Manual filing: The manual returns are normally released by the first week of May.

After we file your Tax Return, the Tax Office will calculate the tax due and send you a payment notice, avis d’imposition. The date of issue is by late September.

In France there are monthly payments on account of income tax which are based on the income tax bill in the previous year. Any balance of tax due is paid in August / September in your final tax assessment, and this will also be debited directly to your French bank account.

Wealth Tax (Impôt de solidarité sur la fortune)

Residents of France are subject to Wealth Tax on their worldwide net assets, although there are now exemptions available for the first five years of residence, please contact us for details.

Non-residents only pay Wealth Tax on their French net assets.

Eligible assets include property; cash in deposit accounts and other financial investments. Business assets are generally exempt.

You need to declare if the net value of your owned real estate is over € 1,300,000. The deadlines are the same as for the income tax returns.

Wealth Tax is now declared as part of the income tax declaration (2042C).

Posted on

Renta 2021- the time has almost arrived !

The Spanish Tax Office (Agencia Tributaria) online filing system for the annual residents’ income tax returns (Renta) for the tax year 2021 is due to open on 6th April.

In order to file, you need to obtain a reference number for online filing, which can be done by clicking on this link on the Agencia Tributaria website. You can access this with a Digital Certificate if you have one or by supplying the details on your residence card.

Last year we found with several clients that the system, due to programming errors, was not recognising details from their residence cards. If this is the case for you please let us know and we will suggest ways for you to resolve the situation such as giving you instructions to obtain a Digital Certificate.

Residents of Spain are taxable on their worldwide income, according to the provisions of the tax treaty between Spain and the country in which the income arises. If any of your income is taxable in both Spain and the country of source, then you can claim the corresponding international double tax credit in your Renta.

As Agencia Tributaria inspections, especially for foreign residents, are getting more common nowadays, you should ensure that you keep documental proof of foreign income and foreign tax paid for 5 years.

The very last possible date of filing is 30th June, but if you have tax due then you should file your Renta by 23rd June so you can pay the tax by direct debit and not have to go in person to your bank.

If you need help in preparing and filing your Renta for the tax year 2021 then we will be happy to assist you. Our website is europeaccountants.com/spain and our contact page here.

Posted on

Alternatives to Spanish company formation for non-resident companies

In our last article we looked at the difficulties of forming a limited company in Spain and suggested an alternative to individual business owners who are just starting off in business in Spain.

Non-resident companies who are considering opening a Spanish office face similar administrative and bureaucratic hurdles. If you would like to form a Spanish subsidiary of your company, the requirements are even more stringent. You will need to obtain a Spanish tax number (NIF) for the parent company in order to complete the company incorporation. A company director will need to be physically present in Spain for some days to visit a bank to open and activate the company bank account and attend the Notary signing. After all is completed, your local accountant (gestor) will deliver the paperwork to the Tax Office and Mercantile Registry. After around a month, the company incorporation will be complete.

As well as filing company tax returns (Modelo 200), Spanish companies are required to file annual statutory accounts. Thankfully these can now be filed online with the D2 software, but the Mercantile Registries (each region of Spain has it’s own Registry) can be very picky and reject accounts for technical reasons which should really be controlled in the initial filing. It’s classic Spanish bureaucracy and leads to a lot of extra work and some stress for your accountant who has to deal with it and having to explain to you who are rightly asking “why” ?!

We no longer offer a full Spanish company formation service for non-resident companies but would like to suggest an alternative which achieves exactly the same aims. This is the registration of your company for tax and VAT in Spain. You can find further details on our website. The procedure is much more simple and does not require you to physically come to Spain. A Spanish bank account is recommended so that you can pay your tax due directly, however we do offer a tax payment service for those clients that require it.

If your company opens an office, shop or warehouse in Spain it will have what is known as a Permanent Establishment and will then be required to file annual Spanish company tax returns (Modelo 200). There is no further tax registration required for this and you will file these returns under the same tax number (NIF) that you were originally registered for.

As always, feel free to contact us if you have any queries and we will get back to you as soon as possible.

Posted on

Alternatives to Spanish company formation for resident and non-resident individuals

Forming a company in Spain is more complex than in many other European countries. This is mainly because Spain still uses the Notarial system for legalisation of private and public transactions, including purchasing a property.

Therefore, in order to form a limited company (sociedad limitada) in Spain, it is necessary for the shareholders and directors of the company to go to a Spanish Notary to sign the Deed of Constitution. This is only one of the steps necessary to complete the company formation, which includes submitting forms to the Tax Office and finally lodging all of these forms and the company Deed at the Mercantile Registry, who take around a month to finally register the company. So at the end of the day, this process ends up being long, frustrating and also costly for the client. For this reason, in recent years we have not offered full Spanish company formation to our clients.

Recently the authorities have introduced a new online One Stop Shop (CIRCE) for procedures which include company formation. Our experience of forming a company through this system has not been good, due to the fact that a Notary visit is difficult for a Notary, who is a typical Spanish public servant with not much will or necessity to adapt or be flexible, to be part of this online procedure. So we are not recommending the CIRCE system for company formation in Spain.

For an individual, whether they are resident or not in Spain, who would like to form a Spanish limited company, there is a simple alternative, which is a registering as self-employed, autonomo. From a tax point of view, the director may not be at a disadvantage using this route. Company tax is Spain is currently 25%. A non-resident individual operating as autonomo pays either 19% (EU residents) or 24% (non-EU residents) on their Spanish profits, so there is a clear tax saving there, subject to any unmitigated international double taxation.

For residents, the company director-shareholder is going to subject to Spanish income tax on dividends and salaries taken from a company. You can find the latest rates on our website. There is also no dividend double tax credit which means that there is double taxation if the profits are paid out via dividends. Sure, for higher company profits the income tax bands go to a lot higher than the 25% company tax rate. But remember that any money that the director draws from the company for their personal use as a salary will also be taxed at income tax rates.

So really we would be recommending Spanish company formation for residents in the circumstance where the company profits are guaranteed to be, say, at least 50,000 Euros a year, and/or there are going to be multiple shareholders involved in the business. If you are an individual business person just starting off in Spain, when it is very possible that you may make a trading loss or small profit in your first years, it would be much better for you to register as autonomo. It is always possible to move to a full company at a later date once your business and earnings are established.

Note that whether you operate in Spain via a limited company or as autonomo , you will be required to pay monthly Social Security contributions which are a fixed rate and do not depend on the actual profit that your business makes. This also applies to you if you are non resident and will never gain any benefit from the Spanish Social Security system !

In all cases you will be need to open a Spanish company bank account, because the Tax and Social Security offices only accept direct debit payments from Spanish bank accounts.

You can find full details about registering as an autonomo and how we can help you on our website. Registration is online via the CIRCE system and is normally complete within a 2-3 working days.

As always, feel free to contact us if you have any queries and we will get back to you as soon as possible.

Posted on

The new EU VAT E-Commerce Package- big changes are on the way !

Originally meant to be introduced in 1st January of this year, the implementation of these big changes in VAT in the European Union has been put back to 1st July due to COVID-19 and may be delayed even further because of concerns raised by influential countries such as Germany and the Netherlands on whether they can implement the changes on time.

The new law is very complex and you can find full links to the EU legislation on the EU website .

However here is a brief summary of the changes:

For goods imported from outside the EU or sold by non-EU traders, E-Commerce internet marketplaces will be, in certain cases, for VAT purposes deemed to be the supplier of goods to customers in the EU.

Let’s see how this work out in the case of an Amazon trader. So in these cases the Amazon trader will no longer need to collect the VAT on each sale and pay it over to the tax authorities where the customer is based ! Amazon will be required to do all of this on the trader’s behalf!

As a consequence, the trader will no longer be required to file VAT returns, or even maintain VAT registration, in the EU countries where there customers are based and they hold no stock. They will be required to keep their VAT registration in countries whey they are physically holding stock e.g. in the Amazon fulfilment warehouse, and to raise a VAT exempt invoice to Amazon for each sale that is made to customers. We assume that this will need to be reported quarterly to the Tax Authority for that country as a VAT exempt Intracommunity supply.

So in which cases is this big change going to apply ?

  1. Goods imported and sold to EU customers by non-EU traders, to a maximum of 150 Euros.
  2. Goods that are already in the EU (whether by origin or having been imported and cleared EU customs) that are sold by non-EU traders.

These changes are going to have a very big effect because much of what is being sold online in the EU is either imported or being sold by non-EU companies.

It is important to note that, for these rules to apply, the internet marketplace must be seen to be “facilitating the sale”, which means that it must control the terms and condition of the sale, payment between customer and supplier and arrange the delivery of the goods- which would be the case in the full package offered under Fulfilment by Amazon (FBA).

Extension of the EU VAT One Stop Shop to all traders and all services/goods

This change will make life a lot easier for many EU traders. They will now be able to declare and pay VAT on their sale to customers in other EU countries in one unified VAT return in their own country.

So if a Dutch Amazon trader has customers in Spain and France then they will be able to include these sales in their Dutch One Stop EU VAT return. VAT on the French sales will be at 20% and on the Spanish sales at 21% and the Dutch tax authorities will pay the amounts due to their Spanish counterparts. As you can see, these are massive changes to make to the tax declaration systems in EU countries, and it no surprise that some Member States are requesting a further delay to give them time for implementation.

One important note is that, under this scheme, traders will still be required to maintain VAT registration in the countries where they hold stock. So if the trader is using the Fulfilment by Amazon (FBA) program, it remains to be seen how this will work out in practice. I.e. if a Portuguese trader holds stock in an Amazon FBA centre in Spain, and makes sales to Portuguese customers (there is no Amazon distribution centre in Portugal), then will they still need to declare these sales in Spain or could they do it via the One Stop Shop of the Portuguese Tax Authorities ?

Amazon itself is being very quiet on this matter and we can find no reference on their websites to the upcoming changes in EU VAT law, which is unexpected because the changes are imminent !