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Non resident paye

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Joined: Thu Apr 23, 2009 12:35 pm

Non resident paye

Postby mattpedro97 » Mon Oct 26, 2009 6:22 pm

I have a situation. Just wondering if someone could shed some lights on.

UK registed compnay. Three directors, two directors resident in uk. One is non resident (permanently now settled in Spain). He carries out all work from Spain - software developing.

Any thought on this particular case regarding tax obligation for

1. The company pays salary to this non-resident director in regards to paye & Nic
2. As emplyee is working abroad, does company have any paye obligation in Spain?

Or any other issues I may have missed!


Posts: 385
Joined: Mon Nov 02, 2009 5:25 pm

Re: Non resident paye

Postby etf » Mon Nov 02, 2009 8:48 pm

If the Spanish based director was previously located in the UK, he should complete form P85 to advise HM Revenue and Customs of his departure from this country. As it looks as though this is a long term/permanent move, the director should break residence in the UK and a no tax code should be requested so that UK tax withholdings are no longer required. A UK tax refund will usually arise in the tax year of departure attributable to a personal allowance and basic rate tax band that have not been fully utilised.

Care should be taken if the Spanish based director will attend director meetings in the UK, as the UK Tax Authorities will not agree that such duties are incidental and therefore UK tax could be due on the associated income.

It is likely that Spanish tax and social security will need to be collected through the operation of a Spanish payroll. In addition to reviewing this payroll reporting obligation, advice should also be obtained to determine whether the Spanish based director could create a taxable presence (permanent establishment) for the UK company in Spain, with the additional tax filings and payments that this could create in Spain.

Tax breaks are sometimes available in Spain for expatriate employees and the director's entitlement to these should be checked.

The Expatriate Tax Factory (ETF) could deal with the UK side of the equation for an annual fee of around £150.

We hope this helps.


Posts: 20
Joined: Thu Apr 23, 2009 12:35 pm

Re: Non resident paye

Postby mattpedro97 » Mon Nov 16, 2009 11:46 am

Thank you ETF.

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Joined: Wed Aug 06, 2008 2:19 pm

Re: Non resident paye

Postby Taxbar » Tue Nov 17, 2009 12:20 pm

The Spanish resident Director will need good advice on his Residence position.

1: Has he made the " Distinct BreaK" from the UK. No available Accomodation severed his links here.
2: Has he filed as a resident in Spain and obtained a tax number and got an Accountant/ Agent there?

3: The Company will need an Accountant to File for an NT code. if they have paid him gross prior to this, there maybe PAYE owing that will have to be paid over and then re-claimed once an NT code is given.

4: NIC's will depend on the Spanish/UK agreement.

5: Has he taken advice to see if he can come within Beckham Law and pay just 24% on Spanish Source income?

All these are essential planning that will avoid tax issues in both Spain and UK.

Daniel Feingold

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