Comment by carlesfe | Hacker News Reader

Comment by carlesfe | Hacker News Reader

Spain is like phone companies: a welcome mat for outsiders, a nightmare for insiders.

Spanish companies can't have anybody working (i.e. 'dormant' state), they always need an "administrador" who pays a monthly 300€ self-employment tax. This kills companies in early stages unless they can break even quickly (3600€/yr while not having any income, plus maintentance expenses, is terrible)

Creating a company is bureaucratically difficult, I reckon it was on the bottom area in the latest "easiest countries to create a company on" report.

If you're an exporter, you can go bankrupt because you owe worker taxes to the State... while they owe you return of export VAT. I personally know a case of these. They owed the State about 300k€ while the State owed them 500k€ for more than a year. They couldn't "cancel out" the debt. That is outrageous. They had to file bankrupcy.

And finally, if you're a small company, you have to pay a lot of taxes, while if you're big and can pay big lawyers/accountants, Spain is equivalent to a tax haven (i.e. Ireland). This is true. Spain attracts big companies with a tax maze which allows the rich to evade taxes.

This is really disheartening for Spanish enterpreneurs. We're treated as second-class citizens... in our own country. Our taxes go to finance big, foreign companies. That sucks.

Sorry for all the negativity, I'm currently trying to start a company in Spain and I'm meeting a lot of friends who also have. This is the general sentiment. Spain needs to fix A LOT of things if they want to be enterpreneur-friendly, starting with THEIR OWN enterpreneurs.

Not negative at all. It is actually quite accurate. I started up in Spain 5 years ago and was the worst decision ever. Never again.

For several reasons our venture failed and I was stuck with hundreds of thousands of € in debt w/o any protection, with me and my co-founders scared of losing our homes, and severely affecting our personal lives.

Spanish gov is specialist in showing a big smile in the pics that appear in the press, but the evil is in the details. When things go wrong you're alone. There's not legal protection for failed startuppers. Starting up in Spain w/o resources is extremely difficult, and can really mess up your life forever.

Looking back, I wish I had started with a LTD in UK, and working from Spain (yes, you can). It's what I'm doing next.

My 0.02

How would the tax situation work with having a LTD in the UK and residing in Spain?

You would normally have to make payments into the Spanish social security scheme. The rules are actually quite complicated but if you live and work in Spain that's where you have to contribute to social security. Owning a UK limited company does not change that.

But would you have to pay tax on your limited company's turnover both in the UK and then subsequently in Spain?

No, the company would have to pay taxes (corporation tax, VAT, etc) only in the UK, and if you personally get something out of the company, like a salary or a share of the profits, then you have to pay income tax or capital gains tax and social security contributions in the country you live in (i.e. Spain).

There is some double taxation of course because the company first pays corporation tax on its profits and then you pay income tax or capital gains tax on any profits you take out of the company. But that is the same regardless of where you live. One way to mitigate this is for your company to pay you a salary.

Yes, you can, but it doesn´t make things better. You will have to pay taxes in Spain if any of these conditions apply:

1) You operate the company from Spain, i.e., having an UK address is not enough.

2) Less than 15% of your revenue comes from customers outside of Spain.

Spaniard here. While I've never started a company, this resonates pretty strongly with my experience as a freelancer. In order to be an autonomous worker, you must pay 250€ a month. On top of the 21% VAT and the 16% IRPF taxes, of course, and without even having any income. According to the law, you only need to register as an autonomous worker and pay the tax if you expect to do this "regularly and as a way of living", but how this actually translates to your income was never written into law, which means you have to fight the state for it in court.

Luckily for me, I was under 30 when I did this, which means I got an 80% discount on the 250€ tax for six months. After that, the discount got reduced to 50%. Similarly, the 16% tax was on "super-reduced mode", which meant it was only a 7% tax.

Relating to the state in Spain in a non-trivial way seems to always be about navigating this ridiculous, expensive legalese maze. Don't ask me how was I supposed to fill my taxes with the autonomous community I lived on, because I still don't have a clue. Crossing my fingers and hoping they never ask for their money.

Careful with that IRPF "discount". In the end of the day you have to pay what you have to pay, they just let you pay less monthly. I was bitten in the ass this way my first year operating, I had to pay more money than I had in my bank when the tax season came.

Following years I started tributing at a 20% which resulted in the state owing me a bit (not much, nobody wants to lend interest free money).

I agree that the 300€ are a big turnoff initially, but it is not a self-employment tax. It's social security contributions and it entitles you to full health coverage (and eventually a pension). Granted, you can get the same in the UK for almost nothing until you actually make money. But the 300€ is about the same as in Germany I believe and you get a big rebate in the first few years if you register as self-employed for the first time.

> Granted, you can get the same in the UK for almost nothing until you actually make money

You don't have to pay any National Insurance contributions (employer or employee) until your salary is above £153 per week. Although that's below the minimum wage for full time employees, as a director you can pay yourself what you want.

That's right, and on top of that you can create a limited company for a tiny fee with zero minimum capital requirements. The UK is pretty much ideal in that regard.

However, there is only one place in the UK for starting a startup and that place is London. Rent alone will cost you several times your Spanish social security contributions.

startups can only work in london? what a bizarre claim

Especially when we're talking about €300 / month being a high premium for a startup to pay, because the premium for one person to live in London is way way higher.

It was not my intention to make that claim. Startups can work anywhere in the world. But within the UK, London has by far the largest startup ecosystem. For a foreigner moving to the UK to start a startup, other places don't make much sense in my view. For UK nationals it may be a different matter.

> However, there is only one place in the UK for starting a startup and that place is London.

But it's a small-ish country, with decent transport connections. Why not Manchester, with trains every 20 minutes to London when needed? [1] Or Bristol [2]. Cambridge has had startups for ages.

[1] http://traintimes.org.uk/london/manchester [2] http://www.theguardian.com/technology/2014/jan/12/bristol-ba...

It's certainly possible to do it that way, but when I was living in NW England, I ended up not making the trip to London very often. You can blame my laziness if you like.

Germany is slightly different if you register as a freelancer rather than self-employed. As a freelancer you can apply for a 3 year exemption from pension contributions when are first registered.

Then as long as you don't earn more than 5/6ths of your income from a single client you can remain exempt.

Fall foul of that 5/6ths though and you have to pay full whack (half for the first 6 months) which is a whopping 500 EUR per month.

It is designed to discourage people who really 'should' be employed, working on long term contracts for a single employer.

I think most serious startups will want to incorporate pretty soon in order to have access to venture capital and limit personal liability. I wonder what the social security contributions are for owners of a limited company in Germany. (And no, I don't expect you to Google that for me ;-)

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