LTD in the UK vs SL in Spain, pros and cons

LTD in the UK vs SL in Spain, Pros and Cons

In this article, LTD in the UK vs SL in Spain, you will find a comparison between the two most common legal forms in these two countries.

Although both legal structures share many similarities in terms of the limitation of liability of the partners, there are significant differences..

Some of these differences relate to taxation and the incorporation process.

Let’s analyse the pros and cons of these two legal forms to help the entrepreneur in his decision.

1 Main Features

2 Creation Process: LTD in the UK vs SL in Spain

3 Taxation: LTD in the UK vs SL in Spain

4 Liability: LTD in the UK vs SL in Spain

5 Tax Compliance Costs

6 International Expansion

7 Conclusions

1 Main Features

An LTD in the UK is a separate legal entity, distinct from its owners or shareholders, who can be one or more.

This means that its partners have limited liability to the capital they contribute. Additionally, it has fiscal and accounting obligations, such as paying taxes.

An SL in Spain is also a separate legal entity from its partners, and their liability is limited to the capital they have contributed.

Similarly, they are required to pay taxes and submit financial reports.

These are the most notable similarities between these two legal structures.

2 Creation Process: LTD in the UK vs SL in Spain

LTD in the UK

Registration: Online at Companies House

Minimum share capital: £1

Registration time: Within 24 hours

Requirements: Information on directors, registered office address, and articles of association.

Costs: £12 fee for online registration.

SL in Spain

Registration: Before a notary and at the Commercial Registry

Minimum share capital: €3,000

Registration time: from 7 to 15 days

Requirements: Articles of association and public deed before a notary.

Costs: Much higher (notary, registration, and fees).

3 Taxation: LTD in the UK vs SL in Spain

The accounting process in Spain is more costly and complex than in the UK, although the tax burden is similar.

Some of the taxes are:

LTD in the UK

Corporation Tax: 25% on profits (there are incentives available).

VAT: Similar to IVA in Spain. Payment is mandatory if annual turnover exceeds £90,000.

PAYE (Pay As You Earn): The company withholds employees’ income tax on behalf of HMRC.

National Insurance Contributions (NICs): The contributions made by businesses to HMRC as payments for their employees’ social security.

Other taxes: Such as Business Rates, which are paid in the UK for the company’s commercial premises.

SL in Spain

Impuesto de sociedades: 25% on profits (there are incentives).

IVA: Mandatory regardless of turnover.

Personal Income Tax (IRPF): Companies also withhold tax from employees’ salaries and deposit it with the Tax Agency.

RLC and RTN Models: Contributions made by all companies for the social security of their employees to the General Treasury of Social Security.

Other taxes: Such as the IAE (Business Activity Tax), which is paid by Spanish companies that exceed a certain turnover threshold.

4 Liability: LTD in the UK vs SL in Spain

Although in both countries the liability of the partners is limited to the financial contributions they have made to the company, there are important nuances.

For example, in cases of negligence or failure to meet tax obligations, it is more likely that the director will be held personally liable in Spain than in the UK.

5 Tax Compliance Costs

Accounting obligations in the UK require fewer bureaucratic procedures than in Spain.

Additionally, external tax and labour advisory services can be accessed from £50 per month. In Spain, this cost is above €200 per month.

6 International Expansion

This is another important aspect to consider when deciding on the country to establish your company.

The UK has a better international reputation and facilitates online business management.

It also imposes fewer restrictions when trading with other countries, and foreigners can create and run a business without the need for residency.

On the other hand, Spain requires physical presence for many procedures and imposes more bureaucracy regarding business dealings outside the EU.

7 Conclusion

Depending on your business model and target audience, it may be more cost-effective to establish your company in one location over the other..

However, in general terms, it can be said that setting up a business in the United Kingdom is easier, faster, and more affordable than in Spain.

At least, this is what our comparison of LTD in the UK vs SL in Spain shows.