Keeping Your US LLC or UK Company While Living on Mallorca

You moved to Mallorca, but your US LLC or UK limited company is still running exactly as before, invoicing clients and receiving payments the same way it always has. For many freelancers and small business owners that feels like the simplest option, and at first it usually is. The catch appears once you become a Spanish tax resident, because from that point on the Agencia Tributaria wants to see your worldwide income, your foreign company included. Keep running the company unchanged without adjusting anything on the Spanish side, and you risk double taxation, missed filings, and in some cases a dispute over where the company itself is actually taxed. This post explains what changes for a US LLC, what changes for a UK Ltd or similar corporation, and when a different setup makes more sense.

When you become a Spanish tax resident

Spain uses the same test regardless of what business structure you keep abroad. According to the Agencia Tributaria, an individual is a Spanish tax resident if they remain in Spain for more than 183 days in a calendar year, counting sporadic absences unless you can prove tax residency elsewhere. You can also be classified as resident regardless of day count if the main base of your economic activities and interests is in Spain, or if your spouse and dependent children habitually live here.

Once either test is met, Spain taxes your worldwide income for the entire calendar year, not only what you earn from Spanish clients. That includes profits from a foreign company you own, no matter where its bank account sits. The full mechanics of the day count and the exceptions are covered in our guide to tax residency on Mallorca.

A US LLC: taxed on your personal return, not the company's

Spain generally treats a US LLC the way the US itself often does by default, as a fiscally transparent entity, similar to a partnership. That matters a lot in practice: the LLC's profits are not taxed separately as a company in Spain. Instead, once you are a Spanish tax resident, its income flows straight onto your personal tax return (IRPF) and is taxed at your personal marginal rate, which climbs toward the high 40s percent range at higher income levels once Balearic regional rates are added on top.

The registration side follows the same logic. If you are the one actually doing the work or running the business from Mallorca, Spanish authorities generally expect you to register as an autonomo and pay into the Spanish social security system (RETA), on top of declaring the LLC's profits on your IRPF return. Keeping the LLC does not replace that registration. The basics of registering are covered in our guide to working as an autonomo in Spain.

A UK Ltd or similar corporation: a different, riskier problem

An opaque corporation, such as a UK limited company, works differently from an LLC because it is a separate legal entity for tax purposes almost everywhere, including in the UK itself. That is exactly where the risk sits. Spain decides whether a company itself is Spanish tax resident using the criteria set out in Article 8 of the Ley del Impuesto sobre Sociedades: a company is resident in Spain if it was incorporated under Spanish law, has its registered address in Spain, or has its effective place of management in Spain, meaning that the overall management and control of the business is actually exercised from Spanish territory.

If you are the sole director of a UK Ltd and you run it day to day from your kitchen table on Mallorca, that third test can be met even though the company was never registered in Spain and pays no attention to Spanish paperwork. If Spain's tax agency decides the company is effectively managed from here, it can assess Spanish corporate tax, currently 25 percent, on the company's profits, potentially going back several years, and UK corporation tax already paid does not automatically offset that Spanish bill.

There is also a practical mismatch in how income gets paid out. UK company owners often take a small salary and the rest as dividends, since that is usually the cheapest combination under UK rules. Once you are a Spanish tax resident, that split can work against you, because dividend income is taxed less favourably relative to salary once your Spanish earnings pass a certain level, so the UK-optimised structure is not automatically the Spain-optimised one.

What to actually do about it

There is no single right answer, it depends on how much of the business is genuinely tied to your home country.

For a straightforward service business with one owner and no local employees or premises abroad, many advisers see closing the foreign company and operating purely as a Spanish autonomo as the simplest long-term fix, since it removes the corporate-residency question entirely. If the company has real infrastructure in your home country, such as staff, clients who require a local entity, or long-term contracts, keeping it and getting the cross-border structure properly advised on both sides is usually worth the cost. A gestoria on Mallorca is a reasonable place to start on the Spanish side of that conversation.

Does closing my foreign company and registering as an autonomo avoid double taxation automatically? It removes the corporate-residency question, since there is no longer a foreign company for Spain to potentially treat as Spanish-resident. It does not automatically avoid double taxation on its own, you still need to handle the wind-down correctly in your home country and file your first Spanish returns correctly, so this is a case where getting advice on both sides before you act pays for itself.

Official sources

Conclusion

Living on Mallorca while keeping a foreign company running is common and perfectly legal, but it stops being simple the moment you cross into Spanish tax residency. A US LLC mostly shifts the problem onto your personal tax return and your autonomo registration. A UK Ltd or other opaque corporation raises the separate and more expensive question of where the company itself is tax resident, based on where it is actually managed day to day. Work out early which category your business falls into, and get advice in both countries before you either keep the structure unchanged or wind it down.

This article is general information, not tax advice. Your position depends on the specific treaty between Spain and your home country and on your own circumstances, so confirm the details with a qualified adviser in both countries before you act.