I read on the tax page on this site that spanish residents with income of less than 22000 ? do not need to complete a spanish tax return. However, the personal allowance is much less, about 6000 ?. Presumably, people earning less than 22000 ? still pay tax, because it is deducted from their earnings by their employer. But what about a UK pensioner who is tax resident in Spain (and therefore does not pay UK tax), but has no earnings in Spain? If their pension income is less than 22000 ?, and they do not complete a tax form, do they end up paying no tax?
Actually, it says “in many cases you only need to file a tax return in Spain when you make more than ?22,000 per year, receive a rental income of more than ?1,000 and/or receive a capital gains and savings income of more than ?1,600.”
Definitely check with an accountant (contable) for your case.
Basically it is the same system as the UK - your income is totaled, your allowances are given and dependent what figures this gives you do or don’t pay tax. But remember this if you are a Spanish resident you must make a declaration for tax to become fiscally resident and then you can claim tax benefits eg like CGT and IHT.
A lot of people quote the 22.000? figure like it is some kind of tax free allowance, but of course it is nothing of the kind. The declaration thresholds are set so that anybody with much tax to pay over and above the amounts retained on their income before they get it (retenciones on salary, bank interest etc) has to do a return.
For example the 22.000? threshold falls to 11.200? if the source of income has not been taxed already (e.g. like a UK state pension) or if you have more than one source of earned or pension income, unless the other sources add up to less than 1.500?
So in answer to David’s original point a UK pensioner who doesn’t pay tax in the UK and who gets their pensions gross does not have to declare unless their income exceeds 11.200? A 65 year old with an 11.000? pension (and no investment income caught by the much lower thresholds referred to by the Expatriator) would get personal allowances of at least 10.149? and probably more, so they are unlikely to be saving much if any tax by not having to declare.
As Rob says it is often in your interest to declare (and obligatory in your first year of tax residency) as you might get a rebate of some amounts retained on your income before you receive it.
Surely it is like England - all higher earners and thus 40% tax payers are obliged to fill out an annual UK tax return whilst lower earners only complete on an ad hoc basis.
I interpret the Spanish rules in the same way BUT because we are foreigners earning an income via pension external to Spain we do need to complete a declaracion de renta (Tax Form) and I have read elsewhere that it needs to be done 3 consecutive years to be eligible for the Spanish tax benefits on CGT and IHT so I along with many Expat friends declare every year.
I also believe the UK Tax system retains the right to ask for proof of your annual Spanish declaracion at any time to maintain your tax free UK status.
The hardest bit is the first time - then once you are in you can apply for the ‘borrador’ and if all looks OK sign and pay (or take a refund)
Many banks/cajas will help you as part of their service.
There is also a computer program from AEAT available to download if you want to try DIY.
Any clever tax avoidance schemes are all well and good but in the end the tax man will catch up with you in one way or another. By registering for tax in Spain you will also get the benefits.
BTW it is reported that the Spanish government has requested all electricity providers to send them lists of all clients and electricity consumptions - they are looking for houses which are being rented out but the landlord is not declaring rental income for tax.
It does not take a genius to work out that governments are hard up and they will be looking at ways of collecting more tax that is due.
Hi Rob,
Some pension schemes can be transferred into QROPS even after you started drawing. What kind of pension do you have? http://www.the-qrops-specialist.com
I have been looking at this site for some time before joining, but I read this link and others with interest.
Please be aware that qrops is unregulated, and as such everyone should be very careful when seeking advice.
Because the qrops transaction itself is unregulated, it is even more essential that you seek advice from a firm/individual that is qualified in this area. It would also be advisable to check that the actual firm/individual is regulated by an appropriate Regulatory body to give financial advice.
Please be warned, sometimes things may well come back to haunt you
There are a lot of unserious companies around, however a QROPS is an overseas pension scheme qualified and recocgnised by Her Majesty?s Revenue and Customs (HMRC) A list of approved schemes can be found on HMRC?s website: http://www.hmrc.gov.uk/pensionschemes/qrops.pdf.
A pension fund is transferred in the name of the policy holder into an overseas, HMRC approved pension fund (QROPS) without being able to be accessed by anyone else than the policy holder.
Just landed is quite right there are firms/individuals advising who are in his words unserious, fundamentally they may not be qualified, they may not be regulated in any capacity, which can lead clients into issue’s around tax that are not fully explained.
Just one other point the list referred to from the HMRC IS NOT A LIST OF APPROVED SCHEMES, READ THE FIRST 4 PARAGRAPHS AND IT DOES NOT MENTION APPROVED ANYWHERE.
As a pensioner in Spain can I opt to continue to be taxed assesed in the UK. At the moment I do not draw enough to be taxed. Secondly, is an NHS pension I receive, count as a local government pension and therefore not included in Spanish taxable earned income?
No the rules don’t really allow for ‘opting’ if you are resident in Spain for more than 183 days a year this is where you should declare your world wide income (and by so doing receive Spanish tax benefits of being fiscally resident) I understand for low income people this might seem tedious especially if you receive a pension from the UK government which cannot be taxed in Spain. (incl NHS pensions I think)
Don’t forget also that you are still entitled to allowances so (like a friend of mine) if your pension is from government service and you pay tax in UK this means your Spanish tax allowances are not being used up by earnings (pension) so you can reclaim tax deduced on any investsment which the Spanish bank has taken at source. My friend gets all the tax back (a refund) that he paid on his Spanish bank interest.
