danielspaniel11234

Hi my parents are planning to move to Spain in the near future and have been told about this law. They were told if their pensions combined were above €12,000 a year they would have to pay €2,000 tax each year out of the pensions. Is this right?
Thanks

danielspaniel11234

When they have bought a house in Spain they will have no other property abroad or other assets.

snikpoh

This thread is not really about Asset declaration then?

I seem to recall a number of good links to tax sites in previous threads. It might help you to take a look at one of these.

£2k tax on an income of only £12k seems very wrong though.

danielspaniel11234

Thanks for info
More to do with them being taxed on pensions
I put asset declaration law as that's what i'm told it's called that affects the pensions not because they have many assets

Fred James

You are confusing two issues.

The tax declaration law says that a tax resident is Spain must declare any asset located outside Spain that has a value of more than €50k. Such an asset only needs to be included in the income tax return if it generates any income but that has always been the case.

If your parents are pensioners over 65 then on that income they will pay no tax as their personal allowances in Spain will exceed their income.

That said, they would still be advised to submit a tax declaration every year even if it does not result in any tax being paid. That way they can ensure that they are registered as tax residents, which will ensure that they get the advantageous allowances against CGT and IHT that apply to tax residents.

marcbernard

I agree with the comment that 2K is somewhat high!
It all depends on the nature of the pension, of course. If the joint income is only €12000, and both parents are over 65, then my view is that the tax take would be nil. If you wish me to delve further, please send me a PM and I will investigate.

Fred James

Agreed - the tax is zero. It does not require further delving! The nature of the pension can only be whether it is a UK Government pension, in which case it is not taxed directly in Spain, or an annuity, in which case only a small percentage of the income is taxable.

EsuriJohn

With regard to Government Pensions do you know Fred if the new DTT has been formally adopted by Spain/UK or is it still in the parliamentary to do tray?

Fred James

According to the HMRC site it is not in force yet.

EsuriJohn

So another 3 mths or so and we can disregard it for this years tax return for 2013?

Fred James

It is debatable whether you should have been declaring the UK Government pensions under the old DTT but most people do not.

Assuming it gets ratified sometime this year, it will affect your tax declaration next year.

EsuriJohn

I have always followed the Blevins Franks doctrine that it should not be declared. So we wait to see if it is this year or next for compulsory declaration.