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Double taxation

Double taxation

Old Apr 2nd 2019, 12:15 pm
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Default Double taxation

Hi All,
I need a pointer for future plans. When I retire I will have a local government pension of about £15000 per annum which I know will be taxed in the UK after UK allowances are taken into account. I will then have my State pension of say £8000 per annum taxed in Spain. Is my Local government pension take home taken into account on my tax allowance in Spain. Really confused.
Cheers.
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Old Apr 2nd 2019, 1:09 pm
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Default Re: Double taxation

Your state pension will probably be covered by your personal allowances so no tax will be due on that income. However, as you pointed out, it will be affected by your UK government pension which has to be declared (the full amount, not the net amount). The effect depends on the exact figures at the time (the exchange rate can have a large effect) but it is almost impossible to work out without running the numbers through the tax program. Whatever the amount (if any) your overall tax bill will be far lower than if the whole lot was taxed in Spain.
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Old Apr 2nd 2019, 4:14 pm
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Default Re: Double taxation

Originally Posted by Fred James View Post
Your state pension will probably be covered by your personal allowances so no tax will be due on that income. However, as you pointed out, it will be affected by your UK government pension which has to be declared (the full amount, not the net amount). The effect depends on the exact figures at the time (the exchange rate can have a large effect) but it is almost impossible to work out without running the numbers through the tax program. Whatever the amount (if any) your overall tax bill will be far lower than if the whole lot was taxed in Spain.
Hi Fred,
Thanks for that. That's what I thought.
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Old Apr 2nd 2019, 5:36 pm
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Default Re: Double taxation

If you had zero Spanish income to tax, your Government pension would have no consequences in Spain at all,as it is taxed solely in UK. However it is taken into account in Spain insofar as it is added to your Spanish income to determine the consuming of your Spanish allowances and also which tax bracket you end up in. I have a UK government pension, taxable solely in UK, and UK rental income, taxable in both countries but UK has first dibs. My only Spanish income at the moment is a little bank interest and so I pay no Spanish income tax. In fact my wife and I file a joint return, (she has a UK Government pension, UK rental income and a UK old age pension), to mitigate the amount of tax my wife has to pay in Spain.
When I receive my UK old age pension then my UK government pension will have a bearing on my Spanish tax liability.
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Old Apr 3rd 2019, 8:12 am
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Default Re: Double taxation

Originally Posted by stevesainty View Post
If you had zero Spanish income to tax, your Government pension would have no consequences in Spain at all,as it is taxed solely in UK. However it is taken into account in Spain insofar as it is added to your Spanish income to determine the consuming of your Spanish allowances and also which tax bracket you end up in. I have a UK government pension, taxable solely in UK, and UK rental income, taxable in both countries but UK has first dibs. My only Spanish income at the moment is a little bank interest and so I pay no Spanish income tax. In fact my wife and I file a joint return, (she has a UK Government pension, UK rental income and a UK old age pension), to mitigate the amount of tax my wife has to pay in Spain.
When I receive my UK old age pension then my UK government pension will have a bearing on my Spanish tax liability.
Thankyou.
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Old May 15th 2019, 7:14 pm
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Default Re: Double taxation

Originally Posted by stevesainty View Post
If you had zero Spanish income to tax, your Government pension would have no consequences in Spain at all,as it is taxed solely in UK. However it is taken into account in Spain insofar as it is added to your Spanish income to determine the consuming of your Spanish allowances and also which tax bracket you end up in. I have a UK government pension, taxable solely in UK, and UK rental income, taxable in both countries but UK has first dibs. My only Spanish income at the moment is a little bank interest and so I pay no Spanish income tax. In fact my wife and I file a joint return, (she has a UK Government pension, UK rental income and a UK old age pension), to mitigate the amount of tax my wife has to pay in Spain.
When I receive my UK old age pension then my UK government pension will have a bearing on my Spanish tax liability.
Am I understanding your post correctly? If you transfer your U.K. State Pension directly to your Spanish bank account in Euro at U.K. Government exchange rate, say €8750 for Jan-Dec 2018 this is treated as income in Spain. However this is below my understanding of the tax free amount for a 74yr old pensioner of around €12400. Therefore you would have no tax to pay.

If you then have a Government Pension of say €20000 does this mean you have no additional tax to pay or are the two amounts added together giving a tax rate based on €28750 income (30%) Is this rate then applied to the €8750 “earned income” state pension? This would give a tax bill of €8625 in Spain having already paid 20% tax on the GP after personal allowance have been deducted in U.K. say €1380, but this cannot be offset against the Spanish tax as would happen with other forms of U.K. income tax. Surly this is double taxation!
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Old May 15th 2019, 7:45 pm
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Default Re: Double taxation

Your figures are way out.

If the 20k was added to the state pension and increased the marginal tax rate to 30%, that 30% would only apply to the 8750, not the whole amount. There are also some additional allowances for low income which can be nearly another 6k on top of the normal allowances. Anyway, that isn't the way the tax office computer works it out so the increase would be small.

If you want to play around with actual figures there is an excellent tax simulator on the AEAT website.
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Old May 15th 2019, 11:07 pm
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Default Re: Double taxation

Originally Posted by EsuriJohn View Post

Am I understanding your post correctly? If you transfer your U.K. State Pension directly to your Spanish bank account in Euro at U.K. Government exchange rate, say €8750 for Jan-Dec 2018 this is treated as income in Spain. However this is below my understanding of the tax free amount for a 74yr old pensioner of around €12400. Therefore you would have no tax to pay.

If you then have a Government Pension of say €20000 does this mean you have no additional tax to pay or are the two amounts added together giving a tax rate based on €28750 income (30%) Is this rate then applied to the €8750 “earned income” state pension? This would give a tax bill of €8625 in Spain having already paid 20% tax on the GP after personal allowance have been deducted in U.K. say €1380, but this cannot be offset against the Spanish tax as would happen with other forms of U.K. income tax. Surly this is double taxation!
It is my understanding that your only income in Spain is your Old Age Pension.you say 8,750€. You would take off the 2,000€ general allowance leaving 6,750€ to be taxed at 30% (you say) = 2,025€. Your personal allowance for over 65 and under 75 is 6,700€ and the relief granted is the lowest rate of tax, 19% = 1,273€. This leaves a Spanish tax bill of 2025-1273=752€ IMHO
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Old May 16th 2019, 7:48 am
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Default Re: Double taxation

You are forgetting one major allowance. For incomes of 13115 or less the extra allowance is 5565. For incomes above 16825 the allowance is zero. In between the allowance is on a sliding scale between 5565 and zero.

This means that a 75 year old taxpayer can receive a total allowance of as much as 15665 - way above the UK State pension.
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Old May 16th 2019, 8:51 am
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Default Re: Double taxation

Originally Posted by Fred James View Post
You are forgetting one major allowance. For incomes of 13115 or less the extra allowance is 5565. For incomes above 16825 the allowance is zero. In between the allowance is on a sliding scale between 5565 and zero.

This means that a 75 year old taxpayer can receive a total allowance of as much as 15665 - way above the UK State pension.
I Totally agree with you Fred James, though, as the government income in question was 20,000 this allowance does not come into play.
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Old May 16th 2019, 11:25 am
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Default Re: Double taxation

If you take the figures mentioned, for a 65 year old, €20000 UK Gov pension and state pension of €8750, then the tax due is €340.28.

That figure was calculated by the current Renta 2018 simulator using the tax rate in Andalucia which is 19.5%
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Old May 17th 2019, 6:56 am
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Default Re: Double taxation

Originally Posted by Fred James View Post
If you take the figures mentioned, for a 65 year old, €20000 UK Gov pension and state pension of €8750, then the tax due is €340.28.

That figure was calculated by the current Renta 2018 simulator using the tax rate in Andalucia which is 19.5%
I am sure I read somewhere on the forum that the replacement system for PADRE can be downloaded onto tablets and phones does anyone have a link for the Apple version. My old windows laptop has gone the way of all 10yr old IT and I am reluctant to buy another just for AEAT programmes.
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Old May 17th 2019, 7:20 am
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Default Re: Double taxation

It's here

https://itunes.apple.com/us/app/agen...l=es&ls=1&mt=8
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