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fiscal residencia and UK retirement pension

fiscal residencia and UK retirement pension

Old Feb 21st 2015, 1:32 pm
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Default fiscal residencia and UK retirement pension

My UK Civil Service pension is taxed at source and paid into my Spanish bank account. I am fiscal resident and when I submit my tax declaration, because my tax is paid in the UK I am not liable to any tax here in Spain. Now however I am also in receipt of a UK retirement pension which is taxed in the UK also as it is added to my total income by HMRC. This pension is paid into a UK bank account.
My question is, this year when I submit my Spanish tax declaration, do I also have to supply information regarding my retirement pension even though I pay tax on it in the UK?
If so, how do I provide the Spanish tax office with the information regarding my retirement pension and the fact that I am taxed on it in the UK and from where do I get this information/proof?
If I just add the gross income from the two pensions to my Spanish declaration, surely they will tax the retirement pension part and I'll find myself being taxed on it in both the UK and here!
Thanks.
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Old Feb 21st 2015, 2:00 pm
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Default Re: fiscal residencia and UK retirement pension

You must declare your non government pension in Spain even if it is being taxed in the UK.

You can deduct any UK tax paid from any Spanish tax due but it is far better to take advantage of the tax treaty and have it paid gross in the UK. You can do this by getting the right forms (FD9) from HMRC and following the procedure to get the pension paid gross.

Incidentally, from the 1st of January this year you will also have to declare your UK government pension on your Spanish tax return. It will not be taxed as such, but it will affect the tax paid on your other income.
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Old Feb 21st 2015, 2:12 pm
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Default Re: fiscal residencia and UK retirement pension

Originally Posted by Fred James
You must declare your non government pension in Spain even if it is being taxed in the UK.

You can deduct any UK tax paid from any Spanish tax due but it is far better to take advantage of the tax treaty and have it paid gross in the UK. You can do this by getting the right forms (FD9) from HMRC and following the procedure to get the pension paid gross.

Incidentally, from the 1st of January this year you will also have to declare your UK government pension on your Spanish tax return. It will not be taxed as such, but it will affect the tax paid on your other income.
I thought that certain types of UK government pensions HAD to be taxed in the UK, certainly Police ones are, and I thought civil service ones were also, which means they cannot be paid gross
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Old Feb 21st 2015, 2:26 pm
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Default Re: fiscal residencia and UK retirement pension

UK CIvil Service pensions can only be taxed in UK
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Old Feb 21st 2015, 3:57 pm
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Smile Re: fiscal residencia and UK retirement pension

Originally Posted by Fred James
You must declare your non government pension in Spain even if it is being taxed in the UK.

You can deduct any UK tax paid from any Spanish tax due but it is far better to take advantage of the tax treaty and have it paid gross in the UK. You can do this by getting the right forms (FD9) from HMRC and following the procedure to get the pension paid gross.

Incidentally, from the 1st of January this year you will also have to declare your UK government pension on your Spanish tax return. It will not be taxed as such, but it will affect the tax paid on your other income.
UK retirement pension called the State Pension. Can be received without tax in UK and transferred direct from pension service to your Spanish Bank Account in euro's.

Civil Service/Police/Teacher/Military Pensions called Government Pensions are taxed at source in UK and you may choose to have them converted to euro's and transfer them to SPAIN.

From this years Spanish tax return Gov pensions must be declared in Spain and they will increase the Spanish tax paid.
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Old Feb 21st 2015, 4:00 pm
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Default Re: fiscal residencia and UK retirement pension

Originally Posted by Fred James
You must declare your non government pension in Spain even if it is being taxed in the UK.

You can deduct any UK tax paid from any Spanish tax due but it is far better to take advantage of the tax treaty and have it paid gross in the UK. You can do this by getting the right forms (FD9) from HMRC and following the procedure to get the pension paid gross.

Incidentally, from the 1st of January this year you will also have to declare your UK government pension on your Spanish tax return. It will not be taxed as such, but it will affect the tax paid on your other income.
Thanks Fred, but a bit confused, sticking to the retirement pension only, it's already paid gross into my UK bank, HMRC then take this into account when assessing my tax liability adding it to my government pension. If I get the form you refer to from HMRC, as the retirement pension is already paid gross into my UK bank, do you mean that completing the form will mean it will not be taken into account for tax by HMRC?
BTW, I already declare my government pension and as such, as it it is taxed at source, I don't pay Spanish tax on it.
It's the UK retirement pension I'm concerned about.
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Old Feb 21st 2015, 4:03 pm
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Default Re: fiscal residencia and UK retirement pension

Originally Posted by EsuriJohn
UK retirement pension called the State Pension. Can be received without tax in UK and transferred direct from pension service to your Spanish Bank Account in euro's.

Civil Service/Police/Teacher/Military Pensions called Government Pensions are taxed at source in UK and you may choose to have them converted to euro's and transfer them to SPAIN.

From this years Spanish tax return Gov pensions must be declared in Spain and they will increase the Spanish tax paid.
Thanks for that, yes as you say, it's correct title is the State pension. Point is I don't want to pay it into my Spanish account, I want it to continue to be paid into my UK bank.
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Old Feb 21st 2015, 4:22 pm
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Default Re: fiscal residencia and UK retirement pension

Originally Posted by Biffta
Thanks Fred, but a bit confused, sticking to the retirement pension only, it's already paid gross into my UK bank, HMRC then take this into account when assessing my tax liability adding it to my government pension. If I get the form you refer to from HMRC, as the retirement pension is already paid gross into my UK bank, do you mean that completing the form will mean it will not be taken into account for tax by HMRC?
BTW, I already declare my government pension and as such, as it it is taxed at source, I don't pay Spanish tax on it.
It's the UK retirement pension I'm concerned about.
All state pensions are tax free, but that amount is deducted from the tax allowance, other work pensions, whether government or private are taxed but some have to be taxed in the UK, others. such as NHS pensions you can get gross and pay tax on in Spain, in all cases you never pay tax twice due to the reciprocal tax agreement. Even here in the UK all tax is taken from my NHS pension.
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Old Feb 21st 2015, 5:04 pm
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Smile Re: fiscal residencia and UK retirement pension

Originally Posted by mikelincs
All state pensions are tax free, but that amount is deducted from the tax allowance, other work pensions, whether government or private are taxed but some have to be taxed in the UK, others. such as NHS pensions you can get gross and pay tax on in Spain, in all cases you never pay tax twice due to the reciprocal tax agreement. Even here in the UK all tax is taken from my NHS pension.
Some NHS Pensions are regarded as Government Pension and must be taxed at source the majority are not in that category and can be exported tax free to SPAIN to be taxed as income in spain.

Under the new regime this year although you will not pay Spanish tax on your GP already having paid tax in UK, it will result in you having to pay more tax on your SP or other income in Spain and NO allowance will be made for the tax already paid in UK. That to me seems very like double tax!
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Old Feb 21st 2015, 5:30 pm
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Default Re: fiscal residencia and UK retirement pension

The revised DTA between UK and Spain demands that the CS Pension (and similar) must be declared on the 2016 tax return (for 2015 income). This is then taken into account in calculating the marginal rate payable on other world income, before the CS pension is then deducted (at the base rate of tax) from the total tax due. By this means there is no tax taken from the CS pension by Hacienda, but, as implied above, it may mean that the total tax paid on other world income is higher than it would have been had the revision not been made to the DTA.
There is no need to have your State Pension paid to Spain if you don't want it so. Simply tell the Pension Department the details of your UK bank into which you wish to have it. It is still not taxable in UK for Spanish Tax residents, but the necessary forms have to be completed.
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Old Feb 21st 2015, 5:42 pm
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Default Re: fiscal residencia and UK retirement pension

Originally Posted by Biffta
Thanks Fred, but a bit confused, sticking to the retirement pension only, it's already paid gross into my UK bank, HMRC then take this into account when assessing my tax liability adding it to my government pension. If I get the form you refer to from HMRC, as the retirement pension is already paid gross into my UK bank, do you mean that completing the form will mean it will not be taken into account for tax by HMRC?
BTW, I already declare my government pension and as such, as it it is taxed at source, I don't pay Spanish tax on it.
It's the UK retirement pension I'm concerned about.
If you arrange with HMRC for your pension to be exempt from UK tax, it will effectively cease to exist as far as they are concerned. You then pay tax on it in Spain, but you get a whole new set of personal allowances to put against it.

The net result is a much lower tax bill overall.

As for the Government pension, as has been pointed out earlier, it now has to be declared in Spain but no tax is directly paid for it in Spain.

However, it is added to your other income to establish the rate of tax that has to be paid on that other income and it will almost certainly increase the amount of Spanish tax paid overall.

The calculation is quite complex, but "officially" it is not taxed twice, but you will end up paying more tax.

Taking into account the benefits of being taxed in two countries with two sets of allowances, the total tax paid is still less that you would pay if the two pensions were taxed in Spain, which is what happens to all pensioners who are not in receipt of a UK government pension.

Essentially, until this year, recipients of UK Government pensions were treated more favourably than other pensioners and that has now been changed.
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Old Feb 22nd 2015, 3:36 pm
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Cool Re: fiscal residencia and UK retirement pension

So just to recap, when myself and my husband retire and move out to Spain we will have state pensions taxed here, private pensions where tax is deducted here but also private pensions that are paid gross and we declare these on our tax return.
what would we have to pay tax on in Spain?
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Old Feb 22nd 2015, 4:11 pm
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Smile Re: fiscal residencia and UK retirement pension

Originally Posted by Carol4775
So just to recap, when myself and my husband retire and move out to Spain we will have state pensions taxed here, private pensions where tax is deducted here but also private pensions that are paid gross and we declare these on our tax return.
what would we have to pay tax on in Spain?
Read the thread carefully. If HERE is UK then no. If you are in Spain for more than 183 days in one year Jan to Dec then you are fiscally resident and you pay taxes in Spain you can reclaim any tax paid in UK but why bother. Have State Pension paid into your Spanish bank by DWP AT THE BEST POSSIBLE EXCHANGE RATE. If you wish you can allow your Private pensions to accumulate in UK then transfer at the best exchange rate. The PP that cannot be paid and exported tax free you will pay UK tax on the one paid gross you will pay tax in Spain. You will declare all your income in Spain pay the Spanish tax and offset any UK tax already paid. Some pensions (annuity based) are taxed very favourably in Spain so you might well be better off. If you are not familiar with the Spanish tax code it may pay in the first year to get a Gestoria Fiscal to do your tax return.
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Old Feb 22nd 2015, 4:23 pm
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Default Re: fiscal residencia and UK retirement pension

Originally Posted by EsuriJohn
The PP that cannot be paid and exported tax free you will pay UK tax on the one paid gross you will pay tax in Spain.
That sentence doesn't seem to be easy to understand.

Just to clarify:-

All pensions except UK government pensions can be "exported" and paid gross in the UK with no tax deducted.

UK government pensions will always be taxed in the UK. The "exported" UK pensions will be taxed in Spain.

And, as you quite rightly point out, annuities are a really good deal when taxed in Spain.
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Old Feb 22nd 2015, 5:08 pm
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Smile Re: fiscal residencia and UK retirement pension

Originally Posted by Fred James
That sentence doesn't seem to be easy to understand.

Just to clarify:-

All pensions except UK government pensions can be "exported" and paid gross in the UK with no tax deducted.

UK government pensions will always be taxed in the UK. The "exported" UK pensions will be taxed in Spain.

And, as you quite rightly point out, annuities are a really good deal when taxed in Spain.
I assume that Carol has been told wrongly that one of the PP's cannot be paid gross that's why I said they would have to offset UK tax paid but if they feel they want to take it up with the pension providor all power to their elbow!
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