Gill Stevens

I am having real trouble finding a definite answer to this one despite having searched the internet. The personal allowances coming up are 5050 euros which is for last tax year.

I understood that personal allowances for individuals before tax is paid has increased to 9000 euros this tax year. Also does anyone know the percentage payable over and above the 9000 euros pa?

Can anyone answer this definitely.

Thanks

Compost Mentis

Hi, I would like to know the answer to this as well.

Mitzyboy

Tax here

http://www.spainaccountants.com/it.html

Bigbhudda69

......Have you seen this...
http://www.spainexpat.com/spain/info...ates_in_spain/

Is it any use.......

Fred James

In addition to the personal allowance of 5050 there is an income related allowance of up to 4000. This also applies to pensions which are considered as earned income.

The 9000 figure is a not a personal allowance, it is the threshold for submitting a tax declaration. If your total family income is less than 9000 then a declaration is not required.

However it is advisable to submit a tax declaration even if no tax is due as this ensures that you are considered to be tax resident should you wish to avail yourself of some of the tax advatages open to tax residents such as reductions in CGT and IHT.

The starting rate for income tax is now 24%.

sunnydee

I was under the impression that the percentage of tax was in stages rising with each stage e.g. 20% on first 5000, 25% on next 5000 of income (I made the figures up as an example as I don't know the correct ones).
I've been told I will pay between 2% and 15% of my income in tax depending on personal circumstances. (The 2% I assume is because I would only work a couple of months of this tax year in Spain.)
I would also be paying about 6% for social security.
Has it now changed to a fixed rate of 24%?

Fred James

I said the starting rate was 24%.

This is paid on the first €17300 of taxable income.

Taking into account personal allowances etc, this equates to a gross income of €25000. If you are lucky enough to earn more than this then higher rates apply in bands up to a maximum of 43% on taxable incomes of over €52360.

Gill Stevens

Thanks for the replies.

I understand what you mean about the 9000 euros figure of not having to declare. However, the site I read about it on was www.expatica.com and they stated "the reform sets the lowest income at which tax must be charged at 9050 euros" and "those who earn less than 9000 euros will not pay any tax from 2007".

Does that mean, therefore, only income as an employee or any sort of income?

I read that to mean the personal allowance is 9000 euros.

Another site said " resident tax payers with an income of less than 9000 euros per year will be exempt from income tax, but then goes on to say the personal standing deduction increased from 3040 euros to 5050 euros".

I am confused!!!!

Our investments are taxed at source at 20% so there is only a small personal pension which will mean no tax at all, but once the state pensions kick in there will be.

I presume the personal allowance for oldies is higher the same as the UK??

Mitzyboy

Did you not look at the link I took the time to post earlier in the thread. It clearly sets out allowances that you asked about.
Your investments may be taxed at source in the UK, but when you move to Spain permanently they will beome taxable here. For instance, building society funds will have to be declared here and you should apply to be zero rated as it were in the UK.

jdr

I have put it in the Free beer/handy info thread.




.

Fred James

I am not surprised that you are confused because both of the statements that you quote are incorrect although that is hardly surprising if you attempt to encapsulate the recent changes to Spanish tax law in one sentence!

As I have said before, personal allowances are 5050 – irrespective of income.

There is also another allowance against earned income of between 4000 on an income of 9000 and this reduces to 2600 on incomes above 13000. This allowance does not apply to investment income – only to earned income (pensions are treated as earned income).

So it is correct to say that on an earned income of 9000 that no tax will be due – but this, of course is not the whole story.

To say that tax payers with an income of less than 9000 are tax exempt is also incorrect. This statement refers to the fact that you do not need to make a tax declaration if your income is less than 9000 but it neglects to point out that this only applies if no more than 1500 of that income comes from investment income.

The 9000 limit is also family income, so if a couple had an income of,say, 5000 each, which would be tax free, they would still be required to make a tax declaration.

As Mitzyboy has pointed out, your investment income should be taxed in Spain so you could possibly fall into the above categories where you will have to make a tax declaration and pay tax on an income of less than 9000.

Gill Stevens

Thanks. Yes I did look at the link which you posted which stated 5050 euros personal allowance which I assumed was out of date because of the information I have read on other sites about the personal allowance now being 9000 euros before tax was paid.

Do you mean that the 4000 euros additional allowance on earned income for pensions would include my small private bank pension as earned income? Do I then add the 4000 euros to the 5050 euros? The income for each of us would not be above the 13600 euros you mention.

The investments we have are 5% tax deferred. In other words anything we take out each year over the 5% has a gain and the investment company pay 20% of that gain to the Inland Revenue. Unless the gain takes us into the higher tax bracket here i.e. £31,000 then no further tax is payable by us.

We now don't know if we should declare to the spanish tax people the amount we take out each year from these plans as the basic rate tax has already been paid by the investment company so strictly speaking no more tax is due as the extra is nowhere near enough to take us into the next tax bracket in Spain.

If we do declare it then we were thinking we would show them the Chargeable Gain Certs we get that show the basic rate tax paid here in the UK. There is no way that that 20% tax cannot be paid by the company as it is tax law here.

Now more confused than ever.

Mitzyboy

No its not out of date .... the notes are for 2007. The income and personal allowances are shown separately if you look again :-)

You have to declare everything in Spain apart from Government pensions. What rates you pay in the UK obviously has no bearing on what you will pay here. Even the tax free lump sums on pensions may be subject to tax here. You need to de register for tax in the UK with the inland revenue if you want to do it properly. Then you shouldn't be double taxed. If you don't declare tax in Spain and are later found out there are quite high penalties I am told.

Your investments etc are also subject to wealth tax. That is a tax on your worldwide assets, property and investments. Its a sliding scale and there are
allowances. Lowest rate is 0.5% iirc. So you pay tax on your assets, and you pay tax on your income.