UKinSpain

New UK-Spain double taxation agreement to come into force on 12th July 2014. Check out what it means for you on the HMRC website.

snikpoh

... but the document says 12th June and NOT July

Fred James

Yes, they did get it wrong, but for people with normal income, it will not apply until 1st January 2015 so the first declaration that will be affected is the one due in June 2016.

The key change is regarding UK government pensions. These will continue to be taxed only in the UK and do not need to be declared as taxable income in Spain.

However, you must now declare that (exempt) income on your tax declaration in the "exempt income" box. In most cases, where you also have other income that is taxable in Spain (UK state pension and private pensions), this will result in an increase in the tax paid on that income which in some cases will result in a significant increase in the tax bill.

Reptonian

Ah, we are victims of that in Germany. The so called Progressionsvorbehalt - Progression rules. I am still arguing the toss here in Germany. They have taken the gross amount and in effect are double taxing that, and ofc the remaining income at higher bands as a result.

davidinspain

Give this new info is this still correct
The current government is in the process of drawing up a new law on income tax, which will affect tax declarations from 2007. At the moment, Personal Income Tax starts at 15 percent and rises to 45 percent. It is a direct tax levied on the income of individuals, minus the expenses deductible according to Spanish law. At present if you earn less than EUR 22,000 you do not have to fill in an income tax return.

Fred James

If your income is less than 22k AND YOU HAVE PAID TAX ON IT, you do not have to declare it.

Otherwise the limit is much lower and the rules are quite complex.

The 22k limit is one of the most incorrect bits of info on tax on the Internet.

davidinspain

And it's on so many sites Fred.

Reptonian

Do you mean pay tax on it in the UK Fred? Mine is my Army pension so it falls under this government servant ruling - Paragraph 18. We are Esurians that are not yet resident there so this is of great interest to us as well as our current German problem below:

The German thing is very complicated. The Tax expert said today that it doesn't get taxed as such, but the gross income is added to the top end of what I earn here. This results in the whole lot costing more.

The other thing is that German Govt Servants pay absolutely no National Insurance during their very long and completely safe careers, and, until 2005 they paid less than 10% tax on their pensions (minus also the standard allowances) - so virtually nothing at all. The German govt is trying to claw this back now and this is probably why they agreed to the DTA in this form. The problem is that because they think we are the same as German civil servants, we are in effect paying way more tax on the pension than the equivalent non-govt servant does here. The tax advisor is going to give me the figure - but his view was that we are better off telling UK to not tax us at all - there is an opt out form I believe - and then declaring all income here but not being treated as a Government servant.

Fred James

No, I mean that the tax is deducted at source under the Spanish PAYE system which will be the case with any bona fide job, just as in the UK. In fact, most people in this category also choose to make a tax declaration as the PAYE system may not take into account any additional tax breaks over and above the basic allowances.

The new tax treaty just reinforces the requirement to declare any "exempt" income (such as UK government pensions), in addition to any other worldwide income.

This has actually always been the case, but in most cases the rule has been misinterpreted and most, but not all, financial advisors etc have said that you should completely ignore the UK government pension income for any tax declaration.

The new DTT makes it quite clear that the exempt income must be declared as "exempt" income on your tax declaration.

It is not just added to your other income as that would mean that it would be taxed directly which is not allowed under the treaty. However the amount is taken into account which will, in most cases, result in an increase in the total tax paid. It isn't just a case of the extra income pushing you into a higher tax band on your other income - it can increase the tax even if the band does not change.

It is a very complicated calculation which can really only be worked out by using the provided PADRE tax program which does your tax declaration for you.

Neptuno

I wonder how many people have been incorrectly informed about the 22000 euro limit, and as a consequence have not paid their taxes at all.
I was horrified to see this info given on sites advising ex pats, by "experts" who should know better
DaveinSpain- since you must have believed it to be true, from what you wrote,hope this doesn't mean all your tax returns have been wrong!

davidinspain

Can't see anywhere in my post that I believe it to be true! Just agreeing with Fred that it's posted around the internet as gospel.

Neptuno

Not surprising I assumed you thought was true.
As it was in bold type and underlined, it appeared to be a statement of fact, which until Fred James corrected you , you gave the impression you believed it was so.
I wonder what would happen to someone whose accountant had submitted tax returns on this basis erroneously. The client would get the fines and have to pay the back taxes I suppose,Fred?
I've seen this frequently misunderstood statement about the 22000 threshold, on other forums, giving advice to ex pats, but when I asked whether he had been submitting tax returns based on this, all went quiet

davidinspain

Nope it was posted as a statement of fact on the forum from which I cut and pasted it Hence my mentioning the fact it was posted around other sites too.

Neptuno

Did you personally think it was incorrect

davidinspain

As Fred quite rightly said it's totally incorrect and it has no effect on my income as I bank in the Caymen Islands.