Resident/Tax Resident in two countries?
Jul 15th 2011, 6:47 pm
#31
Joined: Jun 2006
Location: Granada Costa
Posts: 10,911
Re: Resident/Tax Resident in two countries?
686/687 - so that's where it goes - thanks for that. So if your total taxable income (including the UK income) is less than the 17K basic rate threshold it doesn't generate any extra tax.
Thanks.
Jul 15th 2011, 7:27 pm
#32
Forum Regular
Joined: Jul 2011
Posts: 109
Re: Resident/Tax Resident in two countries?
Interesting - I had always assumed you had to use PADRE - they use it in the tax office if you go to them. I use it for our declarations.
686/687 - so that's where it goes - thanks for that. So if your total taxable income (including the UK income) is less than the 17K basic rate threshold it doesn't generate any extra tax.
Thanks.
686/687 - so that's where it goes - thanks for that. So if your total taxable income (including the UK income) is less than the 17K basic rate threshold it doesn't generate any extra tax.
Thanks.
I don't think they will ever be able to make everyone use a computer to make their declarations - it's a self declared system and they have to facilitate everyone to do it in whatever way they want. I find my checking is better if I do it by hand.
I also don't think there is provision in Padre for the calculation to get the TME and TMA in these circumstances, though I could be wrong.
Jul 15th 2011, 7:41 pm
#33
Joined: Jun 2006
Location: Granada Costa
Posts: 10,911
Re: Resident/Tax Resident in two countries?
This is probably going over the heads of most other members so I think we should take the discussion offline to PM/email.
I will contact you directly soon.
I will contact you directly soon.
Jul 15th 2011, 8:01 pm
#35
Lost in BE Cyberspace
Joined: Jun 2005
Location: Puente Esuri
Posts: 6,906
Re: Resident/Tax Resident in two countries?
It's 183 days not 6 months - that way you will spend more time in one country than the other and will be tax resident in the country that you spend 183 or more days in.
However, the UK, just to be different from almost every other country, have a different set of rules and, in simple terms, if you spend more than 91 days in the UK you are deemed tax resident in the UK.
But there is a double taxation treaty between the UK and Spain and there is a set of rules that determines which country you are tax resident in as you can't be tax resident in both under the treaty.
As for the Government pension, as you know that has to be taxed in the UK but ALL income generated in the UK is taxable in the UK even if you are not tax resident. However certain types of income can be paid free of tax if you are tax resident in a country that has a treaty with the UK. That includes pension income, rental income and dividends and a few others.
An exception to this rule is government pensions which remain taxed in the UK.
Just because you pay tax in the UK doesn't necessarily make you UK tax resident.
However, the UK, just to be different from almost every other country, have a different set of rules and, in simple terms, if you spend more than 91 days in the UK you are deemed tax resident in the UK.
But there is a double taxation treaty between the UK and Spain and there is a set of rules that determines which country you are tax resident in as you can't be tax resident in both under the treaty.
As for the Government pension, as you know that has to be taxed in the UK but ALL income generated in the UK is taxable in the UK even if you are not tax resident. However certain types of income can be paid free of tax if you are tax resident in a country that has a treaty with the UK. That includes pension income, rental income and dividends and a few others.
An exception to this rule is government pensions which remain taxed in the UK.
Just because you pay tax in the UK doesn't necessarily make you UK tax resident.
A contibution and a question, Government Pensions can be exported to certain countries TAX FREE. After we had discounted Cyprus we found that you could take your Government Pension tax free and if you only have pension income (no earnings in Cyprus) opt for a special tax rate of 5% on everything. The tax free transfer also applies to Australia.
My question concerns rental income. We have a house which is rented out and we have filled in and returned the form for payments of rents gross. That has been accepted and a letter from HMRC clearly says so. They have now asked Kath to do a tax return and I can only think that they are looking at this rental income. We have both filled in and had accepted our FD9 forms and made 2 years tax returns to Spain on our pensions and income exported tax free from UK. Why should they want to tax rental income?
Jul 15th 2011, 8:22 pm
#36
Forum Regular
Joined: Jul 2011
Posts: 109
Re: Resident/Tax Resident in two countries?
WOW I'VE BEEN OFFLINE FOR LESS THAN 2 DAYS AND IT HAS GENERATED 5 PAGES OF WHAT LOOKS TO BE REAL HARD INFO.
My question concerns rental income. We have a house which is rented out and we have filled in and returned the form for payments of rents gross. That has been accepted and a letter from HMRC clearly says so. They have now asked Kath to do a tax return and I can only think that they are looking at this rental income. We have both filled in and had accepted our FD9 forms and made 2 years tax returns to Spain on our pensions and income exported tax free from UK. Why should they want to tax rental income?
My question concerns rental income. We have a house which is rented out and we have filled in and returned the form for payments of rents gross. That has been accepted and a letter from HMRC clearly says so. They have now asked Kath to do a tax return and I can only think that they are looking at this rental income. We have both filled in and had accepted our FD9 forms and made 2 years tax returns to Spain on our pensions and income exported tax free from UK. Why should they want to tax rental income?
All those renting out property in Spain while being tax resident in the UK please take note.
Jul 15th 2011, 8:57 pm
#37
Lost in BE Cyberspace
Joined: Jun 2005
Location: Puente Esuri
Posts: 6,906
Re: Resident/Tax Resident in two countries?
I must admit that in principle, adding it in to establish the marginal tax rate makes some sense but I can't see how you can enter that info on PADRE. If you just add the UK income to the other income you will end up paying at least 24% tax on it. I know you can then deduct any UK tax paid but I can't see how you can avoid paying extra tax as the UK basic rate is 20%.
If your UK income was within the allowances resulting in no UK tax and you also declared it in Spain where you had a significant income you would end up paying Spanish tax on it with no deductions as no tax was paid in the UK - clearly that would contradict the DTA.
So how do you sort this out when you complete PADRE? Maybe I have missed it in the 800 or so boxes on the tax form.
If your UK income was within the allowances resulting in no UK tax and you also declared it in Spain where you had a significant income you would end up paying Spanish tax on it with no deductions as no tax was paid in the UK - clearly that would contradict the DTA.
So how do you sort this out when you complete PADRE? Maybe I have missed it in the 800 or so boxes on the tax form.
If you have a large GP and a standard SP I can only think if you add the two together you will not only pay tax on the GP in UK you will end up paying additional tax in Spain.
With just the SP and a pensioners personal allowance you will not end up paying tax in Spain.
Jul 15th 2011, 9:02 pm
#38
Lost in BE Cyberspace
Joined: Jun 2005
Location: Puente Esuri
Posts: 6,906
Re: Resident/Tax Resident in two countries?
If you don't mind, whilst it is at the limit of my comprehension I am following the thread and would be very interested in any additional comments. With your help Fred I have just completed 2 x two years tax returns on Padre for myself and Kath and I hope they are not now wrong since I haver followed the accepted wisdom that GPs are not taxable in Spain and are not declared.
Jul 15th 2011, 9:12 pm
#39
Joined: Jun 2006
Location: Granada Costa
Posts: 10,911
Re: Resident/Tax Resident in two countries?
I have read several copies of Blevins Franks and all make the point that under the DTT Government Pensions are to be ignored in Spain and that some regional officials may try to add the UK Government Pension to the State Pension to give a higher marginal tax rate. In their view this is an incorrect interpretation of the DTT.
If you have a large GP and a standard SP I can only think if you add the two together you will not only pay tax on the GP in UK you will end up paying additional tax in Spain.
With just the SP and a pensioners personal allowance you will not end up paying tax in Spain.
If you have a large GP and a standard SP I can only think if you add the two together you will not only pay tax on the GP in UK you will end up paying additional tax in Spain.
With just the SP and a pensioners personal allowance you will not end up paying tax in Spain.
If you take the alternative option that Rostra suggests is correct then you will only end up paying extra tax if the addition of the exempt UK government pension increases your total taxable income over the 17K 24% threshold.
This doesn't affect the tax on the gov pension which is paid in the UK but it could increase the tax you pay on the income that is taxed in Spain.
I have to say that, having read the various words in both the UK DTT and the Spanish tax law that there is certainly some reason to accept either view but the Spanish case seems just a little bit stronger.
Jul 15th 2011, 9:14 pm
#40
Lost in BE Cyberspace
Joined: Jun 2005
Location: Puente Esuri
Posts: 6,906
Re: Resident/Tax Resident in two countries?
Box 686 (savings income) and 687 (earned income including pensions)
When I get a new client with UK taxed income I always do several calcs (with a pencil) to work out what is best. Almost always the way I am doing it is best. You don't pay more tax on the UK income because you benefit from the Spanish tax allowances. This year everybody had either a zero return or was due a refund of tax retained against interest on Spanish bank accounts - only pennies I know but it saves you taking the form to the hacienda. You can take it to your bank if you have a payment to make or a refund due.
I don't use Padre - I prefer to do it myself. Sucker for punishment, but I'm still working because I enjoy it, so why not!
When I get a new client with UK taxed income I always do several calcs (with a pencil) to work out what is best. Almost always the way I am doing it is best. You don't pay more tax on the UK income because you benefit from the Spanish tax allowances. This year everybody had either a zero return or was due a refund of tax retained against interest on Spanish bank accounts - only pennies I know but it saves you taking the form to the hacienda. You can take it to your bank if you have a payment to make or a refund due.
I don't use Padre - I prefer to do it myself. Sucker for punishment, but I'm still working because I enjoy it, so why not!
Jul 15th 2011, 9:22 pm
#41
Lost in BE Cyberspace
Joined: Jun 2005
Location: Puente Esuri
Posts: 6,906
Re: Resident/Tax Resident in two countries?
Yes, BF makes that point quite strongly and so does David Searle.
If you take the alternative option that Rostra suggests is correct then you will only end up paying extra tax if the addition of the exempt UK government pension increases your total taxable income over the 17K 24% threshold.
This doesn't affect the tax on the gov pension which is paid in the UK but it could increase the tax you pay on the income that is taxed in Spain.
I have to say that, having read the various words in both the UK DTT and the Spanish tax law that there is certainly some reason to accept either view but the Spanish case seems just a little bit stronger.
If you take the alternative option that Rostra suggests is correct then you will only end up paying extra tax if the addition of the exempt UK government pension increases your total taxable income over the 17K 24% threshold.
This doesn't affect the tax on the gov pension which is paid in the UK but it could increase the tax you pay on the income that is taxed in Spain.
I have to say that, having read the various words in both the UK DTT and the Spanish tax law that there is certainly some reason to accept either view but the Spanish case seems just a little bit stronger.
Jul 16th 2011, 6:13 am
#42
Ex Expat
Thread Starter
Joined: Oct 2006
Location: West Midlands, ex Granada province
Posts: 2,140
Re: Resident/Tax Resident in two countries?
Our abogado did our joint tax return for us recently. He was not interested in my husband's Teachers' Pension and did not declare it. He declared my husband's tiny annuity and my UK State Pension, also interest on savings. We had no tax to pay.
Jul 16th 2011, 7:26 am
#43
Joined: Jun 2006
Location: Granada Costa
Posts: 10,911
Re: Resident/Tax Resident in two countries?
I'm not going to disagree with Rostra - she has been doing it the alternative way for some time based on supposedly informed advice.
However everyone else seems to say that you should ignore the government pension - I certainly would!
Jul 16th 2011, 9:40 am
#44
Forum Regular
Joined: Jul 2011
Posts: 109
Re: Resident/Tax Resident in two countries?
Yes I found out that if you have no tax to pay or refund the Banks will not process the Padre generated form. However our bank and the local Hacienda are less than 100m apart and the tax official was more that happy to accept a nil return over the counter in seconds. It is interesting that testing a joint return against individual returns for 2009 produced a small tax bill for the individual returns but none for the joint and for 2010 the opposite was the case and a joint return resulted in a payment of 0,04€. So we submitted a joint for 2009 and individual for 2010 and they were quite happy.
However, now that they've got rid of the eternal queues, handing in your nil return takes only a few minutes.
If I declared for tax only my Govt pensions in the UK, and declared my State Pensions (but no other income) in Spain I would have a tax bill of €440!
I have to admit my State Pension in the Uk is good (thank heaven for Serps) so probably it is more obvious in my case than in someothers which is the better option.
Jul 16th 2011, 9:43 am
#45
Forum Regular
Joined: Jul 2011
Posts: 109
Re: Resident/Tax Resident in two countries?
I'm sure you are right. Why don't you run PADRE and see what happens.
I'm not going to disagree with Rostra - she has been doing it the alternative way for some time based on supposedly informed advice.
However everyone else seems to say that you should ignore the government pension - I certainly would!
I'm not going to disagree with Rostra - she has been doing it the alternative way for some time based on supposedly informed advice.
However everyone else seems to say that you should ignore the government pension - I certainly would!