spanish income tax v uk income tax
Mar 22nd 2012, 12:12 pm
#16
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Re: spanish income tax v uk income tax
..."that if someones business interests are in the uk (not employment) then they can be deemed to be fiscally resident in the uk even though they are normaly resident in Spain...."
Mike - that is correct it's called Dual residency:
The OECD Model Tax Convention residence tie-breaker rules
The residence tie-breaker rules in most recent UK DTAs closely follow
those in the Model Tax Convention of the Organisation for Economic
Co-operation and Development (OECD). They comprise a series of tests to
be applied successively until residence for the purposes of the Agreement is
allocated to one State or the other. In other words, once a test is conclusive
it is unnecessary to apply subsequent tests. The tests usually appear in the
order of:
• permanent home
• centre of vital interests
• habitual abode
• nationality
(extracted from here http://www.hmrc.gov.uk/helpsheets/hs302.pdf )
also
http://www.hmrc.gov.uk/international/residence.htm
I am not saying this applies to you (although it may do) but obviously it does apply to some people depending upon their circumstances, so it is not always as black and white as it may seem.
Mike - that is correct it's called Dual residency:
The OECD Model Tax Convention residence tie-breaker rules
The residence tie-breaker rules in most recent UK DTAs closely follow
those in the Model Tax Convention of the Organisation for Economic
Co-operation and Development (OECD). They comprise a series of tests to
be applied successively until residence for the purposes of the Agreement is
allocated to one State or the other. In other words, once a test is conclusive
it is unnecessary to apply subsequent tests. The tests usually appear in the
order of:
• permanent home
• centre of vital interests
• habitual abode
• nationality
(extracted from here http://www.hmrc.gov.uk/helpsheets/hs302.pdf )
also
http://www.hmrc.gov.uk/international/residence.htm
I am not saying this applies to you (although it may do) but obviously it does apply to some people depending upon their circumstances, so it is not always as black and white as it may seem.
Mar 22nd 2012, 3:15 pm
#17
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Re: spanish income tax v uk income tax
Many thanks for all your replies so far. Many thanks Spainco for your points on dual residency. Delighted by both Fred and Mikeco's advice that uk rental income is not taxable in Spain as most of my income is derived from rental income. Just goes to show that it doesnt pay to listen to the opinions of people in bars who simply like the sound of their own voices.
Mar 22nd 2012, 3:26 pm
#18
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Re: spanish income tax v uk income tax
I agree with Hillybilly's point re hmrc. I arranged to have my uk rents paid gross by signing up to the nrls and have my accounts completed and submitted by an accountant in the uk and pay due taxes on those rentals to hmrc. Mike
Mar 22nd 2012, 4:36 pm
#19
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Re: spanish income tax v uk income tax
If you are tax resident in Spain it will also be taxed in Spain as part of your world wide income. If you paid any tax on it in the UK it can be deducted from any tax paid on it in Spain.
You will get personal allowances in Spain against your taxable income. The UK rental income can have the usual deductions for the costs of renting and in Spain only 50% of the rental is taxable - even if the property is in the UK. This does not apply to short term holiday lets.
Mar 22nd 2012, 4:43 pm
#20
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Re: spanish income tax v uk income tax
Regarding the 50% only rental - apart from this only applying to long term rentals and for residents - I also thought the tenants had to be under 35? as it was a government incentive to get landlords to let to youngsters.
Mar 22nd 2012, 5:19 pm
#21
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Re: spanish income tax v uk income tax
No, it applies to all long term rentals. It was introduced to stimulate the rental market.
You are referring to another scheme where, under certain circumstances, letting to under 35's may be 100% exempt from tax.
You are referring to another scheme where, under certain circumstances, letting to under 35's may be 100% exempt from tax.
Mar 22nd 2012, 5:59 pm
#22
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Re: spanish income tax v uk income tax
Sorry Fred, when you said 'No options - no choice. You then pay Spanish tax on your worldwide income with some exceptions such as a UK government pension and UK rental income.' i thought you meant that i would not pay Spanish tax on my uk rental income. Ime a bit confused though when you say 'You will get personal allowances in Spain against your taxable income. The UK rental income can have the usual deductions for the costs of renting and in Spain only 50% of the rental is taxable - even if the property is in the UK', and then 'No, it applies to all long term rentals. It was introduced to stimulate the rental market.', Doesnt this imply that if i am a Spanish resident, and rent out property in the UK, the Spanish will only tax me on half of the rental income in order to stimulate the UK rental market? Mike
Mar 22nd 2012, 6:12 pm
#23
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Re: spanish income tax v uk income tax
Sorry if I confused you - poor choice of wording, but it is confusing!
It is complicated by the fact that government pensions are taxed in the UK but are not included in your Spanish income but rental income, although also taxed in the UK is not exempt from Spanish tax.
The 50% rule was introduced to stimulate the Spanish rental market - I'm sure they couldn't care less about the UK market but the deduction still applies to UK rentals.
You calculate the net rental income much as you do in the UK and then halve it. That is the figure that you include as income on your Spanish tax return.
It is complicated by the fact that government pensions are taxed in the UK but are not included in your Spanish income but rental income, although also taxed in the UK is not exempt from Spanish tax.
The 50% rule was introduced to stimulate the Spanish rental market - I'm sure they couldn't care less about the UK market but the deduction still applies to UK rentals.
You calculate the net rental income much as you do in the UK and then halve it. That is the figure that you include as income on your Spanish tax return.
Last edited by Fred James; Mar 22nd 2012 at 6:14 pm.
Mar 22nd 2012, 6:26 pm
#24
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Re: spanish income tax v uk income tax
No apology neccessary Fred - many thanks for your patience and many thanks for clarrifying things. Cheers, Mike
