Spanish Tax Declaration
 

I have just been advised by an Asesores that we do not need to register with the Hacienda or make an income declaration in Spain. We are not working here, below retirement age, pay UK tax on a company pension and rental on our UK house. We are resident in Spain. Is this correct? :confused:

Re: Spanish Tax Declaration
 

Not as far as I am aware!

It may be that you will have NO tax to pay, but you still have to submit a tax form.

In fact, I think you should actually be paying Spanish tax on your UK rental and not UK tax.

When you say that you are "resident in Spain", be careful, is that fiscally resident or just living here? I suspect it should be both.

Re: Spanish Tax Declaration
 

If you are living here and qualify as tax resident you are liable for Spanish tax on your world wide income.

Whether you are required to submit a tax declaration depends on the amount and type of income.

There is some more info here

http://www.aeat.es/AEAT/Contenidos_C...RPF2007_en.pdf

Re: Spanish Tax Declaration
 

I do believe I read somewhere that there was an obligation to register with the Hacienda, submit a return and if appropriate they would inform you of the tax situation. The 183 day rule for residency on the surface is clear.However, the devil is in the detail and caveats around visits with an average of 91 days or more over 4 years, etc as described in the Inland Revenue Guide IR20 - Residents and non-residents can be confusing. Certainly I would not be surprised to receive varying opinions from a selection of Asesores/Abogados/Gestores.

The guy I spoke to believed that because of the Double Taxation Treaty with the UK providing I was paying tax in the UK there was not a need to worry about the Hacienda. I'm not so sure.

We could discuss "residence", "ordinary residence" and "domicile". The latter, particularly with regard to IHT and the implications if one is tax resident in Spain (taxable on worldwide assets/income) and owns a UK property.

I feel a headache coming on!

It would be nice to be able to seek professional advice in Spain on such issues and receive consistent advice - a step to far me thinks! :zzz:

Re: Spanish Tax Declaration
 

UK rental income has to be taxed in the UK. No exceptions. You can have your tax withheld by the tenant or agent or you can apply to become a non resident landlord (NRL) and have your rental income paid gross and then declare it as normal on your annual IR tax return.
IMHO it is best to submit annual tax returns in Spain, even if you have no tax to pay, just in case you ever need to prove you are fiscally resident in Spain e.g. on selling a property here. If you can't prove this then you may be treated as a non-resident seller.

Re: Spanish Tax Declaration
 

Thanks Fred J. I shall study once I have managed to download with my slow 3G connection. Surrounded by Galician trees. :)

Re: Spanish Tax Declaration
 

Well, you learn something new everyday. I was told that as a Spanish tax resident (and, by-the-way, Spain has a different view to the UK so it depends who you are asking the question of) MUST pay tax on UK rental income.

Any way, try this link.

Re: Spanish Tax Declaration
 

Before we moved here we were considering the possibility of renting out our UK house and we were told by estate agents at the time that we would have the tax deducted from our rental by them before they paid us, as apparantly that was the way they had been told to act by the HMRC

Re: Spanish Tax Declaration
 

I am told (by SWMBO, and works in the business) that you apply to HMRC for an approval number for rental income if not tax liable, and then you are not automatically assessed. You would however be assessed on your tax return.
How that changes when in Spain, I do not know.

Re: Spanish Tax Declaration
 

UK rental income is taxed in the UK but it is also taxed in Spain as it is part of your world wide income. Any tax paid in the UK can be offset against Spanish tax under the double taxation agreement.

The only UK income that is ignored by the Spanish taxman is UK government pensions.

Re: Spanish Tax Declaration
 

Fred - Thank you. I will discuss with the all-knowing one.:)

Re: Spanish Tax Declaration
 

This site has a wealth (excuse pun) of information

http://www.direct.gov.uk/en/MoneyTax...heUK/DG_078445

Also interesting to note that the Asesores who gave me the original advice has two investment properties in London that he pays UK income tax on, but not Spanish - he winked at me during part of the conversation and it wasn't an expression of affection.

Re: Spanish Tax Declaration
 

The mist is clearing around the issues of the treatment of tax on rental of a UK property! However, the treatment of the value of a UK property within the estate of a UK national tax resident in Spain is still for me rather murky.

The Double Taxation Agreement does not encompass IHT. I have been led to believe that the UK IHT tax free threshold can nonetheless be deducted from the value of UK fixed assets thrown into the pot subject to Spanish IHT. It does seem to be a grey area and influenced by "domicile" status.

Re: Spanish Tax Declaration
 

Oh dear, oh dear, oh dear :(

It is not at all murky! I would suggest that you go here and read up on EU rules and Law with regard to this matter but I nutshell it below.

EU Law states that the individual’s local income and assets should be taxed in Spain but their other worldwide incomes and assets, including those derived or located in other EU Member States, should be taxed in their country of Tax Domicile as their worldwide estate, which for 99% of Brits in Spain is the UK.

So rental income from a property located outside Spain is not taxable in Spain but in the UK

You can make the situation from a tax perspective even easier for yourself by arranging for your property in Spain, if it is of a significant enough value (say over €150,000) to be owned by a UK company and thus remove liability to Spanish Inheritance Tax and/or if you come to sell the property in the future Spanish Capital Gains Tax and even the 7% resale Purchase Tax, all of which will make your property eminently saleable in the future whether you sell it or your estate sells it on your death. Any mortgage on such a property would also be "sold" as a part of the deal, so the purchaser would not need to source finance nor have the costs and hassle of doing so.

I find it quite remarkable how many so called Spanish Tax experts have no idea at all how to advise expats on their taxation, they treat us all as if we are Spanish nationals. We may be fiscally resident and thus taxable on our Spanish derived income and assets but our UK Tax domicile ensures that assets and income outside Spain are not taxable there, and as I say above it is a simple matter to ensure that even Spanish assets can be protected from Spanish Tax.

Arghhhhhh :curse:

Rex Ashcroft
Wealth Protection International Ltd.
[email protected]
+44 2081 446677

Re: Spanish Tax Declaration
 

[quote=Ashcan;7304404]Oh dear, oh dear, oh dear :(

It is not at all murky! I would suggest that you go here and read up on EU rules and Law with regard to this matter but I nutshell it below.

EU Law states that the individual’s local income and assets should be taxed in Spain but their other worldwide incomes and assets, including those derived or located in other EU Member States, should be taxed in their country of Tax Domicile as their worldwide estate, which for 99% of Brits in Spain is the UK.

So rental income from a property located outside Spain is not taxable in Spain but in the UK

You can make the situation from a tax perspective even easier for yourself by arranging for your property in Spain, if it is of a significant enough value (say over €150,000) to be owned by a UK company and thus remove liability to Spanish Inheritance Tax and/or if you come to sell the property in the future Spanish Capital Gains Tax and even the 7% resale Purchase Tax, all of which will make your property eminently saleable in the future whether you sell it or your estate sells it on your death. Any mortgage on such a property would also be "sold" as a part of the deal, so the purchaser would not need to source finance nor have the costs and hassle of doing so.

I find it quite remarkable how many so called Spanish Tax experts have no idea at all how to advise expats on their taxation, they treat us all as if we are Spanish nationals. We may be fiscally resident and thus taxable on our Spanish derived income and assets but our UK Tax domicile ensures that assets and income outside Spain are not taxable there, and as I say above it is a simple matter to ensure that even Spanish assets can be protected from Spanish Tax.

Arghhhhhh :curse:

Rex Ashcroft
Wealth Protection International Ltd.
[email protected] quote]


Not really advertising your services are you mate.

Do you know anything else about Spain apart from buy your house through a uk company ?

Re: Spanish Tax Declaration
 

Seems to be flying in the face of everything that UK / Spanish tax advisors and solicitors tell us ...... very strange.

Re: Spanish Tax Declaration
 

Pardon?

What an extraordinary posting :ohmy: from JDR :ohmy:

But in response to Mitzyboy I would say that it is a sad matter of fact that too many Spanish tax advisers are not properly aware of the impact of EU legislation on the way in which non-Spanish residents and non-residents can be taxed. Our Tax lawyers and accountants spend hours unravelling the results of frankly totally wrong advice given by apparently knowledeable Gestors, but then I would say that wouldn;t I :D

For anyone who is really interested, a classic example is that there is no actual need to pay income tax in Spain unless the income is derived in Spain.

So people paying tax on a UK pension income that does not have its tax deducted at source, or who are receiving income generated from assets held in the UK can opt to continue paying income tax in the UK even if they are resident in Spain for more than 183 days per year. So if it is more cost effective to continue to pay tax in the UK then you would be mad to opt to pay Spanish income tax instead by filing an FD9......anyway if you DO do so then you can always claim it back in the UK through your UK tax return when you discover that the advice you were given was hogwash.

... and I'm not advertising my services at all, I am passing on information that I regularly do for free when I am in residence in Peniscola or Sotogrande - if people want to pay attention to it then they can, if they don't want to then they need not, which is of course what these forums are all about.

Have a great weekend everyone :cool:

Re: Spanish Tax Declaration
 

All I can say is that this advice is complete rubbish and flys in the face of all the information available from the UK and Spanish tax authorities.

Re: Spanish Tax Declaration
 

Fred

Maybe you had better put your sources in touch with me so that our Tax Lawyers can put them straight then.

Re: Spanish Tax Declaration
 

And mine?
And all the other people who have taken advice
and the accountant in the UK
the international tax advisor I got a report from
my abogado
my tax gestor??

They are all wrong? :confused:

Re: Spanish Tax Declaration
 

Not a strange post at all, all I read is you advertising your services and telling everyone else in the world they are wrong.
Holy crap you are so far up your own arse you are nearly inside out, give us a break purleeese.

Re: Spanish Tax Declaration
 

Some history.

What is euphomisticaly called "The Beckham Law" which was enacted in Spain in 2005 to specifically catch tax from wealthy earners in Spain but at I think a flat rate of 25% income tax.

In short it states that foreigners living (and working) in Spain are only liable to Spanish Taxes on their Spanish source income and assets. There are of course conditions to this and you can Google to read more on this.

As a result of this innovation, EU legislators took it and adapted it and enshrined it in EU law to apply to any income at all rather than just income earned by indiviuals who had relocated to a country to work. I've asked our lawyers to winkle out the Statute reference so I can post it here but being Friday night they are all senseless!

Thus if you have no income derived in Spain but enjoy income derived from elsewhere then you are not compelled to pay income tax on it in Spain.

Hence my earlier scenario where an individual is not therefore compelled to enact FD9 and whistle cheerio to HMRC but rather opt to remain within their clutches so that UK based tax strategies can be used to remove capital and income taxation and of course we would ordinarily achieve this happy state by using offshore Trusts.

I think you'll find I am correct, anyway it is common sense when you think about it.

Forums should be fun - not places for rudeness JDR.....

..... it's bottle and glass time I think now.

Re: Spanish Tax Declaration
 

Ah - The Beckham Clause!

As I understand it, it applies to people who are assigned to a job in Spain as part of an employment contract. That rules out most of us!

Also it means, that if you qualify, you pay tax at a flat rate of 25% - that rules out most of us who pay tax at 24%.

Any more bright ideas?

Re: Spanish Tax Declaration
 

Yeah, buy your house through a UK company, you know who can set it up for you. :rofl:

Re: Spanish Tax Declaration
 

I cited the Beckham clause as part of the history that led up to EU legislation clarifiying how member states should view double taxation treaties. I did not intend to claim that you would have to be employed or pay 25% tax to enjoy the benefits of a double taxation treaty, I was briefly describing The Beckham Law. Please read what I posted last night again - you are taking bits of what I said completely out of context to for some reason justify the wrong advice you may have been given in such matters.

If you have a double taxation treaty (amongst other things) to help unify taxation across EU States then if you opt to remain taxed in the UK for say income tax on income derived from there, then you cannot be taxed on that income in Spain regardless of the fact that EU legislation also says that you can be taxed on income derived in the State in which it arises if you wish - for example, would someone living in Spain who enjoys a UK pension where the tax is deducted at source claim the 20% tax back from the UK and then pay 24% tax on the income in Spain? I think not. So how do situations like that square with the advice you have been given? Well the answer is that the advice you have been given doesn't square of course because it is flawed. In the meantime the Hacienda is silently applauding Gestors' ignorances and laughing all the way to the bank.

Fine if you are Spanish and derive all your income from Spanish domiciled assets and income streams; but as Brits we are generally NOT Spanish no matter how native we decide to go, and so we can therefore take advantage of a lot of very useful legislation if we are mided to do so.... as indeed can any other EU national living in Spain.

So if you are faced with the option of paying as you say 24% tax on your income through Spanish income tax or 20% through UK income tax - then you make your choice guys.....!

Similarly if you have an asset in Spain, your home, and Spanish Tax Law allows you to gift that property to a company, and EU Law says that every member state has to recognise the status of any company set up in any other EU State as if it were one of their own, then if you gift the property to a UK trading Company the asset, your home, is then subject to UK taxation and not Spanish taxation.

Similarly if you are relocating to Spain to live (and work or not work as the case may be) or are just buying a second home here (Spain) or an investment property, then if you make your purchase say of a resale property owned by a UK Company then you legitimately avoid paying the 7% purchase tax for a start. So you do a deal with the vendor before you buy the place to share the cost of the incorporation so you both benefit from the tax advanatges of doing so.

A married couple with two inheriting children has £624,000 of UK Inheritance Tax Nil Rate Band available to protect their estate from UK IHT, whereas in Spain they would have only had 4 X €15,957 of personal allowances or say €64,000 - an ten fold difference. If the company was sold then there would be no Spanish capital gains tax since nothing Spanish has been sold but there would be UK CGT because the UK shares/company were/was sold presumably at a profit which at worst would be charged at 10% CGT (but in practice and on average accumulated running costs, travel costs, mortgage interest and other expenses plus UK CGT allowances will reduce the taxable gain to virutally nothing). There would be no 7% Spanish purchase tax to pay by the buyer because they would be buying the UK company shares not the property, and any existing mortgage would similarly be part of the company purchase thus aleviating the need for the buyer to source and pay for the arrangement of a mortgage - if they could get one!

This is all fact and it is easily checked; it is all very simple and perfectly within Spanish, UK and EU Law and to mock it because of ignorance or misplaced loyalty to the so called professionals who time and time again prove they don't know what they are talking about when dealing with the affairs of expats is just crass stupidity.
(SNIP)

Have a great weekend

Re: Spanish Tax Declaration
 

Give us some official links to back it up then please
We have so many prfessionals telling us the opposite to what you are saying, no wonder we are doubtful

Re: Spanish Tax Declaration
 

I'm sorry but I totally disagree with your view that you can opt to be taxed in the UK.

This is from HMRC Double Taxation Treaty manual.

DT17617 - DT: Spain: double taxation agreement, Article 18: Pensions and annuities


(1) Subject to the provisions of Article 19 pensions and other similar remuneration paid in consideration of past employment to a resident of a Contracting State and any annuity paid to such a resident shall be taxable only in that State.

As Mitzyboy has said, please substantiate your claim that there is an option.

Personally, I would not take the option, even if it existed, as I pay far less tax in Spain.

Re: Spanish Tax Declaration
 

I'm going both ways ....... Govt pension in UK, State pension in Spain, best of both allowances

Re: Spanish Tax Declaration
 

Lucky old you!:)

Re: Spanish Tax Declaration
 

I have spoken with our tax advisers.

If you turn the page to Article 19 you will see it confirms what I said earlier about pension with tax deducted at source.

There is no Law anywhere that compels you to pay tax in Spain on income otherwise derived, unless it is derived in Spain, so long as tax is paid on it somewhere. The statement that you should be taxed on your worldwide income if tax resident in Spain presupposes you are not paying tax on it anywhere already. If you decide it is in your best interests to remain a UK tax payer for assets and income streams there or anywhere else in the world, bar Spain, then you are quite entitled to do so.

• if you own property in Spain you have to put in a tax return and pay tax in Spain which at the moment I am sure you all are doing;
  
• if you do not own assets in Spain then you do not have to put in a tax return unless you live in Spain for more than 183 days and have income in Spain.

Income that is taxed elsewhere (including un-taxed pension income on which you pay tax in the UK by choice) need not be declared in Spain although you can do so.

It has been cynically suggested to me that the reason you are paying tax on your non-source taxed pensions is that someone in an office with a brass plate at the door told you that you had to fill in a form “so that you pay taxes on all your income here in Spain”, so you signed the form and they got you. Had they asked “Are you paying tax on your pension in the UK” and you answered in the affirmative, then they couldn’t have said “You cannot anymore because you are resident in Spain” because that would have been wrong.

You have found the source treaty document so you don’t need that link; if you have a properly qualified tax lawyer to hand then he will charge you a fee and confirm all this for you.

There is no need to go any further with the Property Tax thing because this is now a well known mechanism; the reason why it is not common-place is because estate agents sell houses not tax strategies and because few people think to check anything like that out because “at home we go out and buy a house, it must be the same in Spain” and of course UK based IFAs and Accountants know diddley squat about matters Spanish - well guys you know as well as I do that there is plenty about Spain that is quite different to the UK and Hurrah for that mostly, but tax-wise when you buy a home in Spain the accumulated Inheritance Tax, Capital Gains Tax and Purchase Tax actually means that you are also buying a huge tax burden of between 30% and 50% or more of the value of the property so anything that can be done, so long as it is cost effective, to remove such taxation legitimately is a very sensible investment of money especially at a time when traditional investment is both unpredictable and showing very little return.

This debate is going nowhere, I have no intention of getting up anyone’s noses over this, you take what advice you have paid for and if you are happy with it then fine, however there’s more than one way to skin a cat if you are prepared to take the blinkers off and step outside the box.

End of.

Re: Spanish Tax Declaration
 

The treaty can be found at http://www.hmrc.gov.uk/manuals/dtmanual/DT17550+.htm

Article 19 specifically deals with UK Government pensions and as we all know, these are taxed in the UK.

Article 18, which I quoted, refers to other pension income which MUST be taxed in the country of residence.

If you wish to think differently, that's up to you but I think most of us would be happy to believe what it says in the tax manual.

Re: Spanish Tax Declaration
 

So ................... no official links then :confused::unsure:

Re: Spanish Tax Declaration
 

We have finally solved our tax problem!! (Getting registered for Spanish tax and couldn't find out how to do it, even our gestor said my husband's Teachers' pension had to be declared for tax purposes.

Went yesterday to a place which caters for local expats with financial problems or queries.

Paid 40 euros to speak to their wonderful Accountant, who is bi-lingual. He took information from us and told us we didn't have to pay any tax in Spain . He then said he would come to the Hacienda with us to make sure we got registered - he also said we may actually BE registered as with some people it happened automatically when they got their residency card. (He didn't know why some and not others :rofl:).

Anyway, we got there, no queue , and he asked the lady to check and we WERE registered and have been for four years! No-one ever told us. He arranged with the Hacienda to give us a Certificate of Tax Residency which means that we don't have to keep sending in tax returns saying 'nada' , and explained that once we were both 65, assuming we were still resident, then we wouldn't have to pay any CGT if we sold our house. PHEW!

Also we haven't broken any laws by not submitting a Tax Return or obtaining a Certtificate of Tax Residency before this and do not have to bother the Hacienda again.

He is now going to sort out our Spanish wills which he found out for us have never been registered with a notary, as they should have been (the guy who drew them up said everything had been done) and at the moment they are not legal.

Well worth 40 euros! A terrific weight off my mind.

Re: Spanish Tax Declaration
 

That`s good news. :thumbup:

Re: Spanish Tax Declaration
 

Oh and he also told us (I've seen this thing discussed on this forum before) that our four-year-old Padron Certificate was perfectly acceptable and that it only needed to be renewed if we moved house. I've seen posts on here which say they need to be renewed every three months! Maybe it's one of those things that varies from place to place.

Re: Spanish Tax Declaration
 

Some of the gov offices will only accept them with a less than 3 months date on them though, even if you have had them for years, so you have to renew them.

Re: Spanish Tax Declaration
 

Is there an office like the one described by scampicat in the Gandia area that someone can point out to me? My mother-in-law (she's French and is 68 yo) has been living here for 5 years (owns a small apartment here but nothing in France) and tells me that she's still declaring her taxes in France because she was told that she doesn't have to declare taxes here as she does not receive any income here (sounds like what Ashcan described earlier :blink:). She definitely lives more than 182 days here, is this even legal?

She registered as a resident 5 years ago now isn't she automatically in the tax system? Shouldn't the tax return papers be sent to her every year automatically?

We are concerned that she may be slapped with the CGT if/when she sells her apartment.

Re: Spanish Tax Declaration
 

There are two different types of residency and the one Mum would need is to be a fiscal resident here so that means she must complete a tax return. It might be worth doing even if it is a nil tax return then when she comes to sell her property she should not have the retention made. Someone will be along soon though who is more knowledgable than me:)

Re: Spanish Tax Declaration
 

Nope. In Spain the onus is on the individual to get themselves in the tax system and make tax returns.

Re: Spanish Tax Declaration
 

What is a 'Certificate of Tax Residency' referred to above, why is it issued to non tax payers ? How long is it valid. How do you obtain it ?