Brano77

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?

snikpoh

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.

Fred James

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

Brano77

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!

Hillybilly

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.

Brano77

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

snikpoh

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.

Mitzyboy

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

bigglesworth

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.

Fred James

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.

bigglesworth

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

Brano77

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.

Brano77

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.

Ashcan

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

jdr

[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 ?