Mitzyboy

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

Ashcan

Pardon?

What an extraordinary posting from JDR

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

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

Fred James

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.

Ashcan

Fred

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

Mitzyboy

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?

jdr

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.

Ashcan

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.

Fred James

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?

jdr

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

Ashcan

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

Mitzyboy

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

Fred James

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.

Mitzyboy

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

Fred James

Lucky old you!

Ashcan

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.