Spanish taxes

Old Dec 22nd 2021, 1:12 pm
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Default Spanish taxes

Hi all. Well we are about to start the visa process to sell up in the UK & live permanently from April 2022 (we are both 59 & retired), but need some clarification on the taxes in Spain as when searching the subject online, it looks like we will have to pay much more income tax, unless someone can advise us otherwise.

For instance, our individual personal tax allowance in England is £12,500 before we have to pay any income tax, but it says in Spain its only €5,500, so anything above this is taxed at 19%, is that right because if so, we would be financially worse off?
Our income is from our own personal pension plans and we aim to withdraw €10,000 each a year, as we can comfortably live on €20,000, being mortgage free, so would we each have to pay 19% tax on the €4,500 amount above the €5,500 spanish personal tax allowance or is there ways to not to?
Also Our UK house sale would be circa £250,000 hopefully in March 2022, and we are thinking of another option and not touching our UK personal pensions and just living on the property funds which would easily last us over 12 years before having to use our UK personal pensions, so can we simply transfer a yearly amount say of £18,000 (€20,000), and pay no spanish taxes? If we are expected to, is there ways around not doing so?
Finally, would we have to pay any taxes based on selling our UK property (we already own outright a property near Benidorm where we will live permanently), or can we simply say nothing and say we are living on our UK "savings"? Any advice would be much appreciated on this subject
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Old Dec 22nd 2021, 1:51 pm
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Default Re: Spanish taxes

Originally Posted by bonesey333 View Post
Hi all. Well we are about to start the visa process to sell up in the UK & live permanently from April 2022 (we are both 59 & retired), but need some clarification on the taxes in Spain as when searching the subject online, it looks like we will have to pay much more income tax, unless someone can advise us otherwise.

For instance, our individual personal tax allowance in England is £12,500 before we have to pay any income tax, but it says in Spain its only €5,500, so anything above this is taxed at 19%, is that right because if so, we would be financially worse off?
Our income is from our own personal pension plans and we aim to withdraw €10,000 each a year, as we can comfortably live on €20,000, being mortgage free, so would we each have to pay 19% tax on the €4,500 amount above the €5,500 spanish personal tax allowance or is there ways to not to?
Also Our UK house sale would be circa £250,000 hopefully in March 2022, and we are thinking of another option and not touching our UK personal pensions and just living on the property funds which would easily last us over 12 years before having to use our UK personal pensions, so can we simply transfer a yearly amount say of £18,000 (€20,000), and pay no spanish taxes? If we are expected to, is there ways around not doing so?
Finally, would we have to pay any taxes based on selling our UK property (we already own outright a property near Benidorm where we will live permanently), or can we simply say nothing and say we are living on our UK "savings"? Any advice would be much appreciated on this subject
First important piece of advice here is get a tax lawyer with good knowledge of Spanish law to assist. Forums will give opinions based on a mixture of experience and interpretation of laws. Most persons here are not Spanish speakers nor have clear knowledge of how tax affairs are carried out and perceived in Spain. That is not to say that you will get wrong advice, just that you should not take it as absolutely gospel. The main issue here where you will get mixed opinions is residency and tax. Whilst the basic rule suggests 183 days in Spain constitutes tax liability others will argue that that liability kicks in at the moment of residence. This then needs to be placed in the difference of UK and Spain tax periods. If you get your residency in April you will be deemed tax resident for all of 2022 ( jan-dec). If you sold you house in March ,even if that was before residency was granted, the Spanish tax man might expect CGT on the sale even if it was your principal property. If you waited until after the summer then you might be able to avoid being classed as a resident and therefore not be subject to any CGT in either country. Again this very much depends on other things. Now I can assure you this will set off a long convuluted debate here where we all air our own interpretation of the law. I would view the coming onslaught in a slightly detached manner. Get a feel for the arguments and the reasoning but in the end get professional advice. One thing you are right about is that tax quotas are a bit higher than UK but you are not dealing with super large sums. Also remember that by applying for the Visa you are automatically declaring yourself liable to fall into at least some tax bracket as opposed to EU nationals who do not need to present any big income streams.
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Old Dec 22nd 2021, 5:02 pm
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Default Re: Spanish taxes

You will certainly pay more tax as a pension income of €20,000 in the uk would have no tax if split between the two of you. Yes you could transfer the proceeds of your house sale but youwould have to pay tax on any interes earned in the UK.

I think at your income level the tax burden would not be great as personal pensions are tax advantageous in spain.

Consult an expert. I did and at my income level i would NEVER become tax resident in Spain...
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Old Dec 22nd 2021, 5:31 pm
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Default Re: Spanish taxes

Originally Posted by frigilianafreddy View Post
You will certainly pay more tax as a pension income of €20,000 in the uk would have no tax if split between the two of you. Yes you could transfer the proceeds of your house sale but you would have to pay tax on any interest earned in the UK.

I think at your income level the tax burden would not be great as personal pensions are tax advantageous in spain.
Freddie, many thanks for your reply. So can you expand a little on your last quote above based on us taking €10k each a year from our UK personal pensions? Ie what tax would we have to pay on these two €10ks a year?

Last edited by Rosemary; Dec 22nd 2021 at 5:35 pm. Reason: corrected quote
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Old Dec 22nd 2021, 7:10 pm
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Default Re: Spanish taxes

Speaking about taxes, I didn't know lottery wins are also subject to a 20% tax in Spain. As Chipmonk mentioned, better get a tax expert to analyse the case.
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Old Dec 22nd 2021, 9:52 pm
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Default Re: Spanish taxes

Personal pensions are taxed fully as income. Personally purchased annuities have considerable tax reductions.

The basic personal allowance is indeed €5500, but there is an additional €2000 allowance that everyone seems to get. There is also a sliding scale allowance on incomes of less than €16825 that can be as high as €5565 0n incomes of €13115. So, in some cases the tax is less than in the UK.

And, Chipmonk, that is not a random interpretation of the tax law, it is a fact.
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Old Dec 23rd 2021, 6:48 am
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Default Re: Spanish taxes

It's worth noting the difference between direct tax and stealth tax. You're going to pay max 855 Euro in income tax on 10k but if you consider the UK council tax bands I'm sure you'll be quids in. At the lower end of the scale people don't really need to worry about differences in income tax anywhere in the world. By lower end I mean the 99% of us.

As already advised by others; get an accountant, at least for the first couple of years. Just don't try to hide anything. Firstly you're not going to get a NLV by hiding anything and secondly they always catch up with you.
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Old Dec 23rd 2021, 5:35 pm
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Default Re: Spanish taxes

From your post it sounds like the personal pension is a SIPP, if so might be worth having a read of the following article by a firm of accountants;

https://www.spenceclarke.com/article...not-a-pension/

According to the authors a SIPP is not recognized as pension as such in Spain which means that withdrawals are treated as capitals gains i.e. the tax is not on the whole amount of the withdrawal but just on the profit - difference between the buying and selling price of the investment. This is different to other pensions such a state pension, defined contribution and defined benefit schemes in which the income is treated as "earned income" and full range of personal allowances described in Fred's post above can be set against it. Please treat with extreme caution though! - I've been trying to pin the same question down for a while and this is the best answer I've found to date. As one of the other posters suggested best to find an accountant with a knowledge of how the Spanish system applies to expat finances.
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Old Dec 25th 2021, 9:23 am
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Default Re: Spanish taxes

https://expatsmagazine.org/taxes-in-spain/

P&H have done my tax return for years.
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Old Dec 25th 2021, 9:11 pm
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Default Re: Spanish taxes

I use a tax accountant over in Barcelona who does my U.K. and Spanish tax return. Was recommended to me by Pellicar and Hardy and all have been super helpful.

its not as complicated as many on here would make out and lead a pretty non standard life in terms of residency.
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Old Dec 27th 2021, 7:49 am
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Default Re: Spanish taxes

Have you looked at Portugal, it's a much better deal when it comes to taxes and healtcare is residency based entitlement.
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Old Dec 27th 2021, 7:56 am
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Default Re: Spanish taxes

Originally Posted by jogger View Post
Have you looked at Portugal, it's a much better deal when it comes to taxes and healtcare is residency based entitlement.
They already have a house outside Benidorm so they know where they want to live. Plus weather is much better there than in Portugal which is the main attraction for Brits. 24 degrees today!!!
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