Re: state pension coming up
 

I understand it is a rate laid down by the Hacienda.

In my case, the state retirement pension is transferred to my Spanish bank account and thus the figure is the amount received in euros.

Re: state pension coming up
 

Hacienda do give a rate based on the average exchange rate over the year but you are not obliged to use it. Your income may have accrued at different time over the year and you are free to use what rates applied at the time.

In fact, the Hacienda rate is for guidance only as you only declare the income in Euros so they have no idea what the sterling amounts might be.

A tax declaration in Spain is purely by self assessment and you can give whatever figures you choose - no documentary evidence is required.

Personally I use the actual amounts credited to my bank over the year. For other payments I use the rate that applied on the date of the payment into the bank in the UK.

However if you under declare your income then you risk the (rare) possibility of a tax audit and then you would have to justify your declaration.

Re: state pension coming up
 

A joint declaration is advantageous when one partner has a low income.

Contrary to what almost all websites seem to publish, you do not get twice the personal allowance of €5151, you get one full allowance and another of €3400 described as a family allowance.

You also get an "earned income allowance" of between €4080 and €2652 depending on your income. This does apply to normal pensions but not to annuities.

You get an age allowance of €918 if over 65 and an additional allowance of €1122 if you are over 75 (making a total of €2040) - again this figure is consistently under quoted on almost all websites.

Annuities are taxed at a very favourable rate - typically only 25% of the amount paid is taxable (depending on the age when the payments started) and even then they are taxed as savings income at a base rate (irrespective of the amount) of 18%.

Also you can claim mortgage relief on the interest and capital payments if it is your habitual residence up to a limit.

For the current (2009) tax years declaration there is also a flat €400 deduction from your tax bill. This was in place in the previous year and will continue for the 2010 tax year but be limited depending on your income.

If you declare jointly you only get one deduction - if separately you each get the €400 deduction.

So, in summary, most pensioners are taxed pretty lightly in Spain but remember that just because your income is low enough to be below the tax threshold does not mean that you do not have to make a declaration.

Re: state pension coming up
 

I know a couple that came into the office who had made a joint declaration and ended up paying approx €6000 tax. We spoke to the Gestor that we use in the office and he said that a lot of Gestors were lazy and preferred to do a joint tax return, he then worked them out singly - the lady should have paid nothing and the gentleman €3500.

I don't understand tax but can vouch that the above is a correct statement of fact.

Re: state pension coming up
 

Unless one income is very low it is almost always best to do individual returns.

What is really bad is that when you run the PADRE program that they use to do the calculations, you have to enter the individual details and then it calculates both joint figures and the individual figures at the press of one button. You then choose which is the best option and print out the forms.

It costs them nothing to do individual returns apart from the paper and they could charge more for it!

That's why I do my own tax returns - for free!

Re: state pension coming up
 

"You also get an "earned income allowance" of between €4080 and €2652 depending on your income. This does apply to normal pensions but not to annuities"


Fred
What are the rules for this. Does it apply before retirement age for a company pension?

If so that could almost double the allowance given me in the UK as my wife does not earn and we could declare in Spain jointly. I suppose the tax rates are higher in Spain to compensate.

Re: state pension coming up
 

It applies to any income that goes into the normal income box on the tax return which includes pensions. As I said, annuities are excluded but are taxed more favourably anyway.

The allowance is between €4080 and €2652 on a sliding scale on incomes from €9180 – €13260.

The basic rate of tax is higher than the UK at 24% up to about 17K (of taxable income after allowances) and it goes up again after that.

I don't understand your comment about declaration in the UK or Spain. You have no option - you will pay tax in Spain if you meet the tax residency criteria of spending more than 6 months in Spain in one calendar year.

Re: state pension coming up
 

I don't understand your comment about declaration in the UK or Spain. You have no option - you will pay tax in Spain if you meet the tax residency criteria of spending more than 6 months in Spain in one calendar year.

I believe one is also resident for tax if their principle residence is in Spain, regardless of the 6 month rule.

Re: state pension coming up
 

Tax residency is clearly defined in Article 9 of the relevant law 35/2006 28th November.

You pay tax if your "habitual residency" is in Spain and the law clearly defines that as being more than 183 days in one year - not necessarily consecutive.

If the centre of your activities and economic interests are in Spain you are regarded as tax resident and if your spouse and/or dependant children are habitually resident then you are also considered tax resident even if you yourself are not habitually resident in Spain.

The first sentence is not up for debate but the second set of conditions can be challenged, especially if you can prove that you are tax resident in another country.

If by "principle residence" you mean your principle home, that does not appear to be relevant unless you include that in the "centre of activities" clause, however I am pretty sure that they are referring there to your "economic" interests.

Re: state pension coming up
 

I understand there is no choice of where to pay the tax. I was just using the UK as a comparison to see if we would be better off.

Re: state pension coming up
 

It used to be the case that you paid more tax in Spain but about the only advantage of the current £/€ exchange rate is that the Spanish personal allowances are now often equal or greater than in the UK depending on your specific circumstances.

Savings are taxed at only 18% and there is no limit on this rate.

The basic rate is higher than the UK at 24%.

Both systems are pretty complicated but there is a simulator for Spanish tax here

https://www5.aeat.es/es13/s/dacodaresa9w

Re: state pension coming up
 

Sorry going back to claiming for the pension, I actually phoned the office and did all within a few minutes, they needed my NI number, Husbands NI number, bank to be paid into, usual stuff like D.O.B. very helpful, asked if I wanted it monthly or weekly and bobs yer uncle, this was last June.:D

Not sure of your age, but once one of you is claiming your pension then you can get the E121 fro Newcastle and register with the health service here, just like we have recently.also did that over the phone.

Re: state pension coming up
 

They should send the E121 out automatically with the pension paperwork.

I have to say that I have always found the staff there to be incredibly helpful.

Re: state pension coming up
 

I am retiring in July and will be going back to the UK in September,I have a pension forecast of 25 years from the UK and have 12 years paid in Spain.I phoned the Pension service in the UK and was told that you don't add the two together now (since April 2009) and that i would get 25/30 of the full UK pension and would have to apply for the Spanish one separately, i know that the minimum pension period in Spain is 15 years, will they take some of the UK pension to make it up?, also i was told by the pension service that i should have applied for my UK pension through the Spanish social security i.e Country of residence, but as i was going back soon, to leave it.I have not yet claimed for my Spanish pension , should i wait to return to the UK and do it then or apply now while still in Spain. I dont want the UK stopping my pension while they sort it all out.If anyone can help it would be appreciated

Re: state pension coming up
 

When you have a split pension situation like yours the 15 year rule does not apply so you will get a pension from Spain.

You can find out a great deal of information about it here

http://ec.europa.eu/employment_socia.../homepage.psml