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A UK taxpayer but living in spain - what to do?

A UK taxpayer but living in spain - what to do?

Old Mar 19th 2009, 11:18 am
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Default A UK taxpayer but living in spain - what to do?

Hi
We are moving to Almeria in May09 and dont know what to do about becoming a resident (or not) and tax etc etc - do I remain a UK taxpayer?

My daughter will attend a state school and I will work remotely, an employee from a UK company still paying UK tax, with occasional visits to London for meetings.

Myself and my husband both have NIE numbers as we purchased property a year ago in Spain. Now we will be renting for 1 year to see if we like the life.

Can anyone help with some advice?
Thanks
Jo
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Old Mar 19th 2009, 5:06 pm
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Default Re: A UK taxpayer but living in spain - what to do?

Hi Jo.

There are two types of “residency”. The first is the requirement, after 90 days in Spain, to register on the database of EU foreigners who are in Spain. This has replaced the old “residencia” card and is now a piece of A4 paper.

The second is tax residency and you will become tax resident in Spain when you have spent 183 here in one calendar year. You are tax resident for the whole year that you become tax resident, unlike the UK where it can be pro-rata. So, you will be tax resident for the whole of 2009. Even allowing for double taxation agreements there are no exceptions to this rule.

Having become tax resident then, with some exceptions, you are liable for Spanish income tax on your world wide earnings. That said, it is possible for you to still be tax resident in the UK if you spend more than 90 days there and even if you do not, if you are employed by a UK company you may still have to pay UK tax based on the time you spent carrying out the duties of your employment there.

Now you have a particularly unusual situation in that you are employed by a UK company but working for them remotely in Spain. The question is, are you carrying out your duties in Spain or in the UK? If you are considered to be carrying them out in Spain, you should only be taxed in Spain, not in the UK (apart from a small amount based on your visits there for meetings etc). Either way you will be liable for Spanish tax on your whole earnings, it is a question of whether you are still taxed in the UK. It may well be that your UK employer will insist on deducting tax on all your earnings.

This is not a problem however as under the double taxation agreement you can deduct any UK tax paid from the tax due in Spain.

I would suggest you talk to your employer and see what arrangements he can make to have you taxed only on the basis of your time in the UK. HMRC will not allow this until you can prove that you are paying the tax in Spain so there may be a delay in sorting this out as tax in Spain is paid in June following the year that you earned the money.

So you have got until June next year before you need to make a tax declaration so you have got time to see if you like it and want to stay in Spain.

Good luck.
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Old Mar 19th 2009, 5:38 pm
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Default Re: A UK taxpayer but living in spain - what to do?

Fred, two points of clarity if I may?
Does earnings mean only salaried earnings, or does it include investment income?
Also, when does the Spanish tax year run? Calendar or some other point?
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Old Mar 19th 2009, 5:53 pm
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Default Re: A UK taxpayer but living in spain - what to do?

Earnings means any income from whatever source.

Perhaps income is a better description.

The tax year in Spain is the calendar year.
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Old Mar 19th 2009, 8:44 pm
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Default Re: A UK taxpayer but living in spain - what to do?

A point of interest, I recently discovered that if you reside in Spain and your spouse works and pays Tax/NI in England then you and your children in Spain are entitled to full spanish health benefits and child allowance. Now isn't that a suprise!!!
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Old Mar 20th 2009, 8:11 am
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Default Re: A UK taxpayer but living in spain - what to do?

I went through all this when I first moved over here. Similar situation, working for uk employer but carrying out duties in Spain remotely over the Internet.

After seeking advice from uk tax dept, uk tax lawyers, Spanish gestors, Spanish accountants, etc. I found all their advice contradicted each other and I was none the wiser.

Eventually I applied for a NT (No Tax?) tax code from the UK tax people and with confirmation from my employer that I resided in Spain, I no longer pay UK tax and NI. Instead I have a Spanish gestor submit an anual tax return every June declaring my uk salary and paying the approriate rate of tax for a Spanish resident.

As I no longer pay uk NI my family and I are no longer entitled to the UK nor Spanish health service. Two options are available, one is to get private health care, the other is to pay into the Spanish social security system as an autonomo (self-employed). The autonomo payment is around 250€ per month and provides us with Spanish health cards that entitle us all to access the Spanish NHS system along with every other Spaniard.

This is what I've been doing for the last few years with out any problems at all. My wife has even had a baby over here using the Spanish NHS.
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Old Mar 20th 2009, 9:19 am
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Default Re: A UK taxpayer but living in spain - what to do?

Is it possible to just leave things as they are for 6-12months, to see if we actually decide to stay in Spain? Remain UK resident paying UK tax?

My work duties will be carried out remotley on the UK market only, no work will be actually done in Spain to the Spanish market. Would anyone know that I was based in Spain?

I would hate to go through all this procudure, to then decide that we would go back to the UK (which is possible with the current financial climate).

Thanks for all the advice so far, appreciated.
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Old Mar 20th 2009, 9:26 am
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Default Re: A UK taxpayer but living in spain - what to do?

Originally Posted by foxterrier
Is it possible to just leave things as they are for 6-12months, to see if we actually decide to stay in Spain? Remain UK resident paying UK tax?

My work duties will be carried out remotley on the UK market only, no work will be actually done in Spain to the Spanish market. Would anyone know that I was based in Spain?

I would hate to go through all this procudure, to then decide that we would go back to the UK (which is possible with the current financial climate).

Thanks for all the advice so far, appreciated.
Well I guess at the end of the day that will depend on whether you want to break bend the tax laws here. However, we came here in an October 06, and our first tax return wasnt due in Spain until the early part of 2008 for the 2007 year so depending on the time you move here there is quite a delay before your first return goes in as an individual

If you move here to reside then you are required to register at the Police station .... of course then when you are residing over there you will no longer legally have access to the NHS ..... and if you are not paying into the system here then you wont have access here either.
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Old Mar 20th 2009, 9:30 am
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Default Re: A UK taxpayer but living in spain - what to do?

Thanks for that info.
If I pay tax in Spain, will my family have health cover in Spain?
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Old Mar 20th 2009, 10:15 am
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Default Re: A UK taxpayer but living in spain - what to do?

Originally Posted by foxterrier
Thanks for that info.
If I pay tax in Spain, will my family have health cover in Spain?
No, as Billgates pointed out, the only way is to pay into the social security system. If you were employed in Spain the employer would pay it. The only other option is to pay it as a self employed person.

My advice would be to not "officially" arrive here until after the end of June and then you would not become tax resident this year. Just make sure that when you apply for the registration certificate you put down your date of arriving in Spain as July.

That gives you an extra year of breathing space as your first tax declaration would not be due until June 2011.

That way you would be entirely within the rules.
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Old Mar 20th 2009, 10:30 am
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Default Re: A UK taxpayer but living in spain - what to do?

Ok thanks - that seems a bit clearer now.

When you say arrive July do you mean July 09 or July 2010 to officially arrive in spain?
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Old Mar 20th 2009, 11:36 am
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Default Re: A UK taxpayer but living in spain - what to do?

Originally Posted by foxterrier
Ok thanks - that seems a bit clearer now.

When you say arrive July do you mean July 09 or July 2010 to officially arrive in spain?
July this year.

You will not spend more than 183 days here in 2009 so you will not be tax resident. The clock starts ticking again on Jan 1st 2010 so you become tax resident at the end of June 2010. That means your income for the whole of 2010 will be taxable but you won't have to pay it until June 2011. If you have returned to the UK by then it is very unlikely that anyone will chase you.
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Old Mar 20th 2009, 11:43 am
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Default Re: A UK taxpayer but living in spain - what to do?

Originally Posted by Mitzyboy
A point of interest, I recently discovered that if you reside in Spain and your spouse works and pays Tax/NI in England then you and your children in Spain are entitled to full spanish health benefits and child allowance. Now isn't that a suprise!!!
Mitzyboy, I am a bit confused here. What child allowance? We pay our autonomo so get "free" health service but I thought there was no child allowance in Spain?
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Old Mar 20th 2009, 11:52 am
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Default Re: A UK taxpayer but living in spain - what to do?

I am totally confused!! I move over to Spain full time end of next month. I will be there mostly on my own as OH works abroad (paid by UK company and UK tax paid on earnings), I will not be working and only have a small pension paid into my Uk bank (not enough to pay tax). I have informed the tax office of my move so therefore will not be paying tax in UK, what tax, if any, will I (or my husband)be liable for in Spain? I have also contacted healthcare in newcastle and I am getting form E106 for healthcare in Spain to cover me until the year 2011
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Old Mar 20th 2009, 1:35 pm
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Default Re: A UK taxpayer but living in spain - what to do?

You pay tax in the country that you live in. You will be liable for tax in Spain and unless your husband spends more that 183 days in Spain, he will not pay tax in Spain.

Depending on your income you may have to submit a tax declaration even if it results in no tax - that at least ensures that you are officially tax resident so that you would be able to claim any special deals that only apply to tax residents (mainly reduced CGT and IHT). Usually the tax office are happy for you to not submit further nil declarations unless your income changes but that is their call.

Be aware that (according to the small print) if you are tax resident in Spain your husband will also be considered tax resident in Spain unless he can prove that he is tax resident and paying tax elsewhere.
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