# income tax on pensions prior to retirement



## skip o (Aug 1, 2011)

I assume some of you earned interest on your non-Spanish pensions prior to retirement. Did you pay annual income taxes to Spain on that interest? 

I ask because I have been given conflicting information on the interest I make in my US retirement (pension) accounts every year. I am not old enough to make any withdrawals. Every year, my investments earn income which I can not withdraw. Some accountants say that even though there is a tax treaty between the US and Spain, and even though the US does not tax that interest as income, Spain does tax it as income. Other accountants say Spain does not tax it as income.

Part of the problem is that I have not found an accountant that specializes in US and Spain tax laws. Most accountants seem to know a lot more about UK and Spain tax laws.


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## alborino (Dec 13, 2014)

skip o said:


> I assume some of you earned interest on your non-Spanish pensions prior to retirement. Did you pay annual income taxes to Spain on that interest?


skip o glad you asked this again as it illustrates a serious concern for not only US expats but others as well. It has also been asked here before and not been answered.

In the UK we have various tax protected wrappers - as just one example the SIPP (Self Invested Personal Pension). You can use it to build a pension fund and then (from age 55) to manage your fund investment as you draw a pension from it after retirement. Within you can have shares, investment funds, property, cash, etc..

The advantages are that the contents are not reported to the government (by the individual) and the gains within are tax free. However when you extract lump sums or take a regular pension the values you extract are subject to tax.

The SIPP also allows gross earnings input without attracting tax during the pension build phase. 

So the question to the spanish authorities is how will you tax this? At the individual investment level (in which case are loses reclaimable), at the SIPP level (and again are previous and future losses reclaimable), as the UK government does just when you extract cash.

And perhaps more worrying what rule changes might a bankrupt spanish government make in the future? Yup ok that has to be a judgement.

Sadly to get an answer is proving very difficult. The best I have is a suggestion from a spanish accountant saying they think only the pension extracted will be taxed. But he didn't say it with much conviction.

The good news for brits is small SIPP holders from this April, if they are 55, can bail out of the SIPP much more rapidly than previously but of course many would rather not. (As for big SIPP fund holders can't worry about them too much ).

So not just a US or non EU issue and my search for an answer goes on. I'm trying to find a knowledgeable person in Spain and if I succeed I certainly will report back here.

But do please share if you find any answers. Cheers


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## skip o (Aug 1, 2011)

"Sadly to get an answer is proving very difficult. The best I have is a suggestion from a spanish accountant saying they think only the pension extracted will be taxed. But he didn't say it with much conviction."

I too have received answers with no conviction, as well as answers given by two totally confident people that totally contradict each other. My experiences with visas, taxes and other bureaucratic issues in Spain is that there is often very little clarity but very big punishments for making a mistake.


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