# Double taxation in spain



## mr_madonna007 (Sep 17, 2012)

I know taxes can be complicated, so please keep this simple.

How does double taxation work.

Reading different sources of information, seem to make it more complicated than it probably is.

If you have savings, and rent a property in the UK but live in Spain, do I just produce a tax certificate to the tax authorities in Spain?

How does Spain reap any rewards from the taxes I pay in the UK whilst living in Spain?

It would be just 2 incomes - interest from savings, and rental income, nothing else. 

This is not about pensions.

Any simple advice would be so greatly appreciated.


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## StewartL (Sep 5, 2013)

mr_madonna007 said:


> I know taxes can be complicated, so please keep this simple.
> 
> How does double taxation work.
> 
> ...


Please find link to HMRC guidance of double taxation agreements and how to make any claims for relief and or repayments. http://www.hmrc.gov.uk/nonresidents/moreiwtclaim-relief-from-uk-under-a-double-taxation.shtml 

I hope that these help you.


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## larryzx (Jul 2, 2014)

For those tax resident in Spain, rental income in UK is taxed in UK, however, I believe you must still tell Hacienda of the income and the tax paid as you may have a top up tax. Not double tax.

I know you said excluding pensions, but just in case some may be confused. Crown Pensions are taxable only in UK and until this year did not need to mentioned in Spain. That may have changed . 

ALL other income worldwide is taxable in Spain. If you have paid tax on say savings in UK, then that income must be declared in Spain. The tax stopped in UK can be reclaimed in full on a from R43. So no double tax.


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## Rabbitcat (Aug 31, 2014)

Just to be clear. If your interest on savings is taxed in UK does Spain still tax them and then you must reclaim of Spain?


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## larryzx (Jul 2, 2014)

Rabbitcat said:


> Just to be clear. If your interest on savings is taxed in UK does Spain still tax them and then you must reclaim of Spain?


Yes. That's what the Double Taxation Agreements say.


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## snikpoh (Nov 19, 2007)

larryzx said:


> Yes. That's what the Double Taxation Agreements say.


... actually, no. I think you're confusing matters.


If I have paid tax on savings interest in UK, then I simply state this on my tax return.

For example; tax paid in UK = £100 (say 140€). I show the gross income on my Spanish tax form and the fact that I've paid 140€ already. they then calculate if I have to pay any more tax here or if I get a rebate.

So, there's really no need to actually reclaim tax paid as you never actually pay it twice.


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## CapnBilly (Jun 7, 2011)

snikpoh said:


> ... actually, no. I think you're confusing matters.
> 
> 
> If I have paid tax on savings interest in UK, then I simply state this on my tax return.
> ...


I'm afraid that's not correct. Under the old DTA you should have reclaimed from HMRC although they were entitled to 12% under the agreement. In other words if you earnt £100 and paid £20 tax in the UK you declared £100 and then claimed relief on £12. 

Under the new DTA interest earnt in the UK is taxable only in Spain, so should be declared in full, and any tax reclaimed from the UK. You would not receive any rebate from Spain in respect of tax overpaid in the UK anyway, even on offsets which are allowed.

Just to complicate matters the new DTA came into force from 12th June 2014 so the new regime applies to any interest received after that, and the old one to interest received before.

I know that gestors just offset what you have paid, but that's not what the DTA says, and if they check, they can ask you to pay in full and reclaim going back 4 years. 

I was asked to check a return the other day in respect of a submission under the pensions amnesty. Their gestor had submitted the return and offset tax already paid. I advised they shouldn't have done that, and sure enough a few weeks later the Hacienda asked for the tax offset and told them to reclaim it. The point being that they are checking these, so if you are checked they will ask you to pay.


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## snikpoh (Nov 19, 2007)

CapnBilly said:


> I'm afraid that's not correct. Under the old DTA you should have reclaimed from HMRC although they were entitled to 12% under the agreement. In other words if you earnt £100 and paid £20 tax in the UK you declared £100 and then claimed relief on £12.
> 
> Under the new DTA interest earnt in the UK is taxable only in Spain, so should be declared in full, and any tax reclaimed from the UK. You would not receive any rebate from Spain in respect of tax overpaid in the UK anyway, even on offsets which are allowed.


Now it's my turn  I'm not sure that what you say is correct.

Nationwide, for example, still continue to take tax on interest earned - they will NOT pay it gross!

Whilst what you say may or may not be correct, I am relaying what happens in reality.


I have paid tax on savings income in UK so must detail that on my Spanish tax return. I do NOT want to pay tax twice. Yes I can claim it back from UK but .....

As from 2016, things will be clearer (I believe) in that building societies et al will have to pay interest gross.


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## StewartL (Sep 5, 2013)

I would have to agree totally with CapnBilly. Here is a link to the new DTA between the UK and Spain.

https://www.gov.uk/government/publications/spain-tax-treaties-in-force


Although I accept that Agencia Tributaria may well permit or have in the past permitted tax residents to use the method of eliminating double taxation on savings interest tax the new agreement specifically states that this type of income is only taxable in the country of tax residency. (Article 11) Therefore if they continue to allow tax residents to claim relief where not entitled under the treaty they are short changing themselves of potential taxation.

Property rental income (Article 6) is however taxable in both counties and this is where the (Article 22) method of eliminating double taxation would come into play.

I am aware that some building societies do not have systems which can allow them to pay interest gross on some accounts. However if this is the case then the tax deducted should be reclaimed back from HMRC on for R40 or if the tax payable has to submit a self assessment form on this.


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## CapnBilly (Jun 7, 2011)

snikpoh said:


> Now it's my turn  I'm not sure that what you say is correct.
> 
> Nationwide, for example, still continue to take tax on interest earned - they will NOT pay it gross!
> 
> ...


It doesn't matter whether they pay it gross or deduct tax it is still taxable in Spain. I have already acknowledged what happens in reality, but of course, that doesn't make it correct. 

Why do you think they will have to pay it gross from 2016 ?


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## extranjero (Nov 16, 2012)

CapnBilly said:


> It doesn't matter whether they pay it gross or deduct tax it is still taxable in Spain. I have already acknowledged what happens in reality, but of course, that doesn't make it correct.
> 
> Why do you think they will have to pay it gross from 2016 ?


I think it was in George Osbournes budget
It's a faff to have to reclaim it on R40 or is it R 43 ?
It's so much simpler just offsetting it against the Spanish tax


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## StewartL (Sep 5, 2013)

extranjero said:


> I think it was in George Osbournes budget
> It's a faff to have to reclaim it on R40 or is it R 43 ?
> It's so much simpler just offsetting it against the Spanish tax


My apologies reclaim form for non residents of the UK is R43.


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## CapnBilly (Jun 7, 2011)

extranjero said:


> I think it was in George Osbournes budget
> It's a faff to have to reclaim it on R40 or is it R 43 ?
> It's so much simpler just offsetting it against the Spanish tax


No, You're getting confused. In the budget he announced that the first £1,000 would be tax free, or £500 if on higher rate tax. That doesn't mean they will pay interest gross if its under £1,000. 

For example, you may have cash spread all over the place, so does that mean they won't deduct any tax at all, and you have to submit a return. Or, does it mean they will just continue to deduct tax and you have to submit a return. Whatever they do, it will have to be able to cope with a system where there are higher interest rates.

So, I don't think it will just be a matter of the banks paying gross. It may be, it may not be. It may be that it is tied together with the new tax return. I think at this stage there is too much unknown to be able to just state that they will just pay gross interest.


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## CapnBilly (Jun 7, 2011)

StewartL said:


> My apologies reclaim form for non residents of the UK is R43.


The R43 is a generic form for non-residents. You should use the specific form for Spain, which is a Form Spain Individual.


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## Lynn R (Feb 21, 2014)

CapnBilly said:


> No, You're getting confused. In the budget he announced that the first £1,000 would be tax free, or £500 if on higher rate tax. That doesn't mean they will pay interest gross if its under £1,000.
> 
> For example, you may have cash spread all over the place, so does that mean they won't deduct any tax at all, and you have to submit a return. Or, does it mean they will just continue to deduct tax and you have to submit a return. Whatever they do, it will have to be able to cope with a system where there are higher interest rates.
> 
> So, I don't think it will just be a matter of the banks paying gross. It may be, it may not be. It may be that it is tied together with the new tax return. I think at this stage there is too much unknown to be able to just state that they will just pay gross interest.


That is how it has been widely reported in the UK press, though, that banks and building societies will pay interest gross. For example:-
Thereâ€™s a savings revolution coming â€“ be prepared | Money | The Guardian

The relevant paragraph-
"Osborne claimed on Wednesday that 17 million people – 95% of savers – will pay no tax on their savings as a result of the budget changes. Because the banks will no longer deduct tax on HMRC’s behalf and will pay interest gross, pensioners and others earning less than £10,800 will no longer have to go through the current, rather torturous, process of getting their interest paid tax free."

Obviously it will still need to be declared in Spain as there will be no personal savings allowance here.


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## Rabbitcat (Aug 31, 2014)

Yes rates in some of the banks online are now being advertised as "interest free"


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## snikpoh (Nov 19, 2007)

CapnBilly said:


> The R43 is a generic form for non-residents. You should use the specific form for Spain, which is a Form Spain Individual.


Interesting. When I tried to reclaim my savings tax recently, HMRC told me NOT to use this form as it was not the correct one.

They wanted me to use R43.


Seems HMRC are just as disorganized as people in Spain.


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## CapnBilly (Jun 7, 2011)

snikpoh said:


> Seems HMRC are just as disorganized as people in Spain.


Some of them definitely would not pass the elbow test. 

Mind you the Form Spain Individual hasn't been updated to reflect the new DTA.


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