# Becoming non resident in Spain after being a resident.



## Andy Elba (28 d ago)

Hi. I have purchased a villa in Spain. I am 46. I hope to retire in Spain full time at 50 using my savings. I cannot get my pension until I am 57. 
I know that I will have to pay tax on my lump sum if I am a resident in Spain, which I hopefully will be. 
I was seeing if it is possible to leave Spain at say 56 1/2 and become a Uk tax payer again, get my lump sum in uk tax free and then rejoin Spain. 
I cannot find any answers to this. 
I could pay for a Spanish IFA but seems pointless as things could change in the next 4 years where I don’t need to do this.


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## 1kaipa (Jul 20, 2019)

No reason why you couldn't leave but it would probably need to be for a full year. This way you could avoid any Spanish tax burden. If you have not had residence for 5 years then you would need to reapply with a new healthcare policy etc.


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## Andy Elba (28 d ago)

Many thanks. Do you think in that full year I had to leave, I could do the 90 days rule on a tourist visa.


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## 1kaipa (Jul 20, 2019)

It is difficult to say for sure about any of these things when it comes to tax. Obviously you are trying to get the best of both worlds ( nothing wrong with that if it's deemed legal) but the closer you sail to the wind the more complex it might become. Essentially you are saying you are going to hand back your residency and notify the Spanish taxman. Then return to UK and establish proof of residency there. You would need a full UK tax year for the proof you paid tax there on your return to Spain. If you don't tell the Spanish taxman you have moved they will automatically notice you haven't filed for your year away prompting an investigation- and this where they might want to apply certain interpretations I.e. your centre of financial interests still remained in spain!! This is why I imagine you have to make a clean break from spain- so you might need to show zero use of bank account, utility bills very low, no new contracts etc. You also need to sign off padron and deregister from healthcare. So my bet is you would need to stay out of spain for at least year and pay taxes in uk. After that you would need a visa and redo the residency process. The problem with the 90 day is that you would probably be leaving a small financial footprint in spain which would be enough for them to say that your deregistering etc was in affect a means of avoidance as opposed to a genuine desire to return to UK.
Wouldn't it be easier just to pay your tax when you take your lump sum and be happy that you are able to live comfortably in spain for as long as you like? You would probably end up paying alot of the potential tax just living in uk for a year plus expense of getting a new visa etc!!


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## Andy Elba (28 d ago)

Thankyou for your reply. The problem with paying tax on the lump sum is my early retirement plans is based on that tax feee lump sum. My wife’s has a lump sum too. That’s a combined tax free lump sum of £500k in the Uk and from what I have read I think only €6k will be taxed at 19% in Spain and some I think will be taxed at 26%. Not really sure what the tax fee will be and wether I can get a good accountant to lower the tax but I imagine it will be tens of thousands if not more.
Just doing a quick calculation of what I believe the tax bands to be on our lump sums and I think it works out that the tax bill would be £115760 on £500k.


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## 1kaipa (Jul 20, 2019)

Not sure about tax on these things but do really get a 500k pension tax free in uk? I thought that pensions were all taxed. Anyway that will definitely be taxed in spain and as it is a large amount it will definitely attract attention if you bring it to Spain. I think you will basically need to decide if you want to just move back to UK and enjoy a very generous tax free lump sum or carry on in spain. However, the idea of trying to pretend to be a UK tax resident by saying that you were not a resident for more than 182 in spain but spending 90 as a tourist is going to be a tough one and certainly not clear cut. If you are taxed in uk then you will get a credit against any Spanish tax.
This is one of the biggest problems in moving to Spain if not already retired- the 2 tax systems are very different and people plan accordingly during their lives based on those systems. As soon as you change you can find that you have to pay much more than originally planned.


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## Andy Elba (28 d ago)

Thanks. In the UK you can take 25% of the lifetime allowance of a pension. The lifetime allowance is just over a million, so we can take just over £250k each tax free. 
I just need to work out what benefits I would have over the UK on the rest of my pension. 
I could get a Spanish tax expert now to look over my figures, but the problem is, by the time I can retire to Spain in 2026, all the visa laws might have changed.


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## 1kaipa (Jul 20, 2019)

Andy Elba said:


> Thanks. In the UK you can take 25% of the lifetime allowance of a pension. The lifetime allowance is just over a million, so we can take just over £250k each tax free.
> I just need to work out what benefits I would have over the UK on the rest of my pension.
> I could get a Spanish tax expert now to look over my figures, but the problem is, by the time I can retire to Spain in 2026, all the visa laws might have changed.


I don't think the visa laws will change other than the financial requirements which you would easily meet with such a big pension pot. If anything it's a bit of a hassle. If you had permanent residency under article 50 you can be absent 5 years so that might help if you get that before you leave.


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## Andy Elba (28 d ago)

Didn’t think I could get that article 50 thing. I am not able to retire in Spain until 2026 at the earliest.


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## 1kaipa (Jul 20, 2019)

Andy Elba said:


> Didn’t think I could get that article 50 thing. I am not able to retire in Spain until 2026 at the earliest.


Basically if you will have lived in Spain 5 years by 2026 you can be absent for 5 years and still return without need for a visa. This would allow you to be a full UK resident for a year or more then return to Spain again and simply reregister as a tax resident without any visa


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## Andy Elba (28 d ago)

Yes I won’t be living in Spain until 2026. I will then be allowed my lump sum in 2033. So I would have lived in Spain for 7 years by the time I can get my lump sum. 
ps Thankyou for taking the time to reply to me.


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## xabiaxica (Jun 23, 2009)

Andy Elba said:


> Yes I won’t be living in Spain until 2026. I will then be allowed my lump sum in 2033. So I would have lived in Spain for 7 years by the time I can get my lump sum.
> ps Thankyou for taking the time to reply to me.


We've been confused by the title of your thread. It implied that you were already resident in Spain.

So basically, you have bought a property as a non-resident & want to know about tax / pension issues further down the line should you become resident?

If that's the case, I can change the thread title to reflect that.


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## Andy Elba (28 d ago)

Sorry for the confusion. Yes that is the case. Although the Villa that I have purchased isn’t actually built yet. ( to add to the confusion). I won’t be moving out to Spain though until 2026 and the villa will be key ready in 2024.( will no doubt be writing more posts as and when my villa is built).


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## 1kaipa (Jul 20, 2019)

xabiaxica said:


> We've been confused by the title of your thread. It implied that you were already resident in Spain.
> 
> So basically, you have bought a property as a non-resident & want to know about tax / pension issues further down the line should you become resident?
> 
> If that's the case, I can change the thread title to reflect that.


Sorry my mistake, I thought poster was already a resident and paying tax here!


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## xabiaxica (Jun 23, 2009)

1kaipa said:


> Sorry my mistake, I thought poster was already a resident and paying tax here!


So did I!


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## Andy Elba (28 d ago)

Sorry for the confusion.


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## 1kaipa (Jul 20, 2019)

OK now I see. Well the only thing I can say is that you are talking about something 11 years away and it's impossible to say what the tax laws will be like by then.


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## Overandout (Nov 10, 2012)

Surely the fact that the OP will need a visa to become resident in the first place actually makes this kind of operation easier?

I mean it is clear cut compared to an EU person who could still live (to all practical effects) in Spain but pretend to be tax resident elsewhere. The OP will need the first visa, presumably a non lucrative one then not renew it (or renounce it) when returning to live in the UK, then apply again once the UK financial and tax burdens are settled.

Mybe not specific to the OP, but it does raise a question; if someone gains residency under the so called golden visa, are they then allowed to leave, live somewhere else and return without reinvesting the required amount again?


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## Andy Elba (28 d ago)

I am actually only €62k away from qualifying for the Golden visa and it is something I have given much thought to. I need to understand that more then. 
I know it’s 11 years away to be able to get my lump sum but it’s only 3 1/2 years from wanting to become a resident. This problem could mean I don’t try and become a resident and do the 90 day rule until I am 57. Also considering doing 90 days in Spain twice a year and then 90 days in Malta/Cyprus which don’t follow the same rules., and 90 days in the uk.


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## dancingspider (Mar 4, 2018)

Seem to me that if you change your residency, receive a lump sum at a lower tax rate and switch it back you are setting yourself up to be accused of playing the system in the minds of the Spanish tax authorities, who are notoriously difficult. If discovered, they are quite likely to get the hump and are likely to launch a deep dive into your finances. You can look forward to many sleepless nights and much stress. Not sure if anyone here is an expert to offer you sound advise on the tax avoidance plot you are hatching, but you would be wise to cut to the chase and go seek professional advise. I would get the same advise from two firms, as it were, the belt and braces approach, to be assured you are on firm ground.


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## Andy Elba (28 d ago)

Ok. I feel no moral dilemma. This money has been worked for and already been taxed once and the majority of it will be taxed again, which ever country I reside in. 
Of course I am trying to avoid paying tax on it by seeing how I can change my residency status at the time I am due my lump sum. This will all be legal and the cost to me, will be leaving my dream home for however long it takes to have to stay out of the country, or by not becoming a resident until after my lump sum. I am only here to see if anyone know my options.


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## 1kaipa (Jul 20, 2019)

dancingspider said:


> Seem to me that if you change your residency, receive a lump sum at a lower tax rate and switch it back you are setting yourself up to be accused of playing the system in the minds of the Spanish tax authorities, who are notoriously difficult. If discovered, they are quite likely to get the hump and are likely to launch a deep dive into your finances. You can look forward to many sleepless nights and much stress. Not sure if anyone here is an expert to offer you sound advise on the tax avoidance plot you are hatching, but you would be wise to cut to the chase and go seek professional advise. I would get the same advise from two firms, as it were, the belt and braces approach, to be assured you are on firm ground.


Its not tax avoidance unless you deliberately hide or lie. The OP doesnt want to pay tax that he would pay if a Spanish resident. There is nothing illegal in moving to another country so as not to pay tax. The point here is that you need to clearly establish you were not living as resident in the country you dont want to pay tax in. My opinion is that this means the OP needs to out of spain totally for at least on full tax year. And the required proof would be an absence of any financial activities in spain plus proof of a full UK tax declaration. If they move back to Spain after this - that is perfectly legal.


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## Lynn R (Feb 21, 2014)

Andy Elba said:


> Ok. I feel no moral dilemma. This money has been worked for and already been taxed once and the majority of it will be taxed again, which ever country I reside in.


What, you didn't get tax relief on your pension contributions in the UK? What kind of pension scheme is that then?

I moved to Spain several years before my pensions became payable and as a result I paid a 5 figure sum in Spanish income tax on my lump sum (nowhere near as large as yours). I did briefly consider declaring myself non resident and moving back to the UK for the tax year in which I received the payment, then moving back again, but decided it just wasn't worth the hassle especially as I'd have had to rent somewhere to live in the UK. I'm also not sure that the Agencia Tributaria wouldn't see through that strategy, and I guess nobody could tell you with absolute certainty whether they would or they wouldn't.


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## Andy Elba (28 d ago)

I have been reading about QROPS which seems an option but I am still a little confused by it.


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## Lynn R (Feb 21, 2014)

I see you've edited your post about not getting tax relief on your contributions to a SIPP - but I would just like to point out that such contributions do get tax relief as the amount you contribute out of taxed income is topped up-

SIPP tax relief and benefits explained | Bestinvest 

Therefore your claim that you have paid tax on all the money contributed to your fund doesn't reallty stand up, does it?

I have a SIPP myself, I transferred my old AVC sheme into it after I moved to Spain. I don't take any income from it as I don't need to, prefer it to provide some capital appreciation, and as the rules stand at the moment if I die before the age of 75 my beneificary could withdraw the whole sum free of UK tax (but he'd have to declare it in Spain!).


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## Andy Elba (28 d ago)

I wanted to check as I started getting doubts. I have paid tax on my pension already as I went over my annual allowance due to wage rises and had no carry left. Was taxed about 10k, this was when I was still in the DB scheme. 
I do indeed get tax relief on my SIPP payments though.


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## Andy Elba (28 d ago)

I am probably not coming across very well. I am not trying to cheat the system. I cannot afford the luxury of retiring 7 years early and then pay so much tax on my lump sum. 
I was seeing the options I have to legitimately not pay this and it seems I have an option of not getting permanent residency till I am 57 or leave the county and cancel my residency before I hit 57. This is not cheating the system at all. I will have the pain of coming back to the UK and miss out on a year or two living in Spain. That’s my penalty.


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## 1kaipa (Jul 20, 2019)

Lynn R said:


> What, you didn't get tax relief on your pension contributions in the UK? What kind of pension scheme is that then?
> 
> I moved to Spain several years before my pensions became payable and as a result I paid a 5 figure sum in Spanish income tax on my lump sum (nowhere near as large as yours). I did briefly consider declaring myself non resident and moving back to the UK for the tax year in which I received the payment, then moving back again, but decided it just wasn't worth the hassle especially as I'd have had to rent somewhere to live in the UK. I'm also not sure that the Agencia Tributaria wouldn't see through that strategy, and I guess nobody could tell you with absolute certainty whether they would or they wouldn't.


I agree with Lynn here. You aren't going to get a definitive answer here as it really depends individuals interpreting different aspects of the law. Obviously if you phoned and talked to the hacienda and told them your plans and reasons they wouldn't be happy- but then again no one needs to give reasons. You can leave spain anytime you want and also apply to return . If you don't want to pay Spanish tax don't become a resident until you have all your money with any taxed paid in the UK for over 182 days. That is the safest plan. Taking residents then giving it up and then reapplying could possibly cause problems.


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## Andy Elba (28 d ago)

Thanks. Yes that appears my only options although I have emailed my financial advisor to see if he has ever dealt with QROPS. It seems if I have been a resident in Spain for 5 years, then I can transfer my SIPP TO QROPS and get 25% of my pension tax free in Spain.


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## Andy Elba (28 d ago)

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Lynn R said:


> Therefore your claim that you have paid tax on all the money contributed to your fund doesn't reallty stand up, does it?


When I came out of my pension scheme at work, my company pay me an uplift on my salary. 
The uplift is what my company used to pay into my pension scheme they now pay to me monthly as salary. This money is what is allowing me the opportunity to retire 7 years early. Techinically it’s not my pension but it used to be and I pay 45% tax on it.


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## dancingspider (Mar 4, 2018)

1kaipa said:


> Its not tax avoidance unless you deliberately hide or lie.


Tax avoidance — An action taken to lessen tax liability and maximize after-tax income.
Tax evasion — The failure to pay or a deliberate underpayment of taxes 

Kaipa, do you know what you are talking about?



Andy Elba said:


> Ok. I feel no moral dilemma.


Andy, I had a Limited company in the UK. I used that financial vehicle for tax avoidance. I followed the rules to the letter. However, HMRC very aware of this 'loophole' as they saw it, and would pounce on anyone, given half a chance. Even if you were squeaky clean, if you were unfortunate to be randomly the subject of 'an investigation', it would mean hassle, time, worry and stress. I had no moral dilemma about using a Ltd company, to minimise my tax liability and equally you are doing the same, in different circumstances. But your situation is a bit unusual! You may struggle to get proper considered advise and you still run the risk of them getting the hump anyway and just accusing you of tax avoidance and just you with a fine. Would you really want to fight them thru the courts?


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## Andy Elba (28 d ago)

Cheers. I take on board everything you are saying. Although I will be looking at QROPS which is fine. If I didn’t go down the QROPS route I will probably not become a resident and just do the 90 day rule ( although I reckon that might be gone within the next 3 or 4 years). I can also spend 90 days in Malta/Cyprus and keep the Uk tax. So will probably have to spend 180 days in Spain/90 days in Malta/Cyprus and 90 days in the uk. I can probably cover most of the cost by renting mg villa in Spain and the when I hit 57, get my lump sum and move to Spain permanently .


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