# Tax Rate



## tony3121 (Mar 5, 2017)

Been looking at the Income Tax for Spain as moving over next year.
Am i right that my Pension (Early Retirement, not state) will be taxed on all of it? 
If im reading it right there is no tax free as in UK first £11,500.00.


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## Lynn R (Feb 21, 2014)

tony3121 said:


> Been looking at the Income Tax for Spain as moving over next year.
> Am i right that my Pension (Early Retirement, not state) will be taxed on all of it?
> If im reading it right there is no tax free as in UK first £11,500.00.


There are personal allowances, but they are much lower than in the UK. If you are aged under 65 the individual personal allowance is €5,550 plus there is a general earned income allowance (which is applicable to pensions) of €2,000. If a joint income tax return is submitted by a couple where one of them has income but the spouse does not, then an additional €3,400 of the spouse's personal allowance can be added to that.

However, what is important to note is that the tax free lump sum you get is not tax free in Spain. If you are tax resident in Spain when you receive it, it must be declared as income (in addition to your annual pension) and that can result in you having a large tax bill in the year you receive it.


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## Roy C (Sep 29, 2012)

Lynn R said:


> There are personal allowances, but they are much lower than in the UK. If you are aged under 65 the individual personal allowance is €5,550 plus there is a general earned income allowance (which is applicable to pensions) of €2,000. If a joint income tax return is submitted by a couple where one of them has income but the spouse does not, then an additional €3,400 of the spouse's personal allowance can be added to that.
> 
> However, what is important to note is that the tax free lump sum you get is not tax free in Spain. If you are tax resident in Spain when you receive it, it must be declared as income (in addition to your annual pension) and that can result in you having a large tax bill in the year you receive it.


So Lynn, if I'm reading this right (and I think I am) the total allowance for a couple is €10.950?


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## Lynn R (Feb 21, 2014)

Roy C said:


> So Lynn, if I'm reading this right (and I think I am) the total allowance for a couple is €10.950?


Yes, if one half of a couple has no income. Therefore they are better off submitting a joint tax return. If they both have pension income it's normally better to submit individual ones so that each gets the personal allowances of €7,550.


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## stevesainty (Jan 7, 2011)

What you have to remember in Spain is the allowances are not treated the same as in the UK. 

In UK the allowances reduce the earnings and the balance is then taxed. 

In Spain the earnings are taxed as a whole and then reduced by multiplying the allowance by the lowest rate of income tax. 

This is to ensure that people paying a higher rate of tax do not gain an unfair advantage.


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## tony3121 (Mar 5, 2017)

Lynn R said:


> There are personal allowances, but they are much lower than in the UK. If you are aged under 65 the individual personal allowance is €5,550 plus there is a general earned income allowance (which is applicable to pensions) of €2,000. If a joint income tax return is submitted by a couple where one of them has income but the spouse does not, then an additional €3,400 of the spouse's personal allowance can be added to that.
> 
> However, what is important to note is that the tax free lump sum you get is not tax free in Spain. If you are tax resident in Spain when you receive it, it must be declared as income (in addition to your annual pension) and that can result in you having a large tax bill in the year you receive it.


Thanks for the info, so i will need to receive the lump sum before i move to Spain. Thats helpful to know.


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## Roy C (Sep 29, 2012)

Lynn R said:


> Yes, if one half of a couple has no income. Therefore they are better off submitting a joint tax return. If they both have pension income it's normally better to submit individual ones so that each gets the personal allowances of €7,550.


Ah, so if my wife received the rent from our property from here then we would get a better allowance as in €15.100?


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## Lynn R (Feb 21, 2014)

Roy C said:


> Ah, so if my wife received the rent from our property from here then we would get a better allowance as in €15.100?


I know absolutely zero about the Spanish taxation of rental income from a property in the UK, so hopefully someone else can answer that one!


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## Lynn R (Feb 21, 2014)

tony3121 said:


> Thanks for the info, so i will need to receive the lump sum before i move to Spain. Thats helpful to know.


You are classed as tax resident in Spain once you have spent 183 days in the country in a single tax year (1 January - 31 December, and those days are cumulative not consecutive, eg if you come over for a two week stay before moving over later in the year, those two weeks count towards the total). Therefore you need to time your move for after 1 July in the year in which you receive your pension lump sum, and later than that if you've made any trips over here earlier that year.


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## stevesainty (Jan 7, 2011)

Lynn R said:


> I know absolutely zero about the Spanish taxation of rental income from a property in the UK, so hopefully someone else can answer that one!


The rental from a UK property is taxable both in UK and on Spanish tax return.
The taxation paid in UK is offset against any taxation due in Spain.

Obviously it depends on what your total taxation level is in Spain as to the rate charged.

One good thing though, is that you are not charged on the total net rental income in Spain as it is perceived that you are providing a service for your tenants.

If you fill in your Spanish tax form online all you need to do is fill in the basic amounts and the program calculates everything else.


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## tony3121 (Mar 5, 2017)

Lynn R said:


> You are classed as tax resident in Spain once you have spent 183 days in the country in a single tax year (1 January - 31 December, and those days are cumulative not consecutive, eg if you come over for a two week stay before moving over later in the year, those two weeks count towards the total). Therefore you need to time your move for after 1 July in the year in which you receive your pension lump sum, and later than that if you've made any trips over here earlier that year.



That changes things, as i thought if i received lump sum whilst still a UK resident it wouldn't be taxable when i moved as long as i received before i lived or applied for residence in Spain.


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## Megsmum (Sep 9, 2012)

tony3121 said:


> That changes things, as i thought if i received lump sum whilst still a UK resident it wouldn't be taxable when i moved as long as i received before i lived or applied for residence in Spain.



Tax year runs January to January. If you go past the 180 days you're tax resident and any income has to be declared including income received before you moved

Also

Sale of property incurs capital gains tax so you need to ensure property in U.K. Is sold done and dusted before you move out.

We moved here in Feb 2014. My pension lump sum and our house sale completed before year end 2013. Had we moved 2014 in feb or March etc we would have had to declare those to the tax man here

I think I'm right..... someone will concur or disagree


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## Blanco53 (Mar 6, 2017)

Megsmum said:


> Tax year runs January to January. If you go past the 180 days you're tax resident and any income has to be declared including income received before you moved
> 
> Also
> 
> ...


The tax rules, especially in a "transitional year", are complex, and my advice is to seek qualified professional advice before taking any action.

In a professional capacity, I saw a client who was having "difficulty" with the Hacienda. His circumstances involved PCLS (pension tax-free cash) and CGT from a UK property sale. Unfortunately, the guy had relied on some rather questionable advice he got from an unqualified source. 

He was told he had nothing to worry about so long as he didn't spend 183 days in Spain during that year. This may have worked had he been single.....but he was married with children living in Spain. As a result, he fell foul of the rule that says that if your “centre of vital interests” is in Spain – i.e. your spouse lives here, you are then presumed to be Spanish Tax resident, even though you may spend less than 183 days per year in Spain.

My advice was sought, and as the client's problem was way above my pay grade and expertise, all I could do was recommend the best Spanish accountant I could find. In the end, the accountant did some skillful negotiating with the Hacienda, and managed to mitigate the original claim down. Of course, it still cost him a few bob, money that he and his wife had not budgeted for.

The morale of this story is not to rely on hearsay, seek properly qualified advice before making any of these massive financial decisions.


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## Megsmum (Sep 9, 2012)

Blanco53 said:


> The tax rules, especially in a "transitional year", are complex, and my advice is to seek qualified professional advice before taking any action.
> 
> In a professional capacity, I saw a client who was having "difficulty" with the Hacienda. His circumstances involved PCLS (pension tax-free cash) and CGT from a UK property sale. Unfortunately, the guy had relied on some rather questionable advice he got from an unqualified source.
> 
> ...


Yep

Best rule of thumb. Get it all sorted on one year move the following. Seek professional advice


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## Jumar (Mar 14, 2012)

Can someone tell me where I can find these allowances in a Spanish site. Our Spanish accountant says they don't exist!!!

Thanks.


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## Lynn R (Feb 21, 2014)

Jumar said:


> Can someone tell me where I can find these allowances in a Spanish site. Our Spanish accountant says they don't exist!!!
> 
> Thanks.


Well, Agencia Tributaria's own website ought to suffice!

Mínimo del contribuyente. - Agencia Tributaria

This link sets out the 5,500 allowance plus the higher age-related allowances, the 2,000 earned income allowance will be in a separate section.

Sounds like you need a new accountant. If you do your tax return yourself, online, using the Agencia Tributaria's new Renta Web system, once you have entered your personal details including date of birth, and the amount of your income, the amount of tax you owe is calculated automatically, taking these allowances into account. You don't have to enter the allowances anywhere.


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## Blanco53 (Mar 6, 2017)

Jumar said:


> Can someone tell me where I can find these allowances in a Spanish site. Our Spanish accountant says they don't exist!!!
> 
> Thanks.


You can get all the information here:
Inicio - Agencia Tributaria

Or alternatively a commercial site like:
A guide to Spanish income tax in 2017.

If your Spanish accountant says they don't exist....go get a new accountant!!


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## Jumar (Mar 14, 2012)

Blanco53 said:


> You can get all the information here:
> Inicio - Agencia Tributaria
> 
> Or alternatively a commercial site like:
> ...


Thank you.


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## Gran Erry-Bredd (Nov 1, 2016)

Jumar, does your accountant use a battered old suitcase as his office?


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## Jumar (Mar 14, 2012)

Our accountant is actually a good friend and I'm sure she'll take on board anything I give her that's on an official Spanish site. She's asked some questions from a Hacienda trainer and he didn't know the answers but said he'd research for her!!!


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## realhawkkillieken (May 23, 2017)

We have public sector work pensions taxed at source in the UK. We thought we only had to pay the difference between the higher Spanish tax bands and our UK tax. But our tax appears to be calculated by subtracting our UK tax from our UK gross to create a new Spanish gross. This method is clearly prejudicial to pensioners who are not permitted to receive their UK pensions gross. Is this really the way that the double taxation treaty works? Surely the calculation for public sector pensioners should use the UK gross to give an accurate Spanish tax figure which is then reduced by UK tax already paid?


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## stevesainty (Jan 7, 2011)

realhawkkillieken said:


> We have public sector work pensions taxed at source in the UK. We thought we only had to pay the difference between the higher Spanish tax bands and our UK tax. But our tax appears to be calculated by subtracting our UK tax from our UK gross to create a new Spanish gross. This method is clearly prejudicial to pensioners who are not permitted to receive their UK pensions gross. Is this really the way that the double taxation treaty works? Surely the calculation for public sector pensioners should use the UK gross to give an accurate Spanish tax figure which is then reduced by UK tax already paid?


1 If you reside in Spain your old age pension should not be taxed in UK it should be taxed in Spain ONLY! Then your full UK personal tax allowance will be applied to your Public Sector works pension. If you do not tell HMRC that you are paying tax in Spain they will apply your UK personal allowance against your old age pension first and Spain will, quite rightly, tax you on it too.

2 You Public sector work pension, the figure before tax, will be included in your Spanish tax return as exempt income. You are not taxed on it in Spain but it is used to increase your taxable income bracket so that any income taxable in Spain, Old age pension for instance, may be taxed at a higher rate.


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## Megsmum (Sep 9, 2012)

Jumar said:


> Our accountant is actually a good friend and I'm sure she'll take on board anything I give her that's on an official Spanish site. She's asked some questions from a Hacienda trainer and he didn't know the answers but said he'd research for her!!!



Whilst I don't want to be disrespectful to your friend, even a trainee accountant should know what the allowances are in the country they're working in. Or are we referring to other types of allowances.?


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## realhawkkillieken (May 23, 2017)

Update, oops. We misunderstood, the gestor does calculate on uk gross and then takes off the uk tax to give a fair net tax... panic over, thanks to those who read and sorry for confusing you.


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## realhawkkillieken (May 23, 2017)

Thanks for this. More food for thought for further tax years...


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