# Government pensions and dual taxation



## Ladyinred (Feb 28, 2014)

I have recently relocated permanently to spain to an area where little English is spoken. I managed to get residencia sorted. I currently pay tax in the uk on a government pension as I was a teacher. can anyone help me on whether or not I have to also be in t he Spanish tax system as I am told that I cannot opt out of paying tax to the uk as it is a public pension. The amount I earn is unlikely to take me over the threshold for tax payment . I have no other assets like house or investments in the uk.


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## 90199 (Mar 21, 2010)

I too have a Govt. pension, I pay tax in the U.K. on that pension. I also have an O.A.P., I obtained papers from the Inland Revenue in Cardiff, took them to the Spanish tax people, they stamped them and filled the required entries, I posted them to Cardiff and my O.A.P. comes under the Spanish tax system, I pay no tax on that because it is under the Spanish tax threshold.

Once you have resided in Spain for six months in their tax year you must make declaration, even if you are not earning, sounds daft but it is all to do with avoiding death taxes, some tax offices and Gestors will try to discourage you, stand your ground it is in your interest and has to be done.


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## Allie-P (Feb 11, 2013)

Hi Hepa,

I, too, have a Government pension ( there is a lot of us around ! ) which, as you say, is taxed in the UK. Our only other income is my state pension & a very small occupational pension, which my husband receives monthly.

We no longer own any property in the UK & rent here. You mentioned that your state pension is not taxed. Do they disregard the Govt. Pension, when assessing for your tax liability in Spain ? 

We have volunteered to fill in a Spanish tax form - but have been discouraged. Our world-wide assets are, unfortunately, less than the amount required to be declared.

It all gets very confusing........


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## Alcalaina (Aug 6, 2010)

It really is worth doing a Spanish tax return even if you don't owe any tax here. (a) It will cap what you have to pay for prescriptions at €8 per month, and (b) you can claim back the tax withheld on any savings accounts in Spanish banks. We did it last year and were €250 better off even after the €20 gestor's fee!


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## extranjero (Nov 16, 2012)

I have read that this year, although a government pension can only be taxed in The UK, it now has to be declared on the Spanish tax return, to work out the taxable base.I'm sure Cap'n Billy will clarify!


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## Allie-P (Feb 11, 2013)

Hello Alcalaina, 

We are definitely ones for sticking to the rules - not, just when it is to our advantage, either 

We are official Spanish residents, with Pensioner state health cards. Our maximum monthly prescription cap is already at €8. 

Forgive me, I am getting lost again.....


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## 90199 (Mar 21, 2010)

Allie-P said:


> Hi Hepa,
> 
> I, too, have a Government pension ( there is a lot of us around ! ) which, as you say, is taxed in the UK. Our only other income is my state pension & a very small occupational pension, which my husband receives monthly.
> 
> ...


Yes they accept that it is taxed in the U.K. and I produce my P60, that seems to satisfy them.


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## Allie-P (Feb 11, 2013)

extranjero said:


> I have read that this year, although a government pension can only be taxed in The UK, it now has to be declared on the Spanish tax return, to work out the taxable base.I'm sure Cap'n Billy will clarify!



It seems only fair that it would be included !....I would appreciate clarification.

I appreciate that everyone's financial affairs are different. I am paying UK tax on my Gvt.Pension/State pension. 

I have contacted HMRC, no joy there ! They have advised me to continue paying UK tax.

I am very nervous of getting tied up in the Spanish bureaucracy/ red tape.... with no redress.


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## CapnBilly (Jun 7, 2011)

Allie-P said:


> It seems only fair that it would be included !....I would appreciate clarification.
> 
> I appreciate that everyone's financial affairs are different. I am paying UK tax on my Gvt.Pension/State pension.
> 
> ...


If you receive a Government pension, and a state pension, and are resident in Spain, then under the current Double Taxation Agreement (DTA) you pay tax on your government pension only in the UK (and do not need to declare it in Spain ), BUT you must declare and pay any tax on your state pension in Spain. If its the basic pension, or a bit more, then its likely that no tax will be due. Hepa has explained how to do this, although I have written about this a number of times. Search for "Form Spain Individual " 

However, as Extranjero posted, that is about to change. There is a new DTA which has been signed, and just awaiting ratification by both Parliaments. It was signed last year, so it is likely to be introduced sometime this year. It WILL be introduced, and its pretty standard based on the OECD model. 

This allows Spain to take your government pension into account when working out your tax rate. The calculations are slightly different in Spain. Essentially they work out how much tax you would pay on your total income including the government pension, and turn this into a percentage (marginal tax rate). Then, and this is the rub under the new DTA, they apply this rate to all the income that is taxable in Spain, i.e your state pension. 

According to my calculations, if your government pension is around £3,000, then you will start paying more tax in Spain.


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## thrax (Nov 13, 2008)

CapnBilly said:


> If you receive a Government pension, and a state pension, and are resident in Spain, then under the current Double Taxation Agreement (DTA) you pay tax on your government pension only in the UK (and do not need to declare it in Spain ), BUT you must declare and pay any tax on your state pension in Spain. If its the basic pension, or a bit more, then its likely that no tax will be due. Hepa has explained how to do this, although I have written about this a number of times. Search for "Form Spain Individual "
> 
> However, as Extranjero posted, that is about to change. There is a new DTA which has been signed, and just awaiting ratification by both Parliaments. It was signed last year, so it is likely to be introduced sometime this year. It WILL be introduced, and its pretty standard based on the OECD model.
> 
> ...


But if your only income is a government pension, then my understanding is you will not be liable to tax in Spain. Correct?


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## CapnBilly (Jun 7, 2011)

thrax said:


> But if your only income is a government pension, then my understanding is you will not be liable to tax in Spain. Correct?


Thats correct. They can only apply the marginal tax rate to income which is taxable in Spain, which I think is what I wrote. However, if and when you qualify for a state pension (assuming you do), then that situation would change.


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