# Double Taxation



## I Hate The Colour Pink (Jul 29, 2016)

We are moving to Spain shortly. We are not of retirement age just yet but I receive a Police Pension taxed in the UK. I've heard of double taxation do i need to complete forms when I am in Spain or can I do it in the UK before coming to Spain? Any help will be appreciated.


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## tebo53 (Sep 18, 2014)

I Hate The Colour Pink said:


> We are moving to Spain shortly. We are not of retirement age just yet but I receive a Police Pension taxed in the UK. I've heard of double taxation do i need to complete forms when I am in Spain or can I do it in the UK before coming to Spain? Any help will be appreciated.


You will need to apply to HMRC for a double taxation form, fill it in including your Spanish accountants name and address then apply to the Spanish taxation authority for a residential fiscal certificate. You need to do all this before it is acceptable to HMRC. 

Steve


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## stevesainty (Jan 7, 2011)

tebo53 said:


> You will need to apply to HMRC for a double taxation form, fill it in including your Spanish accountants name and address then apply to the Spanish taxation authority for a residential fiscal certificate. You need to do all this before it is acceptable to HMRC.
> 
> Steve


I´m afraid that is incorrect. A UK Police pension is classed as a Government Pension and as such is only taxable in UK. As of this year though, the income from a government pension needs to be declared on your Spanish tax return as "exempt income". This has the effect of putting any Spanish tax liability into a higher rated tax bracket.
In the simplest terms you become tax resident in Spain when you have lived there for 6 months and a day and then complete your first Spanish tax return the following year based on all your worldwide income received during your first year in Spain.
The Spanish tax year runs from January to December so there is room to maneuver depending on the timing of your move. 

Steve´s information would be correct if you have no income that is taxable in UK after your move to Spain. This would include private and UK state pension income but not UK rental income which is taxable in both countries.


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## tebo53 (Sep 18, 2014)

stevesainty said:


> I´m afraid that is incorrect. A UK Police pension is classed as a Government Pension and as such is only taxable in UK. As of this year though, the income from a government pension needs to be declared on your Spanish tax return as "exempt income". This has the effect of putting any Spanish tax liability into a higher rated tax bracket.
> In the simplest terms you become tax resident in Spain when you have lived there for 6 months and a day and then complete your first Spanish tax return the following year based on all your worldwide income received during your first year in Spain.
> The Spanish tax year runs from January to December so there is room to maneuver depending on the timing of your move.
> 
> Steve´s information would be correct if you have no income that is taxable in UK after your move to Spain. This would include private and UK state pension income but not UK rental income which is taxable in both countries.


Yes you are fully correct. I was giving the OP a general idea of what is required regarding the Double Taxation Convention Forms and fiscal certificates. My private pensions are taken into account for Spanish taxes.

Steve


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## I Hate The Colour Pink (Jul 29, 2016)

Just spoke to HMRC they said that I don't need to complete a Double Taxation form until I start receiving my state pension. but to let the Spanish tax authorities know.


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## Jumar (Mar 14, 2012)

I'm a little confused about this Government Pension scenario. A Government Pension can only be taxed in GB?
It now has to be declared as exempt? The tax you pay is worked out on the amount of income other than the G pension, so you may pay a higher tax rate? OK so far. Do you then receive the Spanish tax allowance on other income before you pay the higher amount on any excess???

I've read that some people's tax has increased many-fold since declaring their Government Pension. This seems to infer that they are being taxed again on their G pension.


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## stevesainty (Jan 7, 2011)

Jumar said:


> I'm a little confused about this Government Pension scenario. A Government Pension can only be taxed in GB?
> It now has to be declared as exempt? The tax you pay is worked out on the amount of income other than the G pension, so you may pay a higher tax rate? OK so far. Do you then receive the Spanish tax allowance on other income before you pay the higher amount on any excess???
> 
> I've read that some people's tax has increased many-fold since declaring their Government Pension. This seems to infer that they are being taxed again on their G pension.


If you have no income that is taxable in Spain then the UK government pension makes no difference at all.
However if you do have some taxable income in Spain then the UK government pension is added to it as "exempt income" and can very quickly push your total income into the higher tax percentages. These higher percentages are then applied to your Spanish income only.
For example if your taxable Spanish income is 8,000 euros and would normally be taxed at 19% you would have to pay 1,520 euros, if your UK government pension pushes you into the 30% bracket you would be liable to pay 2,400 (8,000 x 30%) IE. an extra 880 euros. So although you are not taxed on you UK government pension it can, on the face of it, look as though you are.


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## Maureen47 (Mar 27, 2014)

Not sure if anyone can clarify this , my understanding is that if the UK tax allowance is around 11k then if you are tax resident in Spain you pay the difference as the allowance is Spain is much less , I understand there is much debate on public sector pensions and if the tax is paid in the UK that should be it , hence the tax exempt declaration , I am finding this really confusing and will need to check with our accountant.


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## stevesainty (Jan 7, 2011)

Maureen47 said:


> Not sure if anyone can clarify this , my understanding is that if the UK tax allowance is around 11k then if you are tax resident in Spain you pay the difference as the allowance is Spain is much less , I understand there is much debate on public sector pensions and if the tax is paid in the UK that should be it , hence the tax exempt declaration , I am finding this really confusing and will need to check with our accountant.


There are 3 types of income if you are tax resident in Spain.

1 UK Government pensions like Police or Fire or Civil Service. These are taxable in UK ONLY and your UK tax allowance is set against them. From 2016 they have to be declared as exempt income on your Spanish tax return and any income that is taxable in Spain will, normally, be taxed at a higher percentage because of this "Exempt Income". If you have no Income taxable in Spain then it makes no difference as you will not be liable for Spanish income tax.

2 UK rental income is taxable in both UK and Spain but the tax payable in Spain is reduced by the tax paid in UK. Also in Spain the tax is not levied on 100% of the income, this year only about 60% is taxable.

3 Most other income is taxable only in Spain. That means private pensions, paid employment, self employed earnings, UK and Spanish old age pensions, bank interest, dividends, ISA interest(even though it is tax free in UK), premium bond receipts, and lottery wins over a certain amount.

Each year the Spanish tax people make available a computer program for you to fill in your basic details and your income streams. It automatically calculates your tax and you can either submit it online or print it out and submit it through your bank. If you have has a Gestor or accountant do it for you once then the computer program is very easy to follow for subsequent years.

There is no debate on Government pensions now as the income has to be included on the Spanish tax returns as exempt income. Some accountants or Gestors made the mistake of including this income in Spanish tax returns previous to 2016 and if this is the case for you, then a corrected tax return ought to be completed as you will have paid too much Spanish tax.

If you have no income that is taxable in UK only then you will not be able to use your UK personal allowance.

The Spanish tax allowances are not applied in the same way as the UK tax allowances which may be confusing, but they are designed so that people on higher incomes do not receive a greater benefit from the allowances than those on lower incomes.

For example UK income 20,000 tax allowance 10,000 taxable income 10,000 @ 20% tax is 2,000.

Spanish income 20,000, tax allowance 10,000 tax is 4,000 reduced by 10,000 @ 19%
1,900 therefore tax payable is 2,100; slightly different to UK calculations.

All of this information is given as a very simplified overview of the two tax systems and everyone´s own circumstances will be different. However, if you have a very ordinary "man in the street income" you could be paying more in professional fees than you will save by doing it yourself by doing a bit of Googling to find some worked examples from websites that are close to your own circumstances.


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## Jumar (Mar 14, 2012)

Thanks for the replies. I'm a real dummy when it comes to tax, or numbers as a whole.

Until next year my husband has only received a government pension. Next year he'll get his UK OAP also. Will he get the Spanish allowance against this? Or will the fact he's had an allowance in the UK disallow a second allowance???

Sorry if you think head and brick wall!!!


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## stevesainty (Jan 7, 2011)

Jumar said:


> Thanks for the replies. I'm a real dummy when it comes to tax, or numbers as a whole.
> 
> Until next year my husband has only received a government pension. Next year he'll get his UK OAP also. Will he get the Spanish allowance against this? Or will the fact he's had an allowance in the UK disallow a second allowance???
> 
> Sorry if you think head and brick wall!!!


He will get the Spanish tax allowance to offset his UK old age pension. It ought to be an increased allowance too as, presumably, he will be over 65. Make sure, however that his UK tax allowance is not used against his old age pension (it should be paid tax free as it is only taxable in Spain) or he will find the tax levied against his Government pension will be higher.


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## Maureen47 (Mar 27, 2014)

stevesainty said:


> There are 3 types of income if you are tax resident in Spain.
> 
> 1 UK Government pensions like Police or Fire or Civil Service. These are taxable in UK ONLY and your UK tax allowance is set against them. From 2016 they have to be declared as exempt income on your Spanish tax return and any income that is taxable in Spain will, normally, be taxed at a higher percentage because of this "Exempt Income". If you have no Income taxable in Spain then it makes no difference as you will not be liable for Spanish income tax.
> 
> ...


Thats helpful , thank you for taking the time to give a detailed reply ;-)


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## Jumar (Mar 14, 2012)

Thank you, that's good news.


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