# Tax in Spain



## chris&vicky (Feb 6, 2013)

I will me moving to Spain later this year and am a little worried about my tax affairs. I will have an income from a private pension in the UK plus rental income from a property in the UK. I plant to rent in Spain for a while and maybe buy in a year or so.

I have seen mention of a website for Advoco elsewhere in this forum and notice that they offer an Income Tax service for an annual fee of €120. I was wondering if anyone uses this and what they think?

Spanish tax advice

Many thanks


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## Stravinsky (Aug 12, 2007)

chris&vicky said:


> I will me moving to Spain later this year and am a little worried about my tax affairs. I will have an income from a private pension in the UK plus rental income from a property in the UK. I plant to rent in Spain for a while and maybe buy in a year or so.
> 
> I have seen mention of a website for Advoco elsewhere in this forum and notice that they offer an Income Tax service for an annual fee of €120. I was wondering if anyone uses this and what they think?
> 
> ...


I havent even looked, but my wife and I pay €50 a year for the two of us for similar circumstances, so draw your own conclusion


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## chris&vicky (Feb 6, 2013)

Stravinsky said:


> I havent even looked, but my wife and I pay €50 a year for the two of us for similar circumstances, so draw your own conclusion


Thank you, could I ask who provides this service?


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## Stravinsky (Aug 12, 2007)

chris&vicky said:


> Thank you, could I ask who provides this service?


Pablo Faus Banules in Gandia, Northern Costa Blanca.
What I mean to say is you dont need to go with the big companies.


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## chris&vicky (Feb 6, 2013)

Stravinsky said:


> Pablo Faus Banules in Gandia, Northern Costa Blanca.
> What I mean to say is you dont need to go with the big companies.


Thank you. I understand what you say but I would like to go with somebody recommended otherwise you could just be throwing money away and end up in a Tax muddle.


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## Stravinsky (Aug 12, 2007)

chris&vicky said:


> Thank you. I understand what you say but I would like to go with somebody recommended otherwise you could just be throwing money away and end up in a Tax muddle.


Yes for sure, but bear in mind that this is done electronically now. So when you give the guy the details he inputs it into the system and it generates a code that is sent by sms. That code is then entered back onto the form, and its done. Printed off, and then taken straight to the bank. Our last tax return from start to finish took about 10 minutes in his office.

Without knowing your area its difficult for anyone to recommend


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## chris&vicky (Feb 6, 2013)

Stravinsky said:


> Yes for sure, but bear in mind that this is done electronically now. So when you give the guy the details he inputs it into the system and it generates a code that is sent by sms. That code is then entered back onto the form, and its done. Printed off, and then taken straight to the bank. Our last tax return from start to finish took about 10 minutes in his office.
> 
> Without knowing your area its difficult for anyone to recommend


The area is Malaga, Alhaurin. 

Can I clarify with you are you paying for, just a tax return being done, or tax advise? 

For Euro120 Advoco say ... "we conduct a review of the resident client's tax affairs, advise on best ways to minimise tax and prepare and submit tax returns." For tax returns only they charge Euro35.


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## Stravinsky (Aug 12, 2007)

chris&vicky said:


> The area is Malaga, Alhaurin.
> 
> Can I clarify with you are you paying for, just a tax return being done, or tax advise?
> 
> For Euro120 Advoco say ... "we conduct a review of the resident client's tax affairs, advise on best ways to minimise tax and prepare and submit tax returns." For tax returns only they charge Euro35.


I get advice for sure .... I recently went to talk to him about the new asset declaration rules. But what you have described is fairly straightforward, its all about income and the allowances you have here really. If you do need advice of course, you will get it straight away, but you will still be paying €120 a year thereafter for a relatively small amount of work. 

This link is good Spanish tax rates and allowances 2013. Tax rates Spain.


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## chris&vicky (Feb 6, 2013)

Stravinsky said:


> I get advice for sure .... I recently went to talk to him about the new asset declaration rules. But what you have described is fairly straightforward, its all about income and the allowances you have here really. If you do need advice of course, you will get it straight away, but you will still be paying €120 a year thereafter for a relatively small amount of work.
> 
> This link is good Spanish tax rates and allowances 2013. Tax rates Spain.


Thank you for the link I will take a look. I was thinking of just taking the advise for one year because as you say I would not need it going forward as little will change. Once I know what to do I am sure I can sort matters out myself. 

Regards


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## CapnBilly (Jun 7, 2011)

Stravinsky said:


> This link is good Spanish tax rates and allowances 2013. Tax rates Spain.


This is a good site for information, but they charge €150 for a single declaration and €200 for a joint.


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## nikkisizer (Aug 20, 2011)

chris&vicky said:


> I will me moving to Spain later this year and am a little worried about my tax affairs. I will have an income from a private pension in the UK plus rental income from a property in the UK. I plant to rent in Spain for a while and maybe buy in a year or so.


Hello chris&vicky,

I do not know if you are aware of this but following your departure from the UK and based on your above comments you will need to file a UK tax return annually if you receive any of the following:

- £10,000 or more income from UK property (before deducting allowable expenses)
- £2,500 or more income from UK property (after deducting allowable expenses)
- £10,000 or more income from UK savings and investments
- £2,500 or more income from untaxed UK savings and investments

Also, the existing HMRC UK residency rules are set to change with effect from the 2013/2014 tax year which will involve the statutory residency test (SRT). 

Ties such as home, work, family etc. in the UK may class you as UK resident for tax purposes regardless of where you reside. 

Residency is a complex area, if classed as UK resident under the new (SRT) you would then be taxed on your worldwide income so it is very important that your individual circumstances are dealt with correctly to protect your residency status and exposure to UK taxation.


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## xabiaxica (Jun 23, 2009)

nikkisizer said:


> Hello chris&vicky,
> 
> I do not know if you are aware of this but following your departure from the UK and based on your above comments you will need to file a UK tax return annually if you receive any of the following:
> 
> ...


it will be just like Spain & some other European countries then

a lot of off-shore workers who currently work tax-free when their family is in the UK (but they personally are away for the required number of days) are horrified when they discover that they will be liable to pay tax in Spain if they move their family here & are financially supporting them

we had one poster recently actually cancel their plans to move here!


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## nikkisizer (Aug 20, 2011)

xabiachica said:


> it will be just like Spain & some other European countries then
> 
> a lot of off-shore workers who currently work tax-free when their family is in the UK (but they personally are away for the required number of days) are horrified when they discover that they will be liable to pay tax in Spain if they move their family here & are financially supporting them
> 
> we had one poster recently actually cancel their plans to move here!


Yes, they are certainly making it very difficult to not be classed as UK resident for tax purposes.

Tax planning is now much more important!


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## chris&vicky (Feb 6, 2013)

nikkisizer said:


> Hello chris&vicky,
> 
> I do not know if you are aware of this but following your departure from the UK and based on your above comments you will need to file a UK tax return annually if you receive any of the following:
> 
> ...


I was not aware of that I will look into it. I will have income from renting my home in the UK which will exceed the £10,000 and my other income will be drawdown on a private pension. 

The tax situation will not put me off the move but I need to budget accordingly. I do not think it is a simple as some people say here.

I have seen people say "do not worry about double taxation you will probably get money back". I do not understand that because in the UK you can earn £8105 (over Euro 9,000) before you pay any tax, then it is 20%. In Spain I believe it is a little over Euro 5,000 before paying tax and then 24%. It appears to me that I will pay considerably more tax living in Spain?


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## Stravinsky (Aug 12, 2007)

chris&vicky said:


> I was not aware of that I will look into it. I will have income from renting my home in the UK which will exceed the £10,000 and my other income will be drawdown on a private pension.
> 
> The tax situation will not put me off the move but I need to budget accordingly. I do not think it is a simple as some people say here.
> 
> I have seen people say "do not worry about double taxation you will probably get money back". I do not understand that because in the UK you can earn £8105 (over Euro 9,000) before you pay any tax, then it is 20%. In Spain I believe it is a little over Euro 5,000 before paying tax and then 24%. It appears to me that I will pay considerably more tax living in Spain?


Im not sure where that comes from, and would like to know ... because the bottom two items would *not *in the past have prompted you to have to put a UK tax return in if you had de registered for tax in the UK using FD9. Having done that you are a Spanish tax payer, and thats where you submit your returns. There are differentials for UK property rental, as we discussed on here before

Is this a new ruling then nikkisizer? How do the changes you mention tie in with the double tax treaty. It seems that countries within that treaty would be doing their own thing


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## Stravinsky (Aug 12, 2007)

chris&vicky said:


> I was not aware of that I will look into it. I will have income from renting my home in the UK which will exceed the £10,000 and my other income will be drawdown on a private pension.
> 
> The tax situation will not put me off the move but I need to budget accordingly. *I do not think it is a simple as some people say here.*
> 
> I have seen people say "do not worry about double taxation you will probably get money back". I do not understand that because in the UK you can earn £8105 (over Euro 9,000) before you pay any tax, then it is 20%. In Spain I believe it is a little over Euro 5,000 before paying tax and then 24%. It appears to me that I will pay considerably more tax living in Spain?



If that is aimed at me then I have to tell you that a financial adviser will make it seem as complicated as he possibly can. In reality, if you have very simple requirements then it is relatively simple.

I for instance have assets in Spain and the UK. I have advice from accountants in Spain and the UK before I moved here and have kept up with it myself. There are changes from time to time and you have to address them, but please do not let financial advisers make you think that it is a complete minefield. Some of them will tell you for instance that IHT will leave your spouse bereft if you die. Its a generalisation, and they will suggest Ltd Companies and all kinds of things, but it is not always necessary. If I die tomorrow my wife will pay next to no IHT, and thats not because I have made complicated plans.
So the relatively simple is regularly made out to be incredibly complicated and frightening ...... by some


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## nikkisizer (Aug 20, 2011)

chris&vicky said:


> I was not aware of that I will look into it. I will have income from renting my home in the UK which will exceed the £10,000 and my other income will be drawdown on a private pension.


You will need to register for self assessment with HMRC if you have not done so already in order to file your annual UK tax return.

You will still be entitled to claim your personal allowance as a non-resident if you satisfy one or more of the seven conditions, the main one being that you are a British citizen or a national of another member state of the European Economic Area (EEA).


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## chris&vicky (Feb 6, 2013)

nikkisizer said:


> You will need to register for self assessment with HMRC if you have not done so already in order to file your annual UK tax return.
> 
> You will still be entitled to claim your personal allowance as a non-resident if you satisfy one or more of the seven conditions, the main one being that you are a British citizen or a national of another member state of the European Economic Area (EEA).


Sorry but I think I am being really think here. As I understand once living in Spain you are taxed in Spain on all you income wherever it comes from, but there is no double taxation. So using the simple example below how would it work? I pay tax in UK 2,379.00 & in Spain 3,563.76, do I just get offset the UK tax? Therefore what I said before is correct, I need to budget more for higher Spanish taxation.

UK
20,000.00
-8,105.00
11,895.00
Tax @20% = 2,379.00

Spain
20,000.00
-5151.00
14,849.00
Tax @24% = 3,563.76


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## CapnBilly (Jun 7, 2011)

chris&vicky said:


> Sorry but I think I am being really think here. As I understand once living in Spain you are taxed in Spain on all you income wherever it comes from, but there is no double taxation. So using the simple example below how would it work? I pay tax in UK 2,379.00 & in Spain 3,563.76, do I just get offset the UK tax? Therefore what I said before is correct, I need to budget more for higher Spanish taxation.
> 
> UK
> 20,000.00
> ...


You are probably correct that you need to budget for more tax, but its slightly more complicated than you have set out, but its not difficult to work out. Firstly, for the purposes of this exercise we'll ignore the new SRT, so it's as at now, and assumes you are tax resident in Spain.

Your income is made up of rental income from the UK and a private pension ( I.e not a government pension which is only taxable in the UK), which is taxable in Spain. You can apply to have it paid gross, but normally you have to provide HMRC with a Form Spain Individual, before they will allow you to be paid gross. 
Now there is good news and bad news. The bad news is you have to either get the Hacienda to sign it (good luck with that), or much easier provide a certificate of fiscal residency from Spain. The good news is that's easy to obtain, the bad news is they won't issue it until you have submitted a return. So it will be October 2014 before you get one. The good news that HMRC will pay you back the tax you have paid. The bad news is you have to pay Hacienda first. Now, if you pay tax on the pension in the UJ, then under the double taxation agreement, you can offset this against any tax due on this income, and only pay any difference, if the tax is greater. However, the are reports that Hacienda are telling people they have to pay the full amount, and then claim it back from HMRC, which you can do quite easily, as I described earlier. This is what I did, because it was beneficial to me . I would add, that I claimed a small amount against double taxation, because I was resident in the Uk, during the cross over period ( Jan/Feb). I am having to provide documentary evidence ( e.g payslips/P60) and pay for them to be translated into Spanish.

With regard to UK rental income, even though you may receive it gross, it is still subject to UK tax. If you are fiscally resident in Spain then tax is also payable in Spain, but you can offset any Uk tax you pay. The allowances in Spain are more generous, so whether any will be due will be down to other circumstances, such as use of personal tax allowances etc. The allowance for rental are the costs etc, as in the UK, plus 3% depreciation of the cost of the property (I.e excluding the land). Tax is then payable on 40% of the net nome ( it was 50% last year). So this is more generous than the UK, but because you will take advantage of the personal allowance in the UK, and you have used your allowance in Spain (against your pension) you will probably have more tax to pay.

Turning now to your income, in addition to the €5151 you quote, there is an additional €2652. - €4080 earned income allowance for income between €9180 and €13260 on a sliding scale. So upto €9180 you get €4080 and over €13260 you get €€2652. In addition, if you are married you partner has the same allowances ( rental income can be split if property in joint names), and if its more beneficial ( depending upon your partners income) you can combine, but in which case you can only claim an additional €3400.

So as you can see, it's more complicated, but not difficult. As I don't know your income splits etc, I can't work the tax differences out. Obviously you can only be tax resident in one place (under the DTA), so whether you will benefit will depend upon your circumstances under the SRT that Nikki mentioned.

Hope this helps make it clearer.


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## chris&vicky (Feb 6, 2013)

CapnBilly said:


> You are probably correct that you need to budget for more tax, but its slightly more complicated than you have set out, but its not difficult to work out. Firstly, for the purposes of this exercise we'll ignore the new SRT, so it's as at now, and assumes you are tax resident in Spain.
> 
> Your income is made up of rental income from the UK and a private pension ( I.e not a government pension which is only taxable in the UK), which is taxable in Spain. You can apply to have it paid gross, but normally you have to provide HMRC with a Form Spain Individual, before they will allow you to be paid gross.
> Now there is good news and bad news. The bad news is you have to either get the Hacienda to sign it (good luck with that), or much easier provide a certificate of fiscal residency from Spain. The good news is that's easy to obtain, the bad news is they won't issue it until you have submitted a return. So it will be October 2014 before you get one. The good news that HMRC will pay you back the tax you have paid. The bad news is you have to pay Hacienda first. Now, if you pay tax on the pension in the UJ, then under the double taxation agreement, you can offset this against any tax due on this income, and only pay any difference, if the tax is greater. However, the are reports that Hacienda are telling people they have to pay the full amount, and then claim it back from HMRC, which you can do quite easily, as I described earlier. This is what I did, because it was beneficial to me . I would add, that I claimed a small amount against double taxation, because I was resident in the Uk, during the cross over period ( Jan/Feb). I am having to provide documentary evidence ( e.g payslips/P60) and pay for them to be translated into Spanish.
> ...


Thank you very much for taking the time to set out your reply it is very kind of you. I think I will have to read through this a few more times but it does make me think it would be better to pay somebody to sort out my tax affairs and may well save me money in the long run.


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## CapnBilly (Jun 7, 2011)

Its not that difficult to complete the return. You just download the program and complete the sections that apply to you. However, if your income is not complicated, then always recommend that you pay a gestoria to complete your first return. They will give you a paper copy, and you can then use this template to complete your own return in future years. I did this the first year we were here, and then did my own for a couple of years. 

I paid a gestoria last year, as it was a bit more complicated, although I was confident that I could do it myself. In hindsight I was glad I did that, as because I claimed some double taxation relief and an improvement allowance, I was then selected to provide evidence to support my claim. I received a letter which said I had 10 working days to provide the information, in addition, as I mentioned in the previous post, the supporting evidence has to be officially translated. Because I had used the gestoria, they dealt with (and still are) it for me.


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