Where to tax UK rental income

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Where to tax UK rental income


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Old 24th May 2011, 09:19 AM
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My husband and I have lived continuously in Spain since Oct 2005 and became official Spanish residents 4 years ago. Since we have income from renting out two houses in UK, we have continued to submit a UK return which includes income from rents, our pensions, bank interest etc. Our Spanish return only incl pensions and bank interest. Each year we get a refund of tax paid on pensions and bank interest from the UK under the reciprocal agreement. The other day, a UK chartered accountant questioned why, since we have been resident in Spain for more than 5 years, we are still submitting a UK tax return - we are now confused and wonder if what we are doing is correct...?

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Old 24th May 2011, 10:45 AM
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Why don't you write to the inland revenue U.K. , they will advise. I have been a Spanish resident for nearly 10 years, I pay U.K. tax on both my pensions, one is a Government Pension which is taxed at source and cannot be changed. The other is O.A.P. I too have to submit a U.K. tax return, but my Wife does not. I think this is because when I resided in the U.K. I was self employed for the last ten years or so.

Also when I last checked I was better off paying U.K. tax, less to pay than if it was Spanish tax. I do not submit a Spanish return because I do not have an income in Spain


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Old 24th May 2011, 02:14 PM
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Originally Posted by Hepa View Post
Why don't you write to the inland revenue U.K. , they will advise. I have been a Spanish resident for nearly 10 years, I pay U.K. tax on both my pensions, one is a Government Pension which is taxed at source and cannot be changed. The other is O.A.P. I too have to submit a U.K. tax return, but my Wife does not. I think this is because when I resided in the U.K. I was self employed for the last ten years or so.

Also when I last checked I was better off paying U.K. tax, less to pay than if it was Spanish tax. I do not submit a Spanish return because I do not have an income in Spain
Hi - thanks for replying - interesting that you do not submit a spanish tax return at all, as I thought spain regarded your UK pensions as your income in spain...? Being resident in spain, arenīt the spanish tax authorities needing to know what you are living on and wanting to tax it? Any tax we pay on our state and private pensions in the UK, we get refunded a few months later under the reciprocal agreement, as the pensions are taxed in both places. However, you have given us food for thought and we will check the difference in tax on pensions between UK and spain.

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Old 24th May 2011, 02:30 PM
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Hi - thanks for replying - interesting that you do not submit a spanish tax return at all, as I thought spain regarded your UK pensions as your income in spain...? Being resident in spain, arenīt the spanish tax authorities needing to know what you are living on and wanting to tax it? Any tax we pay on our state and private pensions in the UK, we get refunded a few months later under the reciprocal agreement, as the pensions are taxed in both places. However, you have given us food for thought and we will check the difference in tax on pensions between UK and spain.
Apparently not, I have sought advice with a Gestor, provided him with all the details of my pensions and details of the tax I paid in the U.K., with the intention of filling a Spanish tax form. The Gestor said there was no need to complete a Tax form unless I received income in Spain. Apparently U.K. and Spain have an agreement not to double tax and the U.K. tax authorities will not allow my pension to be taxed other than at source in the U.K.
The Spanish tax authorities are aware of us, but have never contacted us.

But this is the Canary Islands and we may differ from where you are,

Hepa

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Old 24th May 2011, 04:37 PM
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Originally Posted by premieji View Post
Hi - thanks for replying - interesting that you do not submit a spanish tax return at all, as I thought spain regarded your UK pensions as your income in spain...? Being resident in spain, arenīt the spanish tax authorities needing to know what you are living on and wanting to tax it? Any tax we pay on our state and private pensions in the UK, we get refunded a few months later under the reciprocal agreement, as the pensions are taxed in both places. However, you have given us food for thought and we will check the difference in tax on pensions between UK and spain.
The Spanish Government do regard your UK pension as taxable income. In general if you are a permanent resident here then you become a tax resident here

If you have a government pension it is taxed in the UK. It cant be moved to Spain. Therefore if you have a UK state pension and a Government pension then you can move your state pension to Spain (by becoming zero rated in the UK for tax) and take advantage of two tax allowances instead of just one. That means in some cases you will pay no tax at all.

Putting in a tax return has its advantage ... we are presently putting in a zero return here. It costs us €60 but we are able to prove to the tax authorities should the need arise that we have been tax residents here.

The dual tax treaty does not mean you are exempt from tax in Spain.

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Old 24th May 2011, 04:46 PM
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Sravinsky, Yes I agree with you, just wish that the interpretation of the legislation and regulations was uniform across Spain.

I have also thought of moving the O.A.P. to Spain for tax purposes, but so far I have been put off by the hassle involved,

Hepa

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Old 24th May 2011, 04:49 PM
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Originally Posted by Hepa View Post
Sravinsky, Yes I agree with you, just wish that the interpretation of the legislation and regulations was uniform across Spain.

I have also thought of moving the O.A.P. to Spain for tax purposes, but so far I have been put off by the hassle involved,

Hepa
Its no hassle. One form. The only down side is that because you haven't put in a tax return in Spain, you wont be able to lodge something proving you have been available for tax here. You would need to go to the local hacienda with your residencia etc and try to get a certificate of tax.

Then they send all that to HMRC Nottingham who process it.

My wife pays no tax at all on her two pensions now ... one "taxed" in the UK, the other in Spain

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Old 25th May 2011, 11:12 AM
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Just took your advice and rang the IR - they checked our stuff and apparently our UK accountant has NOT been declaring our pension income in UK as we are spanish residents - so we are not being double taxed after all - its only spain that taxes us on our pensions which is as it should be, as we need to show we have an income here.

While I am here - does anyone know of a good UK accountant who is familiar with ex-pat (spain) situations? We have been paying 40 quid for each return. Otherwise we will have to do self assessment - I refuse to pay upwards of 200 quid for each return as some people have been quoting me...!!!

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Old 25th May 2011, 06:00 PM
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Originally Posted by premieji View Post
Just took your advice and rang the IR - they checked our stuff and apparently our UK accountant has NOT been declaring our pension income in UK as we are spanish residents - so we are not being double taxed after all - its only spain that taxes us on our pensions which is as it should be, as we need to show we have an income here.

While I am here - does anyone know of a good UK accountant who is familiar with ex-pat (spain) situations? We have been paying 40 quid for each return. Otherwise we will have to do self assessment - I refuse to pay upwards of 200 quid for each return as some people have been quoting me...!!!
You dont have any Government pensions at all then?
Spain wont be taxing you on your pensions btw unless you are declaring it to them ... does your UK accountant somehow do that then by putting a Spanish tax return in?

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Old 25th May 2011, 08:16 PM
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You dont have any Government pensions at all then?
Spain wont be taxing you on your pensions btw unless you are declaring it to them ... does your UK accountant somehow do that then by putting a Spanish tax return in?
Sorry to confuse - No we only have state pensions - my hubby has an additional small private pension - not a government pension, so sadly we canīt benefit from two allowances as you suggest...(???). We have a UK accountant who does the UK return (income/expenditure from the houses), and a spanish accountant who does the spanish return (pensions only)

- but we have lost our UK accountant now so we are thinking of doing self assessment - if we canīt find anyone to send in our simple returns for under 50 quid each... any suggestions...? must be conversant with expats...?

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