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Discussion Starter #1
One of the areas that is not clear to me is that of declaration and payment, if applicable, on certain UK pensions income tax in Spain.

I've read that Government pensions are of no interest to Hacienda as tax is taken at source - i.e. paid in the UK.

First thing then. Given that everyone gets their "Government" pension, be it with or without the SERPS depending on whether the individual has contracted out or not, at 65, does that not mean that no one has to declare this pension in Spain?

Or do we mean Government pension in the "Civil Service Pension" sense?

All other earnings abroad, be they company/private pensions, sold your lucky gold teeth, whatever, over a very small limit (I think 1000€) for foreign earnings, must be declared. I know the area in which they are declared in PADRE (if this is the programme you use) will depend on the type of income it is (Patrimonio/Inmobiliario etc) but the declaration requirement is clear ....... isn't it?

Why am I posting this? Because past and recent threads have given me the impression that people think their UK pensions (from the government at age 65), are of no interest here. I believe that unless if it is a certain type of pension (like a civil service one) you have to declare it. Am I wrong?!

Strav seems to have a good handle on this area - hope he and any other with a clear grasp of this thorn can impart their wisdom.

Thanks,
Xose
 

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Ahhhhh .... no, sorry if I havent been clear.

Your State pension, the tax burden is transferrable. So you can get a certificate of tax payment in Spain and lodge it in the UK and pay your tax here.

By Government pension, I mean things like Civil Service (and someone told me on here recently teachers also) Pensions. Now these will always be taxed at source in the UK, as part of an agreement with the Spanish tax authorities.

So, in theory you can take advantage of the tax allowances in the UK and in Spain to reduce your overall tax burden.

One of the areas that is not clear to me is that of declaration and payment, if applicable, on certain UK pensions income tax in Spain.

I've read that Government pensions are of no interest to Hacienda as tax is taken at source - i.e. paid in the UK.

First thing then. Given that everyone gets their "Government" pension, be it with or without the SERPS depending on whether the individual has contracted out or not, at 65, does that not mean that no one has to declare this pension in Spain?

Or do we mean Government pension in the "Civil Service Pension" sense?

All other earnings abroad, be they company/private pensions, sold your lucky gold teeth, whatever, over a very small limit (I think 1000€) for foreign earnings, must be declared. I know the area in which they are declared in PADRE (if this is the programme you use) will depend on the type of income it is (Patrimonio/Inmobiliario etc) but the declaration requirement is clear ....... isn't it?

Why am I posting this? Because past and recent threads have given me the impression that people think their UK pensions (from the government at age 65), are of no interest here. I believe that unless if it is a certain type of pension (like a civil service one) you have to declare it. Am I wrong?!

Strav seems to have a good handle on this area - hope he and any other with a clear grasp of this thorn can impart their wisdom.

Thanks,
Xose
 

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Discussion Starter #3
Ahhhhh .... no, sorry if I havent been clear.

Your State pension, the tax burden is transferrable. So you can get a certificate of tax payment in Spain and lodge it in the UK and pay your tax here.

By Government pension, I mean things like Civil Service (and someone told me on here recently teachers also) Pensions. Now these will always be taxed at source in the UK, as part of an agreement with the Spanish tax authorities.

So, in theory you can take advantage of the tax allowances in the UK and in Spain to reduce your overall tax burden.
Thanks for that clarification Strav. Just for my own benefit though, does that mean that if you are receiving a state pension and it is Taxed in the UK, you can forget about it here? - or do you still have to declare it (tax paid) so far as hacienda is concerned?

In fact, when you say you can get a certificate of tax payment and lodge it in the UK and pay your tax here, does that mean the option is yours, or that you should to avoid double taxation? - sorry if the last one ties in with the first question. I guess what I'm trying to ask is if one has a choice and hacienda have nothing to say on the matter.

Thanks again.

Xose
 

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'Government Pension' in this sense does not mean State Retirement Pension, but Civil Service, Teachers, Local Government, NHS ....public service pensions basically.

We have recently seen a Spanish accountant and he informed us that the Spanish authority have no interest in my husband's Teachers' Pension (upon which he pays tax in the UK) . Nor will they be interested in my Local Government Pension when I start receiving it.

However they will want to know about my State Retirement Pension when I start to receive it in January, and my husband's SRP when he receives it in 2014.

Hope this helps.
 

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Discussion Starter #5
............However they will want to know about my State Retirement Pension when I start to receive it in January, and my husband's SRP when he receives it in 2014.

Hope this helps.
That clears it up nicely for me thank you. The fact that they will want to know about the SRP was what I was after.

Many thanks,

Xose
 

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However they will want to know about my State Retirement Pension when I start to receive it in January, and my husband's SRP when he receives it in 2014.

Hope this helps.
Apart from the fact that you don't have an option, having your UK state pension taxed in Spain and your "Crown" pension taxed in the UK is to your advantage as you get two sets of personal allowances and both incomes are taxed at the lower rates initially.
 

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Thanks for that clarification Strav. Just for my own benefit though, does that mean that if you are receiving a state pension and it is Taxed in the UK, you can forget about it here? - or do you still have to declare it (tax paid) so far as hacienda is concerned?

In fact, when you say you can get a certificate of tax payment and lodge it in the UK and pay your tax here, does that mean the option is yours, or that you should to avoid double taxation? - sorry if the last one ties in with the first question. I guess what I'm trying to ask is if one has a choice and hacienda have nothing to say on the matter.

Thanks again.

Xose
Having your state pension taxed here is not a choice unfortunately. And it often makes sense. My wife will be in that situation very shortly and we hope to legally escape most tax. If your state pension is taxed in the UK and you are a Spanish resident then in theory the Spanish authorities could come to you for the money. In practice they would insist it was taxed here in the future and then do a deduction on your back returns of what you paid in the UK ... or thats what I am lead to believe happens
 

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Apart from the fact that you don't have an option, having your UK state pension taxed in Spain and your "Crown" pension taxed in the UK is to your advantage as you get two sets of personal allowances and both incomes are taxed at the lower rates initially.
Yes, I will not have to pay tax in either country as I will be below the threshold in both :)
 

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Yes, I will not have to pay tax in either country as I will be below the threshold in both :)
You may well be below the threshold but that doesn't mean that you do not have to make a tax declaration. Depending on the type of income you and your wife have, the threshold for declaration can be as low as 1000 euros.

Also if you wish to take advantage of the conditions of the UK/Spain taxation agreement (which you do by having your government pension taxed only in Spain) then you must make a declaration even if your income is zero.

As Stravinsky said, it is to your advantage to make a nil return.
 

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You may well be below the threshold but that doesn't mean that you do not have to make a tax declaration. Depending on the type of income you and your wife have, the threshold for declaration can be as low as 1000 euros.

Also if you wish to take advantage of the conditions of the UK/Spain taxation agreement (which you do by having your government pension taxed only in Spain) then you must make a declaration even if your income is zero.

As Stravinsky said, it is to your advantage to make a nil return.
It's me and my husband!

We have no choice as to where our income is liable for taxation. As we both have Public Service Pensions (he is already receiving his Teachers'pension, my Local Government one to come in 2014), these HAVE to be taxed in the UK. There is no choice on this. My husband already pays tax in the UK on his.

When we receive our State Pensions (me in January, him in 2014), these are liable for tax in Spain.

However, in my case, neither of the incomes will be enough to pay any tax in the country it is taxed in.

Neither of us, at this moment, has any income that is liable for tax in Spain so we do not submit a return. This is on our Accountant's instructions.

We will both submit a zero return when we have our State Pensions.
 

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Neither of us, at this moment, has any income that is liable for tax in Spain so we do not submit a return. This is on our Accountant's instructions.

We will both submit a zero return when we have our State Pensions.
As I said, unless you have made a declaration you will probably have problems proving tax residency should you need to.

This could have very serious consequences should one of you die or if you moved and made a capital gain.

Tax residents get big tax breaks on IHT and CGT.

One thing I have leant after many year in Spain is that the advice you get from accountants and lawyers is often unreliable especially with regard to "non Spanish" questions.
 

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Trust me on this. Make a Spanish NIL tax return before you get your state pension. This will prove to the UK authorities that you are on the Spanish tax radar and will allow you to transfer your tax liability to Spain for your State pension easily. Also it will have an effect should you ever come to sell a property in Spain as it proves you are tax resident. I dont pay tax here in Spain, although liable. I still put in a tax return and when my wifes pension is due in August I will supply HMRC with a tax certificate from Hacienda which they will issue because I am on the system

It's me and my husband!

We have no choice as to where our income is liable for taxation. As we both have Public Service Pensions (he is already receiving his Teachers'pension, my Local Government one to come in 2014), these HAVE to be taxed in the UK. There is no choice on this. My husband already pays tax in the UK on his.

When we receive our State Pensions (me in January, him in 2014), these are liable for tax in Spain.

However, in my case, neither of the incomes will be enough to pay any tax in the country it is taxed in.

Neither of us, at this moment, has any income that is liable for tax in Spain so we do not submit a return. This is on our Accountant's instructions.

We will both submit a zero return when we have our State Pensions.
 

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As I said, unless you have made a declaration you will probably have problems proving tax residency should you need to.

This could have very serious consequences should one of you die or if you moved and made a capital gain.

Tax residents get big tax breaks on IHT and CGT.

One thing I have leant after many year in Spain is that the advice you get from accountants and lawyers is often unreliable especially with regard to "non Spanish" questions.
We are registered as Tax Resident. Our accountant came to the Hacienda with us toimake sure.

He said it sometimes happens automatically when you register for Residency (he doesn't know why it doesn't happen for everybody!).
 

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We are registered as Tax Resident. Our accountant came to the Hacienda with us toimake sure.

He said it sometimes happens automatically when you register for Residency (he doesn't know why it doesn't happen for everybody!).
As I said, you can't trust them to get it right.

Applying for residencia does NOT make you tax resident!
 

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As I said, you can't trust them to get it right.

Applying for residencia does NOT make you tax resident!
No, I know that - but our accountant says sometimes it does trigger such a registration - in our case it did - and they have given us a certicate of Tax residency!!

I don't see why I should go through the hassle of submitting a return when we don't need to.

We did ask him about the CGT if we sold the house and he said if we were over 65 when we sold it then as tax residents, assuming we had owned it over three years (which we have) , then we wouldn't need to pay any.

We will just wait until we are over 65 to sell it!
 

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We will just wait until we are over 65 to sell it!

And hope that for the want of €60 paid to a gestor to do your NIL tax return that it doesnt come back to bite you. :)

Two things I learned since being in Spain

One: Two different accountants here will have two different opinions
Two: I listen to people who have actually been through it. Thats why people come on forums generally.

Good luck, hope you dont have to pay it before 65 :D
 

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Ok, you've won, we will probably get a gestor to do it although do we really need to if we are registered as Tax Resident?

The reason we went to the Accountant in the first palce was that so many people told us so many different things, that we thought we'd ask someone who knew the ropes.

But I take your point, this is Spain and as such things will not be consistent. :)
 

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Discussion Starter #20
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But I take your point, this is Spain and as such things will not be consistent. :)
Unfortunately, Tax avoidence (not to be confused with Tax Evasion which carries major penalties in any country) leads to all sorts of theorising and precedents laid down by the judges, as opposed to the letter of the law. It takes a brave person, with a lot to play for, to go down the route of a judges application of juris prudence rather than make life simple and stick to the letter of the law.

The law in this case is crystal clear. It is only the experts' interpretation that usually make things complicated. Unfortunately, that's the same wherever you go. I remember my accountant back in the UK theorising on how low I could keep my salary and how much I could earn on dividends to avoid NIC contributions, only to be told by the Tax inspector that what he thought was not necessarily the same as HMRC - and guess who would win the day?! Basically, the message was, keep it real and don't take the pizz.

If you look at the Agencia Tributaria site, under frequently asked questions for the individual, the limits are crystal clear. A declaration, for example, is a must for someone who has lost 501€ in basic share dealing (500€ being the threshold). This isn't shown as share dealing, but as perdidas patrimoniales - so anything that creates a loss of more than 500€.

Crazy right? You haven't earnt a single penny that year, from anywhere. You only make 501€ loss on some shares you sell. You have to make a declaration. Same goes if you make more than 1600€ profit.

You earn moneys from a "non retention" source. Retention being the Spanish systems way of collecting taxes at source, like the % they take from your Bank Interest payments if you have any. Such a source could be a small UK company pension paying only 84€ per month. This is more than 1000 in the year, so you have to make a declaration. The exchange used to work this out from £ to € is the rate on 31st Dec of the relevent year from the ECB. Their web site has this info.

...and so on for several other limits. Clear as clear can be.

The clasic line on this site is "Everyone is supposed to make a declaration, however....." and then goes on to give the limits so that Mr Average working for one company on less than 22K per year does not actually have to, should they wish not to. If, however, he works for more than one company, and earns more than 11600€, then he does have to declare.

I know several people who do not earn 22000€ per year but have income from several sources, including some UK pension payments. They choose to latch on to the 22000 rule even though it clearly does not apply to them. And even though ignorance is no defence, all I can say to them is hopefully, the Spanish IRS have bigger fish to chase and the cutbacks will mean not enough inspectors to chase these cases. Hell of a way to sleep easy though!!

Xose
 
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