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Discussion Starter · #1 ·
HI
I have tried to find the answer through the Spanish Gov web sites but still not found the answer to a simple Q ( maybe I am simple ? )
My understanding is that once I have registered into Hacienda for tax I have a personal allowance of €5,151.
Then I have looked at private pension and it seems this is classed as "wage earner deductions). It says- if the income rises to €13,260 then it is fixed at €2,652.
My Qs are
1 / What if my pension is €25,000 .....does this stay at €2,652 ?
2 / Is the deduction of €2,652 added to my personal allowance of €5,151 do I have an allowance of €7,803 per year or is it just €2,652 total ?
I will be in Spain in a few weeks and will seek professional advice but for now does anyone know so I can work out figures
Thank you
 

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1 / What if my pension is €25,000 .....does this stay at €2,652 ?
Yes, your total income is over €13,260.

2 / Is the deduction of €2,652 added to my personal allowance of €5,151 do I have an allowance of €7,803 per year or is it just €2,652 total ?
It's added. You have an allowance of €7,803 to ofset against your tax.
 

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Discussion Starter · #3 ·
well, thank you zenkarma - better than I though,t yippee.
I see you are from Garrucha ..that's an area I will maybe be renting in until I find a permanent home. Its a bit too busy for me to live long term but there does seem to be a nice community feel to it whilst I find my feet.
Can you recommend a good gestor / tax advisor in your area please ?
 

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I see you are from Garrucha ..that's an area I will maybe be renting in until I find a permanent home. Its a bit too busy for me to live long term but there does seem to be a nice community feel to it whilst I find my feet.
Can you recommend a good gestor / tax advisor in your area please ?
Garrucha is a typical Spanish village you won't find many people there speaking English. It's a place where many Spanish people have holiday homes and come down for their holidays.

I really like it, it's not too big and not too small and has a lovely beach that stretches the full length of the village. Vera to the east and Mojacar to the west are two other areas you might like to look at.

I use these people, they speak Spanish and English and I've never had any problems with them:

Pilar Perez Gestion S.L.
Telephone: 950 478 863
Fax: 950 472 859
Paseo del Mediterraneo, 111
Mojacar Playa
04638
 

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Yes, your total income is over €13,260.

It's added. You have an allowance of €7,803 to ofset against your tax.
Can you please explain what you mean by a 'private pension'. Do you mean one where you have paid in all the contributions? If you have a pension where you paid 'additional voluntary contributions', in addition to contributions from your salary, for an occupational pension could you claim the additional allowance?
 

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Can you please explain what you mean by a 'private pension'. Do you mean one where you have paid in all the contributions? If you have a pension where you paid 'additional voluntary contributions', in addition to contributions from your salary, for an occupational pension could you claim the additional allowance?
I was under the impression that anything that is not classed as the State Pension is classed as 'private', but I stand to be corrected if this is not so.
 

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I was under the impression that anything that is not classed as the State Pension is classed as 'private', but I stand to be corrected if this is not so.
I suppose a Government pension is slightly different to a private pension in that under current rules it wont be taxed in Spain ... but might be soon :)
Whereas a "normal" private pension would be declarable in Spain
 

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If you have a pension where you paid 'additional voluntary contributions', in addition to contributions from your salary, for an occupational pension could you claim the additional allowance?
The additional allowance is not determined by the type of pension.

A single person would get a personal allowance of €5,151 to offset against any type of income before tax liability. In addition to that personal allowance you would also get an earned income allowance (which includes pension income) of €4,080 for earnings up to €9,180 and €2,652 for earnings over €13,260. There's a sliding scale that operates between those two figures.

Occupational and UK state pensions are all taxable in Spain if you are a fiscal resident there regardless of how the contributions were made. A purchased annuity is taxed differently. UK Government service pensions such as civil service, police, fire brigade, armed services etc are only allowed to be taxed in the UK and are therefore not subject to Spanish taxation.
 

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Discussion Starter · #9 ·
Thank you Zenkarma for the recommendation - appreciate that. We have been to all the areas you mentioned - shown round by our Fab real estate agent Paul who lives Garrucha . So far our favourite place is Beda but we still have more exploring to do so will be renting for a while to give us time.
 

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The additional allowance is not determined by the type of pension.

A single person would get a personal allowance of €5,151 to offset against any type of income before tax liability. In addition to that personal allowance you would also get an earned income allowance (which includes pension income) of €4,080 for earnings up to €9,180 and €2,652 for earnings over €13,260. There's a sliding scale that operates between those two figures.

Occupational and UK state pensions are all taxable in Spain if you are a fiscal resident there regardless of how the contributions were made. A purchased annuity is taxed differently. UK Government service pensions such as civil service, police, fire brigade, armed services etc are only allowed to be taxed in the UK and are therefore not subject to Spanish taxation.
Thank you for the very clear information. I do have a small annuity ( from free standing additional voluntary contributions ). Do you know at what rate this is taxed at? Also, what is the position regarding the lump sum (tax free in England) that I will receive when I get my Government pension (Teacher's). Since my pension will be taxed in England, do I have to declare the lump sum on my Spanish tax return and pay tax on it?
 

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I do have a small annuity ( from free standing additional voluntary contributions ). Do you know at what rate this is taxed at?
The guidelines regarding purchased annuities are complex and I'm not even sure an AVC would qualify. A lot depends on when the contributions were made, the type of scheme, whether your employer contributed and at what age the annuity is taken out.

I just don't know enough about this to be able to give you any more information I'm afraid.

This is what I found on purchased annuities:

A purchased annuity is taxed very favourably in Spain. Only a proportion of the annuity income is taxed in Spain according to the age of the recipient when the annuity is vested i.e. a binding contract is entered into to purchase the annuity, and that proportion is taxed at a flat rate of 18%. The tax-free element can be very generous, up to 88% on a whole of life annuity, if taken when over 70.

Such treatment normally only applies to annuities acquired inheritance, legacy or succession. If an employer has ever contributed to the fund, and the fund was built up during the working life of the individual, the annuity treatment is unlikely to be available.

A purchased annuity is where you have paid a lump sum to an insurance company in return for an income for either a specified period of time, or for the remainder of your life. On a whole of life annuity, on death, a reduced income is usually provided for your spouse for the rest of his/her life.

Often with a private pension the Trustees have purchased an annuity on your behalf. If the pension is recorded on your self-assessment tax return in Spain as an annuity, it may be accepted as such and a proportion may be tax-free.

However, this is a grey area in Spanish tax, because of the confusion over the meaning ‘purchased annuity’ in Spain and there is no guarantee that such treatment will be given. Spanish tax inspectors and accountants can, and frequently do, take different views on the matter, and this can vary from region to region, and even within the same region. If your Trustees have bought an annuity on your behalf, even though you didn’t purchase it directly, you may be able to claim the annuity treatment, although this will depend on your accountant, and also the tax inspector. If you do not make a claim for the annuity treatment, or your claim is not successful, your pension income will be taxed as occupational/State pension income.​

Also, what is the position regarding the lump sum (tax free in England) that I will receive when I get my Government pension (Teacher's). Since my pension will be taxed in England, do I have to declare the lump sum on my Spanish tax return and pay tax on it?
Yes you would have to declare the lump sum and it would be taxed as capital gains if you were a fiscal tax resident in Spain within the same tax year as you received the lump sum.

Some teacher government pensions are treated the same as civil service and would not be subject to Spanish tax. Which ones I have no idea, you would need to check on this.

It sounds to me like you need to speak to a specialist Spanish tax adviser!
 

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Yes, I think that you are right! If my lump,sum is treated as a 'capital! gain' presumably I would need to know how much I paid into the scheme and how much of that was for the lump sum part of the pension. Eek! I wonder if there are any other ex teachers/government employees who are forum members and who have been through the process of receiving their lump sum whilst resident in Spain? I would be very interested to hear from them.

Many thanks for your help.
 

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If my lump,sum is treated as a 'capital! gain' presumably I would need to know how much I paid into the scheme and how much of that was for the lump sum part of the pension.
I don't think so. I think it's just treated as a capital gain and taxed on these rates:

€0 - €6.000 21%
€6.000 - €18.000 25%
more than €18.000 27%

You really don't want to get caught for Spanish capital gains tax on your pension lump sum. Just ensure you're not a Spanish fiscal resident when you receive it.

Also, check out your teacher pension, you might find it's not taxable in Spain, many of them are treated in the same way as a government civil service pension.
 

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Think you need to seek proper advice, as I am not sure I agree with Zens original post about lump sums and annuities.

Assuming your pension is a a government pension (under the DTA- which I think it is), then my understanding is that a lump sum will not be taxed in Spain. This is because it is effectively a commutation of your pension, and the DTA is quite clear that pensions and other remuneration, paid out of government created funds, are only taxable in the UK.

Having said that I have posted before about changes to the DTA, which if it drawn next year, may affect the marginal rate of tax on any other income which may be taxable in Spain.

With regard to an annuity purchased from AVC's, I think these are treated beneficially. They are contributions you have made, and then an annuity has been purchased on your behalf, or by you. So you have fulfilled the requirement to receive a regualr income in return for a payment of capital, and the law, as I read it, is different to what Zen posted. The actual law says

In the case of immediate annuities, which have not been acquired by inheritance, bequest or inheritance any other title, shall be considered as investment income the result of applying each annuity the following percentages:

and then it details the percentages depending upon the age when you took it.

Thats always been my understanding, but I don't know the source of Zens info.
 

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This sort of thing enforces my belief that all contentious gains should be settled in the UK in a Spanish tax year prior to the one that you intend to settle in Spain.
 

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This sort of thing enforces my belief that all contentious gains should be settled in the UK in a Spanish tax year prior to the one that you intend to settle in Spain.
Indeed. A suggestion I've already made! It makes life far simpler for everyone really.
 

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Thats a bit ambiguous I guess, as it state separately that Government pensions are taxed in the UK, but doesnt really differentiate when it comes to lump sums
Some government pensions are taxed in the UK but some are also liable to Spanish tax as well.

The only government pensions that are unable to be taxed in Spain are the one's I've already mentioned and that includes some teacher pensions. Other teacher pensions however are liable to Spanish tax and a lump sum would be treated as a capital gain in Spain.
 

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Some government pensions are taxed in the UK but some are also liable to Spanish tax as well.

Not quite sure what you mean by this. Could you expand on it
The only government pensions that are unable to be taxed in Spain are the one's I've already mentioned and that includes some teacher pensions. Other teacher pensions however are liable to Spanish tax and a lump sum would be treated as a capital gain in Spain.
I agree with that, if the pension is not considered a government pension, but I'm still not clear whether you think a lump sum from a government pension is taxable in Spain.
 
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