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Discussion Starter · #1 · (Edited)
I copy below the relevant part of the DTA. It says quite clearly that as from 1st Jan 2015 Hacienda will take Crown Pension income into account.


This is the roughly the extract:-

Pensions

State and /or private pensions are taxable only in Spain. You should apply for these to be paid gross in the UK (using Form Spain Individual)as under the DTA the tax is payable in full, and should not be offset, although many gestors operate it this way.

Government Pensions(GP) are taxable only in the UK; they may not be taxed in Spain under the DTA. Under the old DTA they didn’t need to be declared in Spain. However, from the 1stJanuary 2015, Spain will be able to take the income into account when working out your marginal rate of tax in Spain. This is a standard clause in the OECD DTA.

What this means in practice is that if you have no other income which is taxable in Spain (e.g.state pension, interest, rental income etc.) then it will have no impact (until you start drawing your state pension). If you do have any other income, then the way it works is that they take your GP into account when working out your total income. They then work out the amount of tax you WOULD pay if it was taxable in Spain. This amount is then divided into your total income, and the resulting percentage is your marginal tax rate. This rate is then applied to any income that is taxable in Spain


I have just re-read the info re UK Crown Pension being taken into account when working out the tax to be paid in Spain on income taxable here. I had believed it would apply from next year's declaration.

I spoke an Accountant and a gestor both said CP income in UK will be taken into account as from THIS YEAR.

I now believe such pensioners must supply info re their CP this year as the professionals have said, albeit I think it is income from 14th June 2014 to 31st December 2014,

I have just returned from my gestor’s office where I made my Tax Declaration for my 2014 income.

The gestor originally said the gross CP had to be entered in the ‘Funcionarios’ box on the PADRE (on-line tax form) and then the amount of tax I had paid in UK in another box, and that payment would then be taken from my total income, i.e. including my CP. I would then have to pay tax on the remainder, which have would included paying tax on my CP..

I explained that in UK a funcionario is probably a town hall worker but that the Military. Police , civil servants, etc. were quite different as they were Crown Employees.

After some discussion, during which I produced a copy of the 2013 Double Taxation Agreement which shows a CP cannot be taxed in Spain, she called Hacienda and the third person to whom she spoke understood the difference.

The result was that she was told to ignore my CP.

I do not think that was correct as the DTA says the CP can be taken into consider to establish the marginal rate of tax one must pay in Spain.

Had I not 'discussed' the DTA with the gestor I would have paid at least 1,000€ more on tax this year. I understand that all other of her customers who have CP, and for whom she has already completed the form, will be paying the increased tax. Those from now on will not, as long as they make it clear they have a Crown Pension.

I an pretty certain this will affect many crown pensioners as the interpretation is very varied. It is up to you to make sure they get it right.


Posted for the information of others affected.
 

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Discussion Starter · #2 ·
PS

When I expressed surprise that my tax bill was quite a bit higher this year than last, the gestor recalculated my bank interest using 1.15 euros to the pound, instead of the average for 2014 of 1.24 which I had used and 1.28 which was the rate on 31st Dec 14. She said it did not matter as they never check it !!!!



So pick a number and half it !!!!
 

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PS

When I expressed surprise that my tax bill was quite a bit higher this year than last, the gestor recalculated my bank interest using 1.15 euros to the pound, instead of the average for 2014 of 1.24 which I had used and 1.28 which was the rate on 31st Dec 14. She said it did not matter as they never check it !!!!



So pick a number and half it !!!!
Is that the same gestor that said a resident didn't have to pay IHT on her deceased spouse's worlwide assets?
Perhaps we should all interpret the rules as we would want rather than what they are supposed to be!
Wonder if she privided the same tailor made service to all her clients who queried the amount!
One day, some jobsworth will randomly check tax calculations...
 

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The person who undertakes random checks of tax returns doesn't just do it because he/she wants to cause problems for an individual. He/she will be acting in accordance with the terms under which he or she is employed, with the full backing of the law. It's a useful function that provides some safeguard against people just putting any old rubbish on their tax returns. I am not sure that the term "jobsworth" is particularly fitting or accurate in the circumstances
 

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Discussion Starter · #5 ·
I have just found a surprisingly long list of those who get Crown Pensions and thus are taxed in UK only (but will have to declare the amount in Spain either this year or next, depending on the advice you get !! )

My Gestor wanted to know which clients would be affected.

For those who might be affected, or those just interested, the list is here:-

INTM343040 - DT claims and applications - Types of income: Pensions and Annuities
 
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