Hello Stuart,
Thank you for your question.
Disclaimer: Answers and comments provided here are for general
information and are not intended to be a substitute for informed tax,
legal, or other professional advice. If you require professional
advice, please consult a qualified provider who is licensed country.
The answer is yes, you are required to pay taxes on your income.
Any and all income will be of the interest of the Spanish Inland
Revenue if you spend more than 183 days of any year in Spain. You
automatically become a Spanish subject for tax purposes even though
you have not applied for your residence card.
British subjects who arrive in Spain to take up residence is discussed
here:
“ Tax Is Due On world Wide Income - Any papers or documents relating
to deposits, stocks or bonds or any other asset you own, regardless of
where they may be located should be produced because as a Spanish
resident, income tax is now due on your world-wide income.”
Source: Spanish Property Website
http://www.spanishpropertyco.com/51.htm
Income Tax in Spain - Foreigners Must Declare
“If your stay in Spain exceeds 183 days in one calendar year, you
become legally liable for Spanish income tax. Whether or not you
become a resident is not relevant. Neither is the fact that you are
perhaps paying tax elsewhere.”
“Treaties exist between countries dealing with double taxation,
allowing taxpayers to legally avoid being taxed by both countries.
(..)Foreign residents with the right to apply the rules regarding
double taxation are obliged under the law to still declare their
earnings.”
If You Are Taxable It Will Be On All Your Assets
“If you are liable to pay income tax in Spain, international
agreements make all your income taxable, including your old age
pension, investments, interest, and any other source of income you may
have. Strangely, there is one exception which is that of pensions paid
to civil servants, who are taxed in the country in which they
originate.”
Source: Spanish Property Website
http://www.spanishpropertyco.com/49.htm
The lawyer, Francisco Garcia Ramirez, at the Marbella Lawyers Website
answers questions addressing Tax Laws.
Question: “I am planning to retire in Spain (from U.S.). Is my pension
from U.S. taxable (I will not be paying taxes in U.S.)?”
Answer: “Once you come in Spain to reside permanently you will become
a resident for tax purposes. This means that you will be taxed on the
same basis as any other Spaniard, which would mean paying taxes on
your pension. In case the pension was subject to U.S. tax, the Double
Tax Treaty between Spain and the U.S. envisages tax relief
mechanisms.”
Source: Marbella Lawyers Website
http://www.marbella-lawyers.com/ShowQuestion.php3?Id=14
The UK has a double taxation agreement with Spain, so if you pay taxes
in the UK on your income provided by the insurance company, this
agreement would foresee tax relief mechanisms. Given that you don’t
pay taxes in the UK for this income, this UK/Spain Double Tax Treaty
would not be of assistance in this case.
Antonio Flores Vila addresses tax related questions.
“According to article 15 of the UK/Spain Double Tax Treaty, a Spanish
fiscal resident, who is an employee of a British company, and does not
live in UK for more than 183 days during the tax year, must pay taxes
in Spain.”
Surce: Marbella Lawyers Website.
http://www.marbella-lawyers.com/ShowQuestion.php3?Id=149#150
The lawyer, Francisco Garcia Ramirez discusses tax law.
“There is a tax band with different percentages applied to different
incomes: currently, under three million pesetas of annual earnings
your tax is almost inexistent.(..) Note that being a resident means
that you are taxed in Spain for your worldwide income.
If you are non-resident, then you do not pay taxes in Spain other than
those derived from an activity you are conducting in Spain at a given
time.”
Source: Marbella Lawyers Website
http://www.marbella-lawyers.com/ShowQuestion.php3?Id=59
Lawyer, Francisco Garcia Ramirez answers a question concerning taxes
on rental income from the UK and how it is taxed once becoming a
Spanish resident.
“You will be paying tax in Spain as of the moment you take up your
residency. You can, however, be living in Spain and still pay in the
UK. This is the case where you spend less than 183 days in Spain. (..)
In your case, once you become a resident in Spain, you may still have
to pay the income you derive from your real estate activity to the UK
Inland Revenue, according to the Double Taxation agreement signed
between Spain and the UK of 21 October 1.975. This means that you
would pay in the UK and not in Spain, as per the agreement.
Source: Marbella Lawyers Website
http://www.marbella-lawyers.com/ShowQuestion.php3?Id=68#68
All Very Taxing by Kathleen Hennessy
Thursday August 22, 2002
The Guardian
http://money.guardian.co.uk/Print/0,3858,4486697,00.html
Search Criteria:
Inland Revenue in Spain for British
://www.google.com/search?sourceid=navclient&ie=UTF-8&oe=UTF-8&q=inland+revenue+in+spain+for+british+
UK Spain Double Tax Treaty
://www.google.com/search?num=20&hl=en&lr=&ie=UTF-8&oe=UTF-8&q=UK+Spain+Double+Tax+Treaty&btnG=Google+Search
UK Spain Double Tax Treaty for British citizens
://www.google.com/search?num=20&hl=en&lr=&ie=UTF-8&oe=UTF-8&q=UK+Spain+Double+Tax+Treaty+for+british+citizens
I hope you find this helpful and if there is anything that I've
written that needs clarification, please ask before you rate this
answer.
Best Regards,
Bobbie7-ga |
Clarification of Answer by
bobbie7-ga
on
31 Oct 2002 02:36 PST
Hello Stuart,
I located this comprehensive tax guide where you will find information
on the taxing regime of Spain. The first part is on Corporations, but
if you scroll down to the middle of the document you will find
complete information on taxation on individuals. Here are all the
rules in what is regarded as taxable income in Spain:
Source: Lex Mundi - International Tax Desk book
http://www.lexmundi.org/publications/Tax_Guides/tax-spain.htm
Earned income includes, among other items:
(i)-Wages, salaries, incentives, expense allowances.
-Pensions
-Out of pocket expenses for travelling when they exceed the limits
contemplated by law.
-Benefits received from Pension Plans.
-Supplementary pensions received from a spouse.
-The use of housing or a car by employees or loans granted to them at
an interest rate under that of the market.
-Insurance policy premiums paid by the company and the contributions
made by the company to Employees' Pension Schemes.
(ii) Income from real estate includes:
-Income received for the lease of real properties.
-2% of the cadastral value of real properties used by their owner.
(iii)Income from investments includes:
- Dividends
- Interest
- Annuities or pensions from capital deposits.
- Income from capitalization and insurance transactions when they do
not include the minimum risk item.
-Income from copyrights, industrial rights, lease of businesses, etc.
(iv)The profits obtained from business and professional activities are
deemed to be earned income of those activities.
(2) (i)In income from part-time work the following amounts are
deductible: Social Security contributions and 5% of the gross amount
of the income.
(ii)As regards to real properties, when these are leased, all expenses
including financial expenses are deductible. When they are for
personal use, only the municipal tax on real property and the interest
on the loans for the acquisition of the customary dwelling are
deductible, up to the limit of 800, 000 pesetas per year.
(iii)In income from investments. there is only a general reduction of
25,000 pesetas, except in that arising from technical assistance or
leases in which the necessary expenses are deductible and in annuities
or temporary pensions and in certain insurance agreements, where the
contributions of capital made are a deductible expense.
(iv)In income from business and professional activities, all the
expenses necessary to obtain the income are deductible, with a policy
similar to 'that applicable in Corporate Tax.
(3)Exemptions are very few and the following may be pointed out:
-Income obtained from Popular Savings Plans (These are pending
regularization, and permit a maximum saving per year of I million
pesetas up to the aggregate limit of contribution to the plans of 10
million pesetas).
-Contributions to Pension Plans made by the person concerned or by the
company, up to the limit of 750, 000 pesetas per year or 15% of the
net income.
-Capital gains obtained from transfers made for a consideration when
their aggregate amount in one calendar year does not exceed 500,000
pesetas.
-The capital gains obtained by persons over 65 years of age for the
transfer of their customary residence in exchange for an annuity.
The above information and the link to the complete document addresses
what Spanish authorities regard as income, but I suggest you contact a
tax authority for professional advice.
Warm Regards,
--Bobbie7-ga
Disclaimer: Answers provided are general information, and are not
intended to substitute informed professional tax, legal, investment,
accounting, or other professional advice.
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