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Residency tax estimate.

Posted: Fri Sep 18, 2020 2:08pm
15 replies364 views4 members subscribed
Knc60

Posts: 34

7 helpful points

Location: Benidorm

Joined: 24 Jul 2020

Please can someone guide / advise with regards to helping me approximately calculate my future tax liabilities if I decided whether or not to become a resident here... 🙏

I'm retired. My annual. gross pension & rental income is €37k 

I have read that there is a €5k personal annual allowance.. As such, €32k would be subject to taxation.. And that would be 30%..approx €9k to €10k? 

I understand that if I stay here for more than 182 days,.. Approx January 3rd 2021, I'm classed as fiscal resident.. 

My intention is to ask fellow expats on here initially for advice.. But I will pay an accountant to undertake a formal assessment in due course.. to inform my decision making.. 

PS I'm in the process of obtaining my TIE presently to allow me to stay beyond 90 days.. 

Many thanks for taking the time to read my post. Any advice would be appreciated. 

Kelvin1960

Posted: Fri Sep 18, 2020 4:11pm

Kelvin1960

Super helpful member

Posts: 1488

1767 helpful points

Joined: 5 Mar 2017

Posted: Fri Sep 18, 2020 4:11pm

https://www.spainaccountants.com/tax-rates

If you get your TIE between now and end 2020, you will be tax-resident in Spain for Jan-Dec 2021.

You will complete a Modelo 720 in Feb '22 - a declaration of worldwide assets.

You will submit a tax return in early-mid June '22.

You will pay your tax in Spain in two chunks - late June/early July and November '22 (a roughly 60/40 split).

The kicker ... you will continue paying UK PAYE until late '22, then you will get a rebate from the UK. So there is a significant cash flow issue to manage.

There may be some CGT issues to deal with if you are selling up in the UK/depending on the timing.

Kimmy11

Posted: Fri Sep 18, 2020 4:14pm

Kimmy11

Legendary helpful member

Posts: 6869

12554 helpful points

Joined: 8 Aug 2017

Posted: Fri Sep 18, 2020 4:14pm

Hi Knc60,

I see you're a relatively new member - welcome!

Spanish income tax is more complex than the UK, especially the allowances, which are many and varied.  For example, when you say you are "retired", if you mean that you've reached State pension age, rather than an early retiree, there are other allowances available to you beyond the basic personal allowance.  Jim Taylor has done a great set of guides on Resident's Income Tax - this one is specifically about allowances and should give you a better idea of what may be applicable:

https://www.spaintipsandguides.com/living-in-spain-4/jims-guide-residents-income-tax-allowances-147/

Jim has written a number of other, subject-specific tax guides which you can find here:

https://www.spaintipsandguides.com/living-in-spain-4/

Sadly, Jim's wife has recently died and he has decided that he can no longer contribute to the forum.  We all hope he will return, but in the meantime, if you should have any further queries, please feel free to ask on the forum, as Jim had asked us not to contact him direct.  If members can't answer your questions, we'll let you know it's time to get an accountant  ;o) 

Kind regards,

Kim

Knc60

Posted: Fri Sep 18, 2020 4:34pm

Knc60

Original Poster

Posts: 34

7 helpful points

Location: Benidorm

Joined: 24 Jul 2020

Posted: Fri Sep 18, 2020 4:34pm

Kimmy11 wrote on Fri Sep 18, 2020 4:14pm:

Hi Knc60,

I see you're a relatively new member - welcome!

Spanish income tax is more complex than the UK, especially the allowances, which are many and varied.  For example, when you say you are "retired", if you mean that you've reached State pension age, rather than an early retiree, there are other allowances available to you beyond the basic personal allowance.  Jim Taylor has done a great set of guides on Resident's Income Tax - this one is specifically about allowances and should give you a better idea of what may be applicable:

https://www.spaintipsandguides.com/living-in-spain-4/jims-guide-residents-income-tax-allowances-147/

Jim has written a number of other, subject-specific tax guides which you can find here:

https://www.spaintipsandguides.com/living-in-spain-4/

Sadly, Jim's wife has recently died and he has decided that he can no longer contribute to the forum.  We all hope he will return, but in the meantime, if you should have any further queries, please feel free to ask on the forum, as Jim had asked us not to contact him direct.  If members can't answer your questions, we'll let you know it's time to get an accountant  ;o) 

Kind regards,

Kim

Hi Kim.. 

Thanks for the welcome.. 

Thanks for signposting me to Jim's guides.. I will read them forthwith.. 

Very sorry to hear about Jim's wife. My condolences... 

I have just turned 60.. I took early retirement at 55 with a local government pension that is taxed in UK.. But not too much.!..

I note that worldwide assets ( savings / property etc) in excess of €50 k have to be declared.. 

Am I right in thinking that you don't pay taxes unless said assets exceed €700k..Mine don't.! 

Thanks for your reply

Knc60

Posted: Fri Sep 18, 2020 4:40pm

Knc60

Original Poster

Posts: 34

7 helpful points

Location: Benidorm

Joined: 24 Jul 2020

Posted: Fri Sep 18, 2020 4:40pm

Kelvin1960 wrote on Fri Sep 18, 2020 4:11pm:

https://www.spainaccountants.com/tax-rates

If you get your TIE between now and end 2020, you will be tax-resident in Spain for Jan-Dec 2021.

You will complete a Modelo 720 in Feb '22 - a declaration of worldwide assets.

You will submit a tax return in early-mid June '22.

You will pay your tax in Spain in two chunks - late June/early July and November '22 (a roughly 60/40 split).

The kicker ... you will continue paying UK PAYE until late '22, then you will get a rebate from the UK. So there is a significant cash flow issue to manage.

There may be some CGT issues to deal with if you are selling up in the UK/depending on the timing.

Hi.. 

Many thanks for replying. The link. Is very useful.. I will read forthwith.. 👍

Thank you explaining and listing the key tax related processes for me too.. 

Thanks

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Kimmy11

Posted: Fri Sep 18, 2020 4:54pm

Kimmy11

Legendary helpful member

Posts: 6869

12554 helpful points

Joined: 8 Aug 2017

Posted: Fri Sep 18, 2020 4:54pm

Knc60 wrote on Fri Sep 18, 2020 4:34pm:

Hi Kim.. 

Thanks for the welcome.. 

Thanks for signposting me to Jim's guides.. I will read them forthwith.. 

Very sorry to hear about Jim's wife. My condolences... 

I have just turned 60.. I took early retirement at 55 with a local government pension that is taxed in UK.. But not too much.!..

I note that worldwide assets ( savings / property etc) in excess of €50 k have to be declared.. 

Am I right in thinking that you don't pay taxes unless said assets exceed €700k..Mine don't.! 

Thanks for your reply

Hi Knc60,

You don't pay tax on your assets, just the income derived from them.  My husband is ex-RAF, so like you, he has a Crown pension which is taxed in the UK.  However, depending on your overall income, declaration of these pensions can push you into a higher tax bracket.  I have income from a UK rental property and even taking into account my 50% of our significant savings, I'm taxed at 19%.  My husband is taxed at 24% in Spain and is liable for income tax in both countries, but it runs to hundreds in Spain, rather than thousands of Euros.

Kind regards,

Kim

Kelvin1960

Posted: Fri Sep 18, 2020 5:10pm

Kelvin1960

Super helpful member

Posts: 1488

1767 helpful points

Joined: 5 Mar 2017

Posted: Fri Sep 18, 2020 5:10pm

Knc60 wrote on Fri Sep 18, 2020 4:40pm:

Hi.. 

Many thanks for replying. The link. Is very useful.. I will read forthwith.. 👍

Thank you explaining and listing the key tax related processes for me too.. 

Thanks

I have edited my post above .... I got my dates wrong.

Hope this helps.


Knc60

Posted: Fri Sep 18, 2020 5:12pm

Knc60

Original Poster

Posts: 34

7 helpful points

Location: Benidorm

Joined: 24 Jul 2020

Posted: Fri Sep 18, 2020 5:12pm

Kimmy11 wrote on Fri Sep 18, 2020 4:54pm:

Hi Knc60,

You don't pay tax on your assets, just the income derived from them.  My husband is ex-RAF, so like you, he has a Crown pension which is taxed in the UK.  However, depending on your overall income, declaration of these pensions can push you into a higher tax bracket.  I have income...

... from a UK rental property and even taking into account my 50% of our significant savings, I'm taxed at 19%.  My husband is taxed at 24% in Spain and is liable for income tax in both countries, but it runs to hundreds in Spain, rather than thousands of Euros.

Kind regards,

Kim

Hi Kim

Many thanks for your reply. I hope you don't mind but I have sent you pm.. With more financial info.. 

Thank you

Knc60

Posted: Fri Sep 18, 2020 5:17pm

Knc60

Original Poster

Posts: 34

7 helpful points

Location: Benidorm

Joined: 24 Jul 2020

Posted: Fri Sep 18, 2020 5:17pm

Kelvin1960 wrote on Fri Sep 18, 2020 5:10pm:

I have edited my post above .... I got my dates wrong.

Hope this helps.


Hi.. 

Many thanks for update.. 👍

PeterPan

Posted: Fri Sep 18, 2020 9:28pm

PeterPan

Very helpful member

Posts: 640

580 helpful points

Location: Almoradí

Joined: 1 Aug 2020

Posted: Fri Sep 18, 2020 9:28pm

Knc60 wrote on Fri Sep 18, 2020 2:08pm:

Please can someone guide / advise with regards to helping me approximately calculate my future tax liabilities if I decided whether or not to become a resident here... 🙏

I'm retired. My annual. gross pension & rental income is €37k 

I have read that there is a €5k personal annual allowance.. As such, €32k would be subject to taxation.. And that would be 30%..approx €9k to €10k? 

I understand that if I stay here for more than 182 days,.. Approx January 3rd 2021, I'm classed as fiscal resident.. 

My intention is to ask fellow expats on here initially for advice.. But I will pay an accountant to undertake a formal assessment in due course.. to inform my decision making.. 

PS I'm in the process of obtaining my TIE presently to allow me to stay beyond 90 days.. 

Many thanks for taking the time to read my post. Any advice would be appreciated. 

Hi Knc60, 

I can't help with your tax calculation. However, you have to apply for residency if you intend to stay longer than 90 days. 

If you stay longer than 183 days then you'll become fiscally resident and pay taxes to Spain. If your family (husband, son or daughter) are also resident in Spain or your main income is derived from spain, then you'll be liable to pay tax in spain without staying over 183 days.

One thing to be aware of is the issue of capital gains tax when selling your UK property, tax free lump sums when cashing in your pension(s) and the loss of tax free status for investments wrapped in ISAs.

If you are staying longer than 90 but less than 183 days then you'll be required to sign off the padron when you leave Spain in order to remain UK tax resident. You should also return your TIE card.

HTH

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