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Taxation

Posted: Sun Jan 12, 2020 4:59pm
13 replies208 views9 members subscribed

As ex local government workers, teachers, we have to pay tax on our pensions in the UK. As Spanish residents, we declare our state pension in Spain and pay an abogda to do this for us. Up to 2019, this has been fine but when doing our Spanish tax return in 2019, we were asked for our P60 forms as this was now to be taken into consideration. As a result of this, my husband had to pay tax in Spain for the first time, as well as having paid his tax in the UK. In previous years, we were told that our state pensions were too low to have to pay tax in Spain and we have even had a small refund.

Surely, this is illegal as it is double taxation. Can anybody explain this, please?

RayD

RayD

Legendary helpful member

Sun Jan 12, 2020 5:37pm

Posts: 4003

Location: Catral

2946 helpful posts

Posted: Sun Jan 12, 2020 5:37pm

Did you fill in the HMRC form 'Spain Individual'?

This is the form which prevents double taxation and is in two halves, one for the UK and one for Spain.

You get it from HMRC 

http://www.hmrc.gov.uk/gds/paye/attachments/81015_spain_indiv.pdf

Kimmy11

Kimmy11

Legendary helpful member

Sun Jan 12, 2020 7:09pm

Posts: 1900

2385 helpful posts

Posted: Sun Jan 12, 2020 7:09pm

Hi Sheila and Mick,

Are your local government/teacher pensions classed as "Crown" pensions?  (My husband's military pension is a Crown pension.)  If so, you can't use the "Spain Individual" form, as explained in point 6. of the guidance notes:

"If however you receive a pension paid by the UK for service to the UK Government or a local authority, or where you were employed in a publicly funded educational institution, there are special provisions in the Double Taxation Convention.  Your pension from that employment will be exempt from UK tax only if you are a national of Spain or a dual national of the UK and of Spain, as well as being resident there."

We have been tax resident since 2016 and my husband has always had to provide our tax advisors, Abaco, with the P60s for his military pension, even though he doesn't pay tax on it in Spain.  This is thanks to the deal that David Cameron did with Mariano Rajoy (then the PM of Spain) in 2015, whereby Crown pensions had to be declared in Spain, even though they weren't taxed here.

If you're unsure whether your pensions fall into the "Crown" category, probably worth giving HMRC a call to check.

Kind regards,

Kim

Villas

Villas

Super helpful member

Sun Jan 12, 2020 7:24pm

Posts: 1903

Location: Sax

1077 helpful posts

Posted: Sun Jan 12, 2020 7:24pm

Kimmy11 wrote on Sun Jan 12, 2020 7:09pm:

Hi Sheila and Mick,

Are your local government/teacher pensions classed as "Crown" pensions?  (My husband's military pension is a Crown pension.)  If so, you can't use the "Spain Individual" form, as explained in point 6. of the guidance notes:

"If however you receive a pension paid by the UK for service to the UK Government or a local authority, or where you were employed in a publicly funded educational institution, there are special provisions in the Double Taxation Convention.  Your pension from that employment will be exempt from UK tax only if you are a national of Spain or a dual national of the UK and of Spain, as well as being resident there."

We have been tax resident since 2016 and my husband has always had to provide our tax advisors, Abaco, with the P60s for his military pension, even though he doesn't pay tax on it in Spain.  This is thanks to the deal that David Cameron did with Mariano Rajoy (then the PM of Spain) in 2015, whereby Crown pensions had to be declared in Spain, even though they weren't taxed here.

If you're unsure whether your pensions fall into the "Crown" category, probably worth giving HMRC a call to check.

Kind regards,

Kim

As in two posts in tandem at the moment:

Tax on pension 

V

Movingon

Movingon

Very helpful member

Sun Jan 12, 2020 7:30pm

Posts: 1004

Location: Albatera

639 helpful posts

Posted: Sun Jan 12, 2020 7:30pm

Paying tax in two countries does not automatically equate to double taxation. 

Was your abogda declaring your teachers pensions, sounds like maybe not.

Not wishing to teach anybody to suck eggs but in essence you need to declare your worldwide income gross in order to establish your overall tax liability in Spain from which tax paid in UK will be offset, unfortunately because of the more generous allowances in UK that can result in a larger tax bill in Spain than if you had actually received everything gross.

I'm pretty sure this was not new for 2019 in which case it's possible you could be receiving correspondence from the Spanish tax man regarding undeclared income for previous years.

You are already receiving your state pensions gross so unless you are being stopped tax in UK on other income, interest on savings or investments etc. for instance, then submitting a Spain Individual now will serve no purpose.

Kimmy11

Kimmy11

Legendary helpful member

Sun Jan 12, 2020 9:36pm

Posts: 1900

2385 helpful posts

Posted: Sun Jan 12, 2020 9:36pm

You're correct, Movingon, it's not new.  As I said, this was agreed between the UK and Spain in 2015, effective 2016 tax year - and yes, my husband does pay more tax overall.

Kind regards,

Kim

jimtaylor

jimtaylor

Legendary helpful member

Mon Jan 13, 2020 5:58am

Posts: 4667

Location: Mudamiento

6294 helpful posts

Posted: Mon Jan 13, 2020 5:58am

Sheilamick69 wrote on Sun Jan 12, 2020 4:59pm:

As ex local government workers, teachers, we have to pay tax on our pensions in the UK. As Spanish residents, we declare our state pension in Spain and pay an abogda to do this for us. Up to 2019, this has been fine but when doing our Spanish tax return in 2019, we were asked for our P60 forms as this was now to be taken into consideration. As a result of this, my husband had to pay tax in Spain for the first time, as well as having paid his tax in the UK. In previous years, we were told that our state pensions were too low to have to pay tax in Spain and we have even had a small refund.

Surely, this is illegal as it is double taxation. Can anybody explain this, please?

It's been a requirement for several years that government pensions have to be declared on tax returns, but this declaration is in a special section of the tax return. 

Government pensions aren't taxable in Spain, but the amount can mean that tax on other income due in Spain may be taxed at a higher rate.

If your abogado hasn't asked you in previous years for the amount of your government pensions, then your tax returns haven't been done correctly.

It's also possible that they put details of the government pensions in the wrong section of the last tax returns. Have a look at the returns for 2018 - the pension amount should be in Casilla 0525, and UK tax deducted should be in Casilla 0588.

ldp

ldp

Mon Jan 13, 2020 9:23am

Posts: 68

Location: Torrevieja

26 helpful posts

Posted: Mon Jan 13, 2020 9:23am

I am a fellow ex teacher.

Now also have a property rented out in UK.

This year we are using a company who will deal with both our UK and Spanish tax returns.

I can pm you the contact details if you would like them

Andrea Murphy

Andrea Murphy

Helpful member

Wed Jan 15, 2020 11:44am

Posts: 369

Location: Almoradí

232 helpful posts

Posted: Wed Jan 15, 2020 11:44am

you have to fill in the Double Taxation Form from the UK and then give one part to the Spanish Tax authorities and the other part to the UK authorities.   You have to pay tax on that pension in the Uk but you also have to delcare it in Spain where you do not pay tax on it due to the filling in of the Double Taxation Agreement form.   We are in the same situation and have not paid tax on a teachers pension over here in Spain but it has always been declared and used the Double Taxation Form mentioned before.

jimtaylor

jimtaylor

Legendary helpful member

Wed Jan 15, 2020 12:18pm

Posts: 4667

Location: Mudamiento

6294 helpful posts

Posted: Wed Jan 15, 2020 12:18pm

An update, Andea. You no longer need the Spanish half of the Spain/Individual form. You just send the English half of the form to HMRC, along with a fiscal residency certificate you get from Hacienda. You can only get the fiscal residency certificate after submitting your first tax return.

Be careful not to claim a refund of tax paid in the UK if that's already been entered on your tax return here and the amount offset against tax due here. If you do, you'll get a letter from Hacienda demanding payment plus a penalty.

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