Taxation

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

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.

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

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.

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

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.

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.

Hi Jim, Happy New Year and lovely to hear from you.   Under the weather at present with Bronchitis, but that is nothing new at this time of the year.   Hope you and your lovely wife are well and safe and back in your home, I have friends who have been out of their homes due to the floods for what seems ages now!

On the topic above, UPDATES - thanks for that, having been out here 20 years and being fiscal residents do not think about updates.   Just wanted to let people know that we are in the same situation as they are and you have to pay the tax in the UK but not in Spain but declare it here to be legal fiscally.   Hope I did not give too much incorrect info above.   As usual Jim, always lovely to hear from you and lovely to read your notes on all the topics, always helpful.