Rental in Costa Blanca

Congrats on your Irish passports.

Re the NIE ... this is just an identity number. It confers no status. Our Spanish solicitor dealt with that for us (within the house purchase process). If you need a NIE before you get to Spain (to rent a home), I understand that you can apply online ... others are better placed to respond to that. 

Re taxes ... I assume that your income is derived from the UK ... there is a non-double-taxation agreement between the UK and Spain that means (once you have Spanish tax-Residency) most income made in the UK is taxable in Spain, and ceases to be taxed in the UK - income from employment (e.g. online/distance working), company pensions, state pension, dividends, ISAs. If you have a good income/pension, you will pay more tax in Spain than in the UK.

Some Crown Pensions remain taxable in the UK (e.g. military, civil service, police, some NHS/teachers). 

Rental income from a UK home seems to be treated inconsistently. My wife and I each rent out a UK home. We continue to declare/pay income tax in the UK on that income, but we have to notify our Spanish gestor, as the income might impact our marginal tax rates in Spain. Others on this forum seem to declare and pay only in Spain.

If you inherit anything of value, you pay IHT in Spain.

If you gain Residency between July '21 and June '22 (inclusive), you will become tax-Resident in Spain wef 1/1/22. This is a key date. The Spanish tax year is Jan-Dec, paid in arrears.

You will ...

- declare your worldwide assets (modelo 720 form) in Feb 23

- make income tax declarations in June 23

- pay income tax for Jan-Dec 22 in two chunks .... in June and November 23.

There is a tax-cutover period ... a period in which you are effectively paying tax in both countries. You will be able to start the process of seeking exemption from UK taxation (rental income notwithstanding) from October 23 onward, but the process is bureaucratic. In our case, Covid is delaying everything. We have been tax-Resident in Spain since 1.1.19, and have not yet been exempted from UK tax (rental income not withstanding). So we are likely to end up paying tax in both countries for maybe 2 years before we receive the UK tax rebate.

The next 3 paragraphs only apply to you if you think that you might sell your UK home at some point in the future ...

If you sell your UK home after you gain tax-Resident status in Spain, you will pay Spanish CGT on your profits without any allowances. 

If you sell a UK business asset (e.g. an investment property) after you gain tax-Resident status in Spain, you must declare and pay UK CGT on your profit (with allowances) within 30 days, AND THEN declare for additional CGT in Spain (CGT already paid in the UK is deducted from your Spanish CGT liabilty).

In your case, you are turning your home into a business asset (by renting it out for profit). HMRC applies a sliding scale of allowances, based on durations of ownership, personal occupation and rental occupation. Overall, this is unlikely to impact you, as Spain will apply CGT to its own overall level - only the UK paid deduction will change.

Thanks Kelvin, this is useful stuff and sounds complex and scary. As I mentioned before we are planning on next year and when things are back to some form of normality. We are not at pensionable age yet but do have private pensions which would cover our rent. Life is for living and if we do not do it soon it will remain a distant dream.

Thanks again.

Kevin.

In reality, all these issues will hit you over several years, so there is no need to digest it all at once.

But ... on the basis of my experience (and that of my wife), I recommend that you get a professional tax assessment before you commit to Residency. Between us, my wife and I pay around double the income tax in Spain that we do in the UK (and temporarily paying tax concurrently in the UK and Spain is on top of that).

A further thing to think about .... once you gain Residency, you must obtain a Spanish driving licence. Until 31/12/20, Brits (as EU citizens) could fill in a few pieces of paper, pass a minimal medical test, and simply exchange their UK licence for a Spanish one - that is all we did. But Brits moving here after 1/1/21 (who are no longer EU citizens) must re-take their driving tests - in Spanish. This is a daunting prospect for many.

I wonder if you could obtain Irish licences ?   .... it would make your lives much easier in due course.

Hi Kelvin,

Do the above tax laws apply to Irish citizens moving to Spain?  Also regarding an Irish driving license there very long waiting times for a test and the test it’s self is difficult to pass.

We are hoping to buy in either Catral or Bonalba if anyone has any advice it would be welcome.

Ei