Are savings in UK taxable in Spain? - Page 2

Hi, I’m not looking to use savings interest (it’s just a few pounds due to appalling rates), but the capital itself. The idea is to transfer circa 10k from the a/c every year to supplement my CS pension. I could sustain that for about 6 years at which point the savings will be used up. By then I will have reached state pension age & would have that pension in addition to my CS one (ie the state pension would in effect be replacing the dried up savings). 

These are modest sums here - I’m not on the Times rich list so wealth tax is a world away for me!

Btw, I hold an Irish ppt. I don’t have any other income so just trying to see if moving is feasible on 22k income a year (12k CS pension + 10k savings). I don’t have property in Spain (or anywhere else) so that figure would have to cover rent. It ‘seems’ as though the savings are not liable for tax of any description.

Many thanks.

One other thing I’ve just become aware of (thanks to John123456). I haven’t claimed my CS pension yet. I can take 25% of the lump sum tax free here in the UK, however, according to John’s link, it seems that tax would be payable on the lump sum in Spain (ie none of it is tax free) aaaagh. It seems mind boggling to me how Spain can tax you on your UK pension. Yes, I would pay tax on the other 75% of the lump sum- I get that, but then you should be entitled to walk away with the balance without the Spanish tax man telling you you’ve got to pay him as well!

What an absolute minefield that has to be considered if planning a move to Spain.

Just be careful when you take the money from your pension fund. Take the money before you become tax resident and you won't pay tax in Spain. You become a tax resident once you have been in Spain for over 6 months in one financial year which is the same as the calendar year.

If you receive money in the first 6 months of the year, or Jan to Jun, but don't actually take out residency until (say) September of the same year, you will not be liable for tax in that year. Let's say we are talking of 2025.  Receive your tax in March 2025. Move to Spain and register your stay in September 2025. You will not be a tax resident for 2025 so you don't complete a tax return in 2026 for the year 2025. Your first tax return would be done in 2027 for the financial/calendar year 2026. Anything before that is not considered by the Spanish tax authorities. 

If, on the other hand, if you take out residency or register your stay in the first 6 months of 2025 then you will be liable for tax on all income in 2025 and have to complete a tax return by June 2026 to cover that income.

Just like things such as capital gains tax, you have to plan your move fairly carefully.

To be honest you're asking an awful lot of financial questions, which in my opinion need to be answered by a financial adviser/expert as I don't believe you will get a satisfactory answer from Forum Members, however I may be proved wrong.

You might find the contents of this link helpful, which explains when a person becomes tax resident in Spain:

https://sede.agenciatributaria.gob.es/Sede/en_gb/no-residentes/residencia-personas-fisicas-juridicas/persona-fisica-residente-espana.html

Have you considered taking your Civil Service lump sum earlier than you had originally planned? As you will read you only become tax resident once you have lived in Spain for 183 days during the calendar year.

The tax free pension lump sum is governed by UK legislation - hence why you would want to be subject to that legislation for the tax period in which you take it.

I would also be looking to keep my tax affairs as simple as possible in my new country - so assuming you're determined to take the lump sum (which presumably in turn comes with a reduced annual pension) then I'd be looking at doing that in the tax year(s) before I became tax resident in Spain. That just keeps things simple.

Whether that is the right thing for you is not for me to determine. While I'm all for tax planning (comes with the territory of being an accountant), it's also important to focus on what is right for you and to not let the tax tail wag the dog in most circumstances. 

Thank you very much Marcliff. I was hoping to be in a position to move very soon (due to personal circumstances here), however, it probably wouldn’t be very sensible to panic & do a rushed move. Also, the pension paperwork states that the process takes approximately 3 months, so it most likely would be after June ‘24 before i have access to it. As such, trying to coordinate everything for a move this year could prove costly (pension taxed). Let’s say I move over in June ‘24 - I would become resident for tax purposes in December of this year  which if I understand you correctly would mean that my lump sum would be liable for Spanish tax in the current tax year. Perhaps the better option would be to delay things & claim the pension in the early part of next year & make the move straight after. That way i can be fairly sure it won’t be taxable - would i still have to declare it on the following years tax return? 

And…before moving have the lump sum paid into my savings a/c in UK. That would then form my total savings pot which  would have to last me for 6 years (then i turn 67). 

Q. How would the Spanish tax authorities even know the source/breakdown of that savings figure? Would i be asked/have to account for it? If it’s money that I’ve saved from my salary or gifts from family etc surely that’s none of their concern? Maybe I’m overthinking this - would I even have to enter a savings balance on a tax return, isn’t it just income that you must declare - I can understand that if you didn’t declare all income, then penalties would be incurred - I wouldn’t have any other income (interest, dividends etc ) just my CS pension.

Kind regards.

Spanish and UK tax authorities do talk to each other. 

If you move over in June 2024 then you become a tax resident for 2024. If you delay it a month or so then you do not become a tax resident until 2025 as that would be the first year you will have been resident for over 6 months (183 days). You'd have to move over after July 3rd to avoid that.

You don't declare savings on a Spanish tax return, just income derived from those savings. You do declare savings on a form 720 each year but, again, the savings aren't tax, just the income such as interest.

Spain doesn't do part years, it is either all or none. 

Seems a bit silly moving over a couple of weeks early and then worrying if they will ever get you. Then can go back on records for 4 years so you'd have that worry.

You might be right in that it could be missed but, as someone who has been audited by the Spanish tax office, it's not a very nice feeling to have to prove everything and, unless you are really up on Spanish tax procedures, a solicitor or gestor will charge you each time they contact the tax authorities on your behalf. 

Can I ask in relation to this: I recently bought a property in Spain but I am a non-resident there. Obviously, I am liable for the non-resident tax but I am curious to know whether the rules regarding CGT apply to non-residents as well as residents?