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Non Lucrative visa tax liability?

Posted: Fri May 14, 2021 5:36pm
4 replies205 views3 members subscribed
Paul2109

Posts: 104

24 helpful points

Location: La Zenia

Joined: 6 Dec 2020

Hello all,

Does anyone know if you are subject to Spanish income tax on a Non Lucrative Visa?

I was under the impression that as it is called 'Non Lucrative', there would be no Spanish income tax implications, but I've heard that this may not be the case? 

Surely, if you cannot work in Spain on this visa, then you shouldn't  be liable to Spanish income tax, either from an income from a UK business or, as in my case, an incom from a UK pension provider, as tax would already gave been paid in the UK.

I'm pretty dumbfounded by this possibility, as my pension will be taxed in the UK!

Any help or links to a definitive answer would be appreciated - thanks!

Kelvin1960

Posted: Fri May 14, 2021 11:30pm

Kelvin1960

Super helpful member

Posts: 1488

1767 helpful points

Joined: 5 Mar 2017

Posted: Fri May 14, 2021 11:30pm

Enjoy your dumfoundment.

Non-Lucrative means you will not be earning an income from work in Spain.

But you will still be liable for income tax in Spain on most of your worldwide income.

There is a non-double-taxation agreement between the UK and Spain, that means 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).  

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 liabiity).

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

Saltydog

Posted: Mon Jun 14, 2021 3:11pm

Posts: 85

35 helpful points

Location: La Romana

Joined: 7 Jan 2021

Posted: Mon Jun 14, 2021 3:11pm

Kelvin1960 wrote on Fri May 14, 2021 11:30pm:

Enjoy your dumfoundment.

Non-Lucrative means you will not be earning an income from work in Spain.

But you will still be liable for income tax in Spain on most of your worldwide income.

There is a non-double-taxation agreement between the UK and Spain, that means 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).  

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 liabiity).

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

Just to pick-up on some points. We are going to apply for a non-lucrative vise in the coming months after we have sold our house in the UK. We have to have around 35,000Euros for the first year of residency which is made-up of 1,600.00Euros NHS pension per month and the shortfall made-up from profit from the house sale. We are hoping to have around a 6 figure sum left from the house sale. Will this profit be taxed in the UK or Spain or both? Is it better to leave it in the UK or put into a Spanish bank account, or ask my kids to look after it?

Sorry so many questions...

 

Kelvin1960

Posted: Mon Jun 14, 2021 9:32pm

Kelvin1960

Super helpful member

Posts: 1488

1767 helpful points

Joined: 5 Mar 2017

Posted: Mon Jun 14, 2021 9:32pm

Saltydog wrote on Mon Jun 14, 2021 3:11pm:

Just to pick-up on some points. We are going to apply for a non-lucrative vise in the coming months after we have sold our house in the UK. We have to have around 35,000Euros for the first year of residency which is made-up of 1,600.00Euros NHS pension per month and the shortfall made-up from pro...

...fit from the house sale. We are hoping to have around a 6 figure sum left from the house sale. Will this profit be taxed in the UK or Spain or both? Is it better to leave it in the UK or put into a Spanish bank account, or ask my kids to look after it?

Sorry so many questions...

 

If you sell your main UK home before you gain Spanish tax-Residency, there is no CGT in either country.

You might find that your NHS pension is classed as a "Crown Pension", so will continue to be taxed in the UK (but has to be declared in Spain).

Re the UK or Spanish bank ... Spanish banks have deposit guarantees much like UK banks, so I don't see risk there. Banking is quite expensive in Spain, so having a large sum in the bank will exempt you from charges. So it's your guess on the exchange rate  ....

Saltydog

Posted: Mon Jun 14, 2021 10:40pm

Posts: 85

35 helpful points

Location: La Romana

Joined: 7 Jan 2021

Posted: Mon Jun 14, 2021 10:40pm

Kelvin1960 wrote on Mon Jun 14, 2021 9:32pm:

If you sell your main UK home before you gain Spanish tax-Residency, there is no CGT in either country.

You might find that your NHS pension is classed as a "Crown Pension", so will continue to be taxed in the UK (but has to be declared in Spain).

Re the UK or Spanish bank ... Spanish banks have deposit guarantees much like UK banks, so I don't see risk there. Banking is quite expensive in Spain, so having a large sum in the bank will exempt you from charges. So it's your guess on the exchange rate  ....

Thanks Kelvin.. 

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