When to apply for residency - Page 2

Some people say that NHS pensions are, effectively, UK Government pensions, and continue to be taxed in the UK. So that Spanish tax pain may not apply (although you still need to do the Modelo 720 and income tax declaration in 2022, even if you don't actually pay Spanish income tax).

But I'm not sure on the details, so I still think Spanish Tax advice would be worthwhile.

We rent out property in the UK, and that income continues to be taxed in the UK, although we pay income tax on our pension incomes in Spain.

As you are in Campoverde, I suggest http://www.britannialegals.com/

My wife and I have found them to be excellent.

As long as you understand the tax implications .... go for it this year.

Thanks for the helpful information which I have taken on board

I want to apply for residency in the hope that it takes a few months to sort so I can take my last 3 months salary with my UK employer, so end of March 2021 my employment will end. I'm 51 years old and have a long way to draw my pension (if I'm lucky enough) so will be relying on other forms of income from UK based business and property assets. These properties are in trust with my children so I wont need to declare them as a worldwide asset  although I can draw the rent as income as required to live my life in Spain and continue to contribute to the system as I already do with my property in Spain. Apologies if this comes across as if I've got loads of money because I haven't. It would just generate enough income for me to live a modest life but with the weather and time on my hands.

I'm more than happy to pay my due taxes as I do in the UK, but we are all after the best deal and most tax efficient way so advice is a must. It's alot to take on board and getting  the best advice at the start could save loads of costly headaches in the future.

Excuse my stupidness if I've misinterpreted some of your advice wrongly.

Regards

Hi GC

Again, I think expert tax advice would benefit you.

From my recent experience (and that of my wife), if you gain Residency between now and June 2021, you will be tax-liable in Spain for Jan-Dec 2021. I don't think this is avoidable. 

You will need to declare all forms of income in 2022, but not all income categories will be taxable in Spain.

My wife and I have private sector company pensions - we pay tax on these in Spain. We don't receive UK State Pensions yet, but when we do, these will be added to our Spanish tax.

We have share dividend income - taxed in Spain.

We have a UK bank savings account, that makes around £10 per year (yes, 10 whole pounds) - taxed in Spain.

We also have UK property income (and CGT in due course) - these are taxed in the UK.

Other than as above, we have no "business assets", so have no advice to offer.

Our Spanish tax bill is getting on for double the tax that we paid under UK rules (and that assumes that our UK taxable income actually falls within our UK taxable allowances - yet to be declared). Given the tax reconciliation process, this year, we have paid Spanish tax, AND we continue to pay UK PAYE - in total, this adds up to nearly 3X our UK tax. 

Whatever you do, I wish you all the best. But don't mess up your financial future for the sake of a tax consultation and liability estimate.

Trying to respond to some of the points raised in previous posts:

I don't think you need worry about the application process being dragged out over a long period of time. I don't have time to check the legislation, but the decision should effectively made at the point you submit the application. If you're rejected, you'll be told why, and can return within ten days as part of the same application process. If you can't correct whatever is deemed wrong within ten days, then you'd have to start over again. Basically, any delay will be caused by the applicant and not by the authorities.

The golden visa is available to anyone who invests €500,000 in a property in Spain, but I've not seen any confirmation as to whether this applies to the combined value of several properties the applicant buys, or whether it applies to a property or properties you already own before moving to Spain.

There have been a few recommendations on the forum for gestores, but the one that appears most frequently is Uma at Get Legal in Spain. Bear in mind that the initial application can be made online, either by an applicant who has an acceptable personal electronic certificate, or by a gestor who has gestoría certificate - so that's something to check when choosing a gestor.

You can offset tax paid in the UK against tax due in Spain, but you need to ensure you don't later get a refund of that tax from HMRC.

Once you've submitted your first tax return here, you can in most cases get out of paying tax in the UK.

If you sell a property in the UK and invest the proceeds in a property in Spain before the end of this year, CGT won't be due in Spain on the UK sale. That exemption won't apply next year.

Whether or not an NHS pension is classed as a government pension, and thus not directly taxable in Spain, depends on who pays it.

As a resident in Spain, renting out a property in the UK, you can be classed as a non-resident landlord, and avoid paying tax on the income in the UK.

When you get residencia doesn't affect when you become a fiscal resident - that happens if you spend 183 days in Spain in any calendar year. Up to the end of this year, people have been able to take advantage of the fact that the movements of EU citizens isn't monitored, so the only way the authorities could establish if someone was a fiscal resident was by looking at their padrón or residency date. That get out won't apply next year, when movements will be monitored.

Hi again

Thanks very much and yes it will  be all about the planning as I definitely dont want to be paying more tax than necessary. If that was to be the case I may as well stay where I am and just split my time between the UK and Spain. 

I will try and find a good consultancy.

Hi Jim

Thanks for the info.

That's an interesting point in respect of UK property being let out.

In my previous post I mentioned about my property's in Trusts in my children's name but I can effectively draw the rent if needed and that would be classed as income which would  be subject to the usual tax rules in Spain. I will just need to investigate into the allowances etc. I will have a look at the company you mentioned.

I will still be applying for residency and like you said the fiscal part is a separate matter which could really help matters until I can get all the nitty gritty sorted. It will be a costly exercise especially as I will need to pay for PMI to enable the application process to proceed, and from my point of view this will be necessary to continue and not just to aid the application process.......piece of mind.

I don't chase money anymore but I need to ensure that I can afford to stay in Spain with the modest income I will be receiving. As long as I can go out for a few drinks and meals a few times a week I will be happy knowing that I can enjoy the life and weather.

I have a Spanish bank account but I'm wondering if it is also possible to use my English accounts to prove income as I'm still being paid by a UK business. I have also started to use my Transferwise account which I may use more often and eventually move things over so I can avoid the monthly charges being made. I pay a regular amount of £700 every month and that converts to euros at the normal fluctuating exchange rate every month.

Thanks again for the advice.

This tax debate needs some context.

If you are granted Residency this year (or, as some are saying, if you have your application in by the end of this year), you stand to benefit from Reciprocal Healthcare from the age of 66 until you pop your clogs - according to the UK Gov website.

If you had to pay for that (by way of the Convenio Especiale) it would cost you around 2K Euros per year ... each.

So if you make it to 86, you are up 40K Euros  ... each.

It is for you to decide if sneaking around under the radar or attempting to defer your Spanish Tax Residency for a year is worth that.

Additionally, if you get your Residency this year, you will continue to receive any UK State Pension rises. 

Go figure.

If will be interesting to see of the UK will give you an S1 form at some future date (to transfer your healthcare benefit to Spain) if you remain a UK Tax Resident.

Glen's advantage is that he can draw income as required, and can do so in order to minimise his tax liability here. 

Not being able to prove income or a balance on a Spanish bank account is a possible problem. The law effectively says that it doesn't matter where the income is provable, but the official handling your residency application will apply his own rules. OK, it's possible to appeal against a refusal to grant residencia and, again in law, such an appeal should succeed, but it's not a path I would recommend.

GOV.UK do say that the S1 healthcare system will continue. Very blasé. It's not even mentioned in the withdrawal agreement, and I challenge anyone to find such a mention on either the EU or Spanish websites.

A couple of points:

Kelvin1960.......I'm not sneaking around under the radar by any stretch of the imagination and am happy to pay the correct taxes.

RayD........I'm not trying to avoid paying any taxes that are legally due and feel that if your statement relates to me then I'm a little offended.......not much mind!

However, like everyone I want to have as much as possible to be able to live my life in a decent manner and contribute to the economy I live in by spending money in shops, restaurants, bars and all the usual. I have already invested in Spain by purchasing my house which again contributes to the system in taxes and bills. I'm also looking into another venture in Spain which will further contribute to the economy.

I do not evade or avoid taxes that are due, but if I can save money by paying less tax legally then I will........who wouldn't? All it will mean that I have more money to spend in the economy.......it gets there in the end in some shape or form.

People with business's employ accountants to help with their tax liability by advising on the most efficient way for their business and themselves.......that's just life. 

Now before I get jumped on, I totally disagree with the larger organisations that move business to evade tax altogether with offshore accounts etc. so dont think for one second I condone this immoral behaviour................but for the average self employed person or small business's out there, tax planning is a must. We all know that some business owners struggle and all the stories of them earning a pittance  to keep the  business and staff employed......I have been there. Sometimes effective tax planning is the only way for them to survive. This option is still better than having a business go bust causing tax payers to foot the bill of unemployed people let alone any other businesses that were affected by not being paid.

Now we have gone off track from the original topic which seems to happen quite regularly on the forum lately.

I hope the above clarifys my position.

Just  doing mine. First start now by paying a monthly sum for each of you into your spanish bank.  Mark the transfer as Living expenses Spain or Pension ect. You will need at least 3 months statements, showing a regular income into your spanish account. You DO need proof of income, to live here

I am using Lindsay at The Foreign Exchange , Pinoso

She is excellent 0034965070584