Hi I will shortly be moving to Spain buying a property outright and having sufficient savings to last untill my pension becomes available at 66 I'm 61 at the moment I have no intention of working so Will be living of what money i have the question is would I have to pay tax on my savings in the bank
Thanks
Posted: Sun May 3, 2020 12:21am
Super helpful member
You are assessed for tax on your income, not your capital. So if you earn interest on your savings, that will be liable for tax. But just like the UK, you get a personal allowance, currently 5550 euros.
See Jims Guides for a full explanation, tab at the top of this page.
Wonder what your definition of "shortly" is?
Within the next 6 months I think would be considered by many as optimistic.
Posted: Sun May 3, 2020 10:28am
Super helpful member
If you apply for and gain Spanish Residency between July and December this year .... (see Jim's Guides) ....
You will be deemed tax-resident in Spain for fiscal '21 (Jan-Dec) and you will reconcile your taxes in June '22.
Your income from savings (eg. interest, dividends etc.) will be classed as taxable income.
If you leave your savings in the UK (and/or keep a property, company shares, private pension pot in the UK), this will be classed as worldwide assets, and will be declared in February '22. If your worldwide assets are substantial, they become liable to wealth tax in Spain. I think "substantial" is somewhere around 700K Euros (but I'm not sure).
Until June '22 you will continue to pay tax in the UK ... so if you have savings interest/dividends, this will be assessed for UK tax.
In June '22 you will pay Spain the tax you owe for Jan-Dec '21. You will then reclaim the equivalent tax from the UK. So there is a cash flow to be managed. Tax is paid in arrears in Spain ... not PAYE.
To gain Residency (at your age) you will need to demonstrate financial independence, healthcare, and that you have purchased a home/have a long-term lease. You do not qualify for the Spanish NHS, so you will need to purchase private health insurance.
It is probably a bit optimistic to assume that you will be able to gain Residency by end December '20. If you gain Residency between Jan-June '21, you will still be deemed tax-resident in '21 and reconcile in June '22.
It seems likely (but details not confirmed) that the requirements required to demonstrate financial independence will substantially increase after the end of Brexit Transition (currently planned for Dec '20).
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