Residence Tax - Page 2

Jim, I apologise for jumping in on this thread, but we have never known what the threshold amount was to paying tax if we became residents, but we approached a well known company who after initial visit where we asked them to give us an idea what we would pay, told us it would cost 100€+iva each to calculate as its not as simple as "just working it out in 5mins" and then demanded 50€ for the initial visit which gave us no information we didnt already know.. We never returned as we felt that was too expensive. So thankyou for that info though I note it says "income from one source." We have gov,t pensions, I at 70yrs have gov,t pension,  3 private pensions(all not huge) and a share of rent. My hubby of 76yrs only has gov't pension and also a share of rent. So more than one source. Howevever altogether neither earn over 14,000€. We have been thinking of applying for residencia this year as our income wont hold up after Jan 2021 but as we would still have our Uk home unsold (and I do understand the cgt applicable if sold after residency) I,m not sure what keeping Uk home on and not selling it would mean if we didnt rent it out at the beginning, but at a later date until we felt we needed to return to the UK in older old age! Lol. I hope you understand what I mean. At present we are paying all bills for 2 homes anyway, and would still continue but as a spanish resident instead of Uk resident so outgoings no differrent, and if we rented uk home out obviously tax on the rent would apply. Could we return to Uk in say 10years time to same house, giving up Spanish residency, and not having any implications to paying any further tax to Spain.? I ask this as house has been home for 40years and would probably gain us a minimum of  £160,000 profit.

Any advice even possibly a recommendation of  tax advisor who wouldnt charge us the earth would be gratefully appreciated.(I do use  Angar from your recommendation and also the Notary for our wills last year and am very pleased with them too.)

Kind regards

Pauline.

Hi Pauline.

A tax calculation isn't "just working it out in 5mins". I've just done one and, bearing your comments in mind I timed myself. It took me 11 minutes!

€14K would be tax free, but at €14265 you'd start paying tax.

Irrespective of whether or not tax is due, you'd have to file a tax return for the first year of fiscal residence to get you in the system.

You can certainly opt out of the Spanish tax system if you revert residency to the UK. Depending on what your income is at that time, and the amount of tax you pay here, you might find it more tax efficient to return in the first half of the year rather than the second.

I still haven't bottomed the CGT implications of selling a UK property - sorry.

Have I missed anything - bit rushed at the moment? If so, let me know.

Thanks Jim, wasnt sure if the €14k was excluding a further taxable source as rent and only for earnings or pension. (It was the "single source" I,d read about on a earlier post. Having said 11 minutes to do your calculation, given we turned up with all the figures, 100€ per person was definitely mighty steep. I know you do your own but do you have any recommendations to a company where we could get assistance with tax declarations and what keeping our Uk home not rented out, would affect us.

Regards and thanks

Pauline.

I've yet to come across a tax adviser I would trust, but Kim (Kimmy11) uses Abaco Advisers and is happy with their service. Some distance from you, at Rojales and Torrevieja, but they might allow remote dealing.

In the same way that you pay tax for having a second property (your Spanish property) - I prefer to refer to non-resident tax as a tax on owning a second property rather than as an imputed tax - as a Spanish resident you should in theory pay the equivalent tax on the UK property. I don't know of anyone who does so, and nor have I ever heard of Hacienda chasing the non-declaration of the tax.

If you do decide to declare it, have a look at:

https://www.costablancaforum.com/area/almorad%C3%AD-spain-11/taxes-suma-nie-tax-advice-in-almorad%C3%AD-25/residents-income-tax-owning-a-second-property-including-in-the-uk-36008/

Thanks again Jim, your info is invaluable, I have reread the linked post done in May 2018, its annoying and even embarrasing to be in the same conflicted situation. Having reread the link, I,m assuming each owner again would pay the non resident tax on the UK property until it became a rented property, but at least thats no differrence to paying it on a Spanish second home. We had resigned ourselves to the 2021 Shengen rule visits when out of the blue, I thought I,d try and reverse the situation by still becoming a spanish resident with a Uk property unrented. Before others chip in with we,d still pay all costs (council tax, fuels etc) on Uk home, but we do it now as UK residents on our Spanish home. My real question is can I assume if we return to Uk after a period and give up spanish residency our Uk property would after that be free of CGT to Spain so long as in that year we have not been in Spain for 183days. Hence your adding "do it early part of the year". I will telephone Abaco and get their advice. 

Now can someone tell me how on a spanish driving licence can I own and insure a UK vehicle ( for UK use only)? It doesnt seem as easy as owning our spanish vehicle in Spain as our own insurance companies would not insure if we were not Uk residents. Then we have to hope getting S1 for spanish healthcare we find a way round to getting Uk healthcare as a spanish resident.

I appreciate all the advice on offer immensly, this is the hardest  decision we have to make and given all our previous problems, one we cant afford to get wrong.

Regards

Pauline. 

You're quite right, Pauline. If you're not fiscally resident in Spain at the time of completion of the sale of a UK property, then there would be zero CGT implications here.

I don't know, and hopefully someone else will answer, but I thought all you need to own a car in the UK, and get insurance for it, is to have a residential address in the UK, and that this doesn't have to be a property you own but could just be the address of a friend.

And congratulations on being so thorough. I continue to be amazed as the number of people who move out here without the faintest idea of what might be involved.

Thankyou Jim for the compliment, It brought tears to my eyes. I thought I,d done everything so thorough 13 years ago but it didnt stop us losing everything we owned in a 5 bed house and an insurance company refusing to pay out,  nor losing 1200sq mts of land to Renfe with abysmal compensation, nor the Brit who robbed me of 3,000€,s with shoddy workmanship. I wont even go there regarding the corrupt spanish builder who caused us a 14,000€ fine.

One of the first questions asked by Uk insurers "Are you a Uk resident" and how long for. Can't lie, not worth it in case of an accident, I know many would, but its the end result that could be disasterous. I feel sure others must have done it legally, not interrested in putting vehicle in sons name with myself as extra driver (he cant drive as disabled). Do some people get cover in Spain or a specialist Uk insurer. This is my last obstacle. Everything else is ok (except health S1, but think we,d be covered in an emergency in Uk?.  Actually if you have S1 are all medications free? Also if you were going away for a period (as a spanish resident on a long holiday) is it possible to get medications to cover that period in advance as we already do here in Uk.? Oh, that could be a stumbler as we have 7 medications between us and I believe pricey or even impossible in Uk to buy. Hmm unsure about that one?

Seems there's no end of queries, but I,m 90% of the way there with everyone's help.

Regards

Pauline. 

Hi Pauline, my sincere sympathies for all your problems.

I can't help you re insurance, and if nobody else chips in on this thread, I suggest you start a new topic in the driving or insurances section.

If you transfer health cover by S1 from UK to Spain, you then need to apply for an EHIC-E (different from the normal EHIC) which covers you for emergency treatment in the UK.

Without checking the current law I'm not sure what prescription charges are before you submit your first resident tax return, but you only pay a proportion of the charge, and there's a monthly cap on what you have to pay. Once you've done the first resident tax return, if your taxable income is less than €18,000 then the state law says you pay 10% with an €8 a month cap, and with a higher income the cap is €18. However, Valancia law means that pensioners with taxable income under €18,000 get prescriptions free. There is a limit to the value of those free prescriptions of €1100, after which you have to pay the 10%.

Some medications aren't paid for by the state or Valencia, and you have to pay full price for them. Unfortunately I'm not aware of a list of what is and isn't funded. One of Margaret's meds isn't state funded so she has to buy it, and in such a case it's always worth asking if there's a cheaper generic version available.

If you can identify the Spanish names for your meds, you can check prices here:

https://prvademecum.es/

If you're going out of the country, you can't get prescriptions dispensed in advance. What you do is buy them and get a receipt from the chemist. On your return, take the boxes and receipt to the chemist. They transact the prescription, keep the bar-codes off the boxes, and refund your money.

Thanks Jim, that answered a lot of queries regarding health, all seems fine even if we do pay for the first year. Just the driving questions to answer, hope someone here can give me info on that. I,m sure there must be many who have initially owned a Uk vehicle as a spanish resident and insured it legally.

I did come across another posting on another source of inheritance tax. Hadn,t given it much thought as all our assets are being left to charity except a small amount to our son but not enough to affect his benefits. However it spoke about the tax for a spouse to pay. I already knew about the differrence Uk to Spain but not the differrence between tax paid as a Uk resident and a spanish resident. As Uk resident both countries would be taxed seperately under seperate wills  but as spanish resident all worldwide assets taxed together and payment of tax upfront before inheriting property? So assume that would mean all properties and if some are rented out is the rent still payable to the survivor or embargoed until tax is paid? That seems a tricky one to get my head round. Obviously half is still owned by survivor but deceased half would amount to a reasonable sum. Also are savings in a joint account still available to pay the inheritance tax or is half clamped (even fully clamped?) until tax paid? Do we need to keep savings under the mattress just in case??

Oh what a minefield just to enjoy that sun on our backs for the summer months. 

I,d say we,re 95%of the way to making a decision with all your help

Kind regards

Pauline.

You really are trying to bottom things, aren't you!

Ref IHT, just a few comments.

In theory, when someone dies then their estate is subject to an embargo. 

In the case of a joint bank account, the practice is that the survivor doesn't tell the bank immediately. The survivor opens a separate individual account, transfers some money into it, contacts the utility companies etc and transfers any direct debits to the new account.

Before the estate of the deceased can be settled, the bank will have to be informed as they have to issue a statement of holdings in the deceased's account. An inheritance tax return has to be submitted, even if it's a nil tax due return, before any property or other assets can be transferred to the inheritor.

At present, for inheritance between spouses who have lived here for a few years, there's a large tax-free allowance to those who live in the Valencian Community, so the survivor doesn't usually have to pay any IHT. However, if Boris stuffs up completely, and we end up with a hard Brexit at the end of the year, then that allowance might disappear.

For anything bequeathed to anyone other than a spouse, the inheritor has no access to the assets until that person has paid IHT. That makes things difficult for someone who inherits a high value item like a house, because the IHT will be a considerable sum which they might not be able to raise.

And on a final note, I hope you've read my guides to both Spanish and UK wills.