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How to ..... ?

This blog is intended to be helpful to English-speaking foreign residents in Spain by explaining "How to ... " do certain things. "The Crazy Guy" has lived in Spain full time since 2008. A fluent Spanish-speaker he reckons he knows his way round the bureaucracy, the indifference and sometimes downright rudeness of "funcionarios".

HOW TO ….. do your Spanish INCOME TAX return?
Sunday, April 16, 2023 @ 3:54 PM

It’s time to think about doing your income tax return, the IRPF (Impuesto sobre Renta de Personas Físicas). You can do it yourself online, but The Crazy Guy much prefers to use a gestor. For a token charge, say 50€, a qualified gestor will do it with you in 20-30 minutes. Here’s more from The Crazy Guy.

 

By going to a gestoría you can save yourself a lot of worry and stress. My wife and I go to an excellent family gestoría in Ronda, where Daniel is the tax expert.

My wife typically ends up paying a few cents tax a year, plus Daniel’s fee. I pay nothing at all to Hacienda, because my income is below the tax threshold (my UK pension is taxed in the UK, so I don’t have to pay again in Spain, under the Spain/UK dual taxation agreement. Oddly, my wife, a German, pays tax on her German pensions in Germany, but is also required to pay tax on earned income in Spain – Spain and Germany have no dual tax agreement).

 

Daniel is also excellent when it comes to other tax matters. For example, when I sold a Spanish property four years ago I made a capital gain of 15,000€, and assumed I was going to get clobbered for tax. However, I sat with my Daniel, and by the time we’d deducted all the allowable off-sets, I ended up paying ….. 50€! Yes, 50€ tax, plus his fee of 50€. What a great outcome!

The Declaración de la Renta season has started and concludes on the last working day in June.

Basically, if you are tax resident in Spain, ie you reside here for more than 183 days per year, you are required to make an annual personal declaration of your worldwide income.

This can, of course, be either a source of dread or excitement, depending upon your situation.

If you've overpaid in the calendar year of 2022, you'll be due something back, but if you've underpaid, you'll need to hand over the difference.

If you are due a tax refund the State tax office, Agencia Tributaria or Hacienda, has until December 31 to pay it to you. If they pay after that date they must also add interest.

But the good news is that Hacienda does not normally stretch it out that long, especially if you get your declaration in early – sometimes, taxpayers get their rebates before May is out.

For those who need to pay to make up a shortfall, you would typically be expected to settle it in a lump sum before the end of June, but as long as you apply to do so before the close of the 'declaration window', you can arrange to stagger it in several payments.

 

Who is required to make a Declaración de la Renta?

Annual income tax declarations, in Spain, are not just for the self-employed. Almost everyone has to file one, even if they are retired or their income is from non-work-related activities – but there are some exceptions.

In general, if your income for the whole of the previous calendar year was from just one source, and was less than €22,000 in total, you are not required to make an annual declaration.

I was in this situation for years, as my only source of taxable income was the UK state pension which is way below the threshold. Now, I have one or two other sources, eg holiday rental income, income on bonds and bank savings account interest (my personal pension income, as described above, is already taxed PAYE in the UK and the net amount doesn’t count as income), so I must make a declaration. But as my total income from all sources comes nowhere near the threshold, I pay no tax anyway. All a bit futile, really. I just pay Daniel, my gestor, his 50€ fee. The whole thing is simple and free of pain.

 

What is classed as income?

Small amounts of money received as gifts or, for example, interest on a deposit account, selling a few second-hand personal effects at a car boot sale or on eBay or Wallapop, or a friend giving you €10 as a thanks for feeding their pets when they were on holiday, do not normally count as 'earnings' for tax declaration purposes.  

However, if you are not sure whether you are exempt from making a declaration, check with your gestor, because if it turns out you should have made a declaration and you failed to do so, you could be fined.

There are other taxes, of course, that affect residents as well as non-residents, but I shall deal with those in another article.

In the meantime, further reading of possible interest is:

HOW TO ..... pay less tax in Spain? (eyeonspain.com)

HOW TO ….. Dodge the Tax Man (or not): Catastral Values and Tax in Spain (eyeonspain.com)

The taxmen are after you! - Secret Serrania de Ronda

Foreigners who pay tax in Spain stand to cash in from next year (eyeonspain.com)



Like 4




12 Comments


Keith Barthorpe said:
Saturday, April 22, 2023 @ 7:53 AM

Just read article, interesting thank you, i was told by my gestor that even though I've paid UK tax on my UK pensions, i have to pay it again in Spain & then reclaim what I've paid in UK from HMRC, is that correct? Thanks


PablodeRonda said:
Saturday, April 22, 2023 @ 8:12 AM

Hi, Keith
Thank you for your comment and question. I assume you are tax resident in Spain and that your pensions are public pensions, as defined in my article.
If that is the case, then I fear your gestor is wrong. As stated in my article there is a dual tax agreement between Spain and the UK, to avoid people paying twice.
If your UK pensions are not "public" ones, then I don't understand why you are paying tax on them in the UK. Unless you are not tax resident in Spain, in which case your gestor is correct.




Christine said:
Saturday, April 22, 2023 @ 8:35 AM

Just wondering if you had any information on the new VAT law change for rental
Properties


Dave11 said:
Saturday, April 22, 2023 @ 8:41 AM

Very interesting and informative article.


Dave11 said:
Saturday, April 22, 2023 @ 8:48 AM

Just thinking PablodeRonda, if I have a UK state pension and also some private UK pensions, but the total amounts of them combined falls below the €22k Spanish taxable amount would I still have to pay tax on the private pensions in Spain?


PablodeRonda said:
Saturday, April 22, 2023 @ 11:56 AM

Hi Dave11
Thanks for your compliment.
Re your question, I am assuming the following:
You are tax resident in Spain.
Your UK state pension is paid gross.
None of the private pensions are "public" pensions so are also paid to you gross.
My understanding is that if the total income from your pensions plus all other worldwide income totals less than 22k€ you are not liable for any IRPF (income tax) in Spain.
HOWEVER, because your various incomes come from more than one source you are obliged to make a tax declaration, even though you won't pay any tax. Can't see the logic of this, personally, but it's the law. Failure to complete a tax declaration before 30 June will result in a fine.
Better to go to a tax gestor, like I do, as soon as possible and pay him a fee of, say, 50€.


PablodeRonda said:
Saturday, April 22, 2023 @ 12:00 PM

Hi Christine
Not sure what you are referring to here. In which autonomous community do you live, as it can vary from region to region?
Do you mean VAT? Or something else? British non-residents who own property in Spain are penalised tax-wise more than other nationalities since BREXIT.


Dave11 said:
Saturday, April 22, 2023 @ 12:47 PM

Many thanks PablodeRinda, that answers my question in full. All the very best.


digger79 said:
Saturday, April 22, 2023 @ 2:25 PM

Am I right in saying if I have a UK state pension and a works pension then a tax return is required as more than one source.
I am in that situation and although when added together I receive about 18k to 19k gross I got clobbered for over 2k tax the last 3 years. A gestor does my return. I only used to pay about £750 tax back in the UK and just put it down to the lower personal allowances over here and a slightly higher tax rate.
Maybe I should consult another gestor?


Jeff said:
Saturday, April 22, 2023 @ 7:19 PM

If your assumption that no tax is due on income less than €22.000,00 per annum then very few people in Spain would pay tax.

The 22,000.00 limit refers to someone who only has one job and tax has been deducted at source just like under PAYE in the UK.




Mike1234567 said:
Saturday, April 22, 2023 @ 8:12 PM

Keith Barthorpe you'll need to be very sure that your pension is a "crown pension" and therefor only taxed in the UK. A "technical officer" at HMRC will tell you if your pension is private or public. There are surprisingly few "crown" or public pensions. Even the UK state pension is regarded as a private pension for tax purposes in Spain. Surprisingly the NHS pension, although fully backed by the UK government, is a private pension and is taxed fully in Spain and not the UK if you are resident in Spain. Double taxation rules for this pension don't apply.


Keith Barthorpe said:
Saturday, April 22, 2023 @ 10:27 PM

Thanks for your replies. My pensions are UK State & a draw down private pension. I have registered to be fiscally resident in Spain for period 1 Jan to 31 Dec 22. I have paid UK tax on both pensions. I am told by my gestor i have to pay tax again in Spain & reclaim UK tax paid from HMRC because I am a Spanish tax resident. I thought a double tax agreement means only pay tax in one country & then a top up in Spain if there's additional tax due based on Spanish tax rates? I am confused???


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