Is there a benefit in being tax resident in Spain

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02 Nov 2011 12:00 AM by mikesmith4 Star rating. 29 posts Send private message

 Next spring we are moving to Spain,, but we haven't decided how long for, as we intend to retain our home in the UK. This raise the question of  being tax resident in Spain or remaining tax resident in the UK. I am aware that in the UK you cannot transfer individual tax allowance between spouses i.e. enabling the higher earning spouse to use the tax allowance of the lower earning spouse. My question is, can this type of tax transfer be done within the Spanish taxation system? If this is possible then it is a substantial benefit for couples managing their income/finances and to some extent makes the decision a little easier.

Hope this makes sense.

Mike





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03 Nov 2011 8:41 AM by johnzx Star rating in Spain. 5240 posts Send private message

If one intends to spend 3months or more, permanently, in Spain, they must register on the EU citizens register, immediately they are then tax resident. 
 
Or, if one is physically in Spain for 183 days, or has their main residences (there are a couple of other rules too) then they are tax resident in Spain.
 
Some people think they can choose where to pay taxes. That is not so.  
 
So being tax residence is not one of choice but of circumstances.  
 
What the benefit are would only apply is that was the criteria for choosing where to live





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03 Nov 2011 9:21 AM by gill556 Star rating in orihuela. 69 posts Send private message

yes you can be taxed either seperately or as a couple. Each year our accountant works out which is best for us and ir does vary as my husband is classed as my dependant and therefore I claim his allowances.





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03 Nov 2011 9:45 AM by Sten46 Star rating in Hatton, Derbyshire &.... 243 posts Send private message

 

Ref the reply from Johnzx - are you refering to the registration for residencia?

I have been given to understand by an adviser in Spain that you must apply for either a) Residencia, or b) Fiscal Residencia.

The first is the standard straightforward residencia requirement while b) is the same PLUS the financial and taxation aspects.

Have I been mis-advised?

Steve.



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03 Nov 2011 10:03 AM by johnzx Star rating in Spain. 5240 posts Send private message

Steve
 
The advise was not exactly wrong but maybe ‘confusing’
 
If you want to make a financial transaction in Spain, buy a property, a vehicle etc, then you need an NIE (That is a tax number for foreigners; by which all your Spanish  financial transactions, like bank accounts, employments, investments etc can be traced by the tax office).
 
If you intend to spend 3 months or more, then you must register on the EU citizens register.  Although Residencia (and the ID card) do not exist,  in practical terms registering and getting ‘the piece of green paper’ means you are immediately resident with all the privileges and responsibilities it entails, including making an income tax returns in Spain.  
 
If you have an NIE when you register on the EU citizens register,  then the NIE becomes your certificate number. If you don’t have an NIE then the Registration Cert Number is your NIE





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03 Nov 2011 10:23 AM by dringman Star rating in www.Condadoexcursion.... 772 posts Send private message

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 One advantage is that if one person pays autonimo then dependents also have medical cover. No pre existing conditions like private medical cover. Our experience of the health system is better than UK

 

You can conduct business legally. Advertise and promote business. 

 

also as a tax paying resident you have "inheritance tax" advantages 



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03 Nov 2011 11:11 AM by mariadecastro Star rating in Algeciras (Cadiz). 9388 posts Send private message

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 This is not an easy question as it is something that need to be answered in a comparative, specific scheme.

I can answer: Are there benefits of being tax resident when selling a property in Spain against being UK tax resident? In that case I would go to regulation of capital gains in the Uk and Spain and will issue an opinion, but.... in general, it is very difficult to answer



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03 Nov 2011 2:25 PM by Team GB Star rating. 1245 posts Send private message

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Even the FCO (UK in Spain) chooses to side step this issue and recomends specialist advice - surffice to say though thankfully you only pay it once.

Britain has a double taxation agreement with Spain, to ensure people do not pay tax on the same income in both countries. However, taxation is a complex issue, and advice should be sought. The Spanish Finance Ministry publishes a book in English called 'Taxation Regulations for Foreigners'.


 



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03 Nov 2011 2:38 PM by johnzx Star rating in Spain. 5240 posts Send private message

 

Spain has double taxation agreements with MANY countries, but they are different from country to country.

As far as UK is concerned, the fact that there is a Double Taxation Agreement does not protect one unless you register correctly and advise the UK that you have taken up residence in Spain and are making tax returns in Spain.

It is quite possible to pay tax in UK, which should be paid in Spain, but still have the obligation to pay the tax due in Spain.  In which case, if you do not make the tax return here, you can also be fined and surcharged.
 

 A simple example would be paying tax on a UK Government Retirement Pension in UK.   If you are tax resident in Spain, that tax MUST be paid in Spain.  An exception is a UK Government Employee Pension (Police Officer,  Army Pension  etc)  that is taxable ONLY in UK.

 

 



This message was last edited by johnzx on 03/11/2011.



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03 Nov 2011 2:41 PM by Tamsin Star rating. 169 posts Send private message

How on earth  can any country in the EEC  find out how  many days anyone spends in Spain as your passport is never stamped ?  Look at all the Gibraltanians who spend all summer in Spain and live  there every week-end, or the people who have properties in both Spain and the UK who travel back and forth.  It is a farcial number and relies on the person giving an honest answer .





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03 Nov 2011 2:52 PM by johnzx Star rating in Spain. 5240 posts Send private message

Tamsin,

 
I do not post here to engage in 'what if maybe' situations but to assist people who need to know.
 
However, as a former Detective in UK, I can assure you that it would be extremely simple to investigate how long a person has been in Spain.  Unless you arrived using false papers, had no property, bank accounts etc. then it might be more difficult, but that does not apply to most people, only the very dishonest.
 
In saying this I do not believe that in most cases the authorities would bother, but if they choose to, no problem.  I know that in some cases the authorities clan ask you to prove you have not been here as long as they think.  Guilty until you prove yourself innocent!

 





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05 Nov 2011 12:51 PM by ColinReid Star rating in El Portús, Galifa, .... 11 posts Send private message

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 My wife and I are pensioners and have ben paying our tax in Spain for 6 years.  It took some years to receive the agreement of the UK Inland Revenue who clearly consider anyone moving to Spain to be a potential criminal.

Since starting to pay our tax here we have been pleasantly surprised that we pay less tax than before as UK taxpayers and the Spanish Tax Authorities are extremely pleasant and helpful,  here in Cartagena.

We have had to move all of our onshore UK investments offshore because of the difficulty in claimimg back tax deducted at source from the UK Inland Revenue and they permanently retain 12%.  A rip-off.  We asked them why they did not encourage people abroad to invest in UK but received no reply.  We feel more comfortable away from them.



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05 Nov 2011 12:58 PM by johnzx Star rating in Spain. 5240 posts Send private message

 

 

Colin Reid

 

The tax retention Is not the fault of HMRC but the bank / building Soc etc. Some (most) will pay gross.

 
Nationwide will not pay gross. The tax man in that case will, as you say, return 8% but the 12% retained can be used to off-set any tax liability you have in Spain. If you have none, then as you say, you loose it.





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05 Nov 2011 3:58 PM by ColinReid Star rating in El Portús, Galifa, .... 11 posts Send private message

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 Thanks John  As it happens it is Nationwide but I have looked around for an onshore  account  that pays gross but there don't seem to be any.



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05 Nov 2011 4:25 PM by johnzx Star rating in Spain. 5240 posts Send private message

Colin, 
               I  had quite a lengthy correspondences with a Nationwide director on this but, even thought they accepted my view, that it is easier and less costly to pay gross in the correct cases, they were not open to changing their policy.  
 
 Like you, I transferred savings off shore, including Nationwide off shore.  
 
Of course I declare the interest on my Spanish tax return

 

 





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06 Nov 2011 9:46 AM by Cormona Star rating. 69 posts Send private message

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Can anybody inform me is it possible to live in Spain cumute to work outside Spain do you need to pay tax in the country you work in or do you I have tax obligations in Spain..I was thinking of moving to Spain were I have a property but carry on working in the country I am from to young to retire and have a good job.



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06 Nov 2011 10:55 AM by johnzx Star rating in Spain. 5240 posts Send private message

Carmona
 
The double tax rules between Spain and other countries govern where you pay tax.
 
If your main residence is in Spain, regardless of the time you spend here, you are tax resident in Spain.
 
However, it will depend on what the other country is and  what the agreement says.





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07 Nov 2011 5:35 AM by Susanspain Star rating in Mijas, Malaga. 145 posts Send private message

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Hi Team GB ^,

Do you have a link/know where one can purchase a copy of this tax advice? 

Sounds like a good book to have...

 

(PS - in relation to the main thread/topic.  I have a very good Asesore Fiscal.  (Accountant I guess.) She does not come cheap, but is worth her weight in gold.  I can thoroughly recommend her - www.cohesa.es  She also does property law/handling.)





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07 Nov 2011 7:41 AM by Cormona Star rating. 69 posts Send private message

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OK thanks for the reply I will contact them and see if they can help.



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07 Nov 2011 9:16 AM by johnzx Star rating in Spain. 5240 posts Send private message

Susan Spain
 
The Double Taxation Agreements between countries are government documents ( rather like a UK Statue Law ).  They are published on government web sites and of course they are different between each country. For example, what might apply between UK and Spain would be different between Spain and Ireland.
 
Whilst there are books which you can buy which give advice on living in Spain, most are either  a bit out-of-day by the time they are published, or by the time you read them,  contain errors, or just do not cover the particular situation  you may find yourself in.
 
The same problem can often occur when you seek advice form lawyers, gestors, accountants etc.  Some maybe on the ball but many also get it wrong, and if your legal expert gets it wrong on a say a tax form which you have signed, you are the one responsible !     Having said that, if you find ‘the best’ you will probably have to pay a lot more than at your ‘local friendly gestor.’    (My son in UK who is an accountant pays over £200 per hour when he needs professional advice).
 
With UK and Spain, I have on several occasions spoken to HMRC. They have dedicated staff whom I would think get it right, at the very least, most times.





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