New Double Taxation Agreement between Spain and UK

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04 Apr 2013 8:31 AM by johnzx Star rating in Spain. 5248 posts Send private message

I just read this.

 

It may affect all / most of us.

 

 

Tax:

 

 

Spain and United Kingdom have signed a new treaty to avoid double taxation between the two countries (From the La Moncloa Government website). 'When it comes into effect (within three months of its ratification), this treaty will replace the agreement signed in London on 21 October 1975 between Spain and the United Kingdom of Great Britain and Northern Ireland, to avoid double taxation and prevent personal income and wealth tax evasion. ("Official State Gazette" of 18 November 1976).

The new treaty updates the text of the former document, which had become out-of-date in certain regards due to the considerable period of time that has elapsed since it first came into effect.

This update has led to the text being adapted to both the requirements arising from current economic and trade relations between Spain and the United Kingdom, and the successive changes that have been made to the OECD's Model Agreement on double taxation. A response has thus been given to the main problems that the previous treaty was unable to resolve, including the treatment of residents not domiciled in the United Kingdom and trusts.

The new agreement means a considerable reduction of source-based taxation, establishing exclusive residence-based taxation for those dividends derived from majority shareholdings, as well as for interest payments and fees. Furthermore, it includes an arbitration clause for the resolution of any conflict that may arise from applying the new agreement.

Spain is thus moving forward in its commitment to renegotiate all those agreements that, due to the passing of time and the strong economic relations maintained with certain countries, need to be adapted to the new status quo. A new treaty was also signed between Spain and Argentina to avoid both double taxation and tax evasion on 11 March, which will replace the agreement signed in 1992'.

 

 





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04 Apr 2013 8:36 AM by davidjrowe Star rating. 37 posts Send private message

Big Brother...is watching us all.





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04 Apr 2013 8:50 AM by clarice Star rating. 35 posts Send private message

 yup torture the little people into oblivion so the fat cats can get fatter .....





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04 Apr 2013 9:03 AM by johnzx Star rating in Spain. 5248 posts Send private message

Sorry guys,  but I would have thought that everyone would understand that Double Taxation Agreements are signed to protect tax payers from having to pay tax twice on the same income.
 
The existing agreement between Spain and UK establishes where tax must be paid (albeit that some still think they can decide).
 
I expect the new agreement will ensure that areas of ambiguity as to where the obligation lies,  will be clarified, which is to the benefit of tax payers affected. 
 
It may remove the need some posters have had over the years of asking (and the many hypothetical circumstances invented) how the law affects them, in their particular circumstances.





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04 Apr 2013 11:35 AM by Mungry Star rating. 329 posts Send private message

all these changes i dont like.

i think i will go apartment shopping in gibraltar tomorrow and sack spain off



_______________________

i coldnt stay away from you miserable whining whingers for some reason




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04 Apr 2013 11:43 AM by tamaraessex Star rating in Colmenar, Malaga. 508 posts Send private message

tamaraessex´s avatar

"The new agreement means a considerable reduction of source-based taxation, establishing exclusive residence-based taxation for those dividends derived from majority shareholdings, as well as for interest payments and fees."

I will wait until fuller and clearer guidance is out on this, but on a first reading it APPEARS to me to clarify that UK dividends and interest should no longer be taxed at source but in future any such income arising in the UK should be declared in Spain and taxed in Spain.  Some difficulties will inevitably arise in persuading our banks and brokers (for example) to pay without tax deductions.  Useful if it clarifies and updates old legislation, but it does feel like there's an awful lot of change coming through all at the same time!



_______________________

 Blog about settling into a village house in the Axarquía. http://www.eyeonspain.com/blogs/tamara.aspx




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04 Apr 2013 11:55 AM by johnzx Star rating in Spain. 5248 posts Send private message

At present some UK banks/ building societies will pay interest gross, in which case it is easy to declare that income and pay tax in Spain.  As with offshore banks.
 
Other institutions refuse to pay gross and stop 20%. The Spanish tax resident can claim 8 % back from the HMRC and can use the 12% retained to offset against tax liabilities in Spain.
 
Complicate,  and in the case of a person with insufficient income in Spain to pay tax, they lose the 12%.
 
Resident based tax would seem to more straightforward and probably fairer.  As it would mean that one is paying their tax in the country where they enjoy the services provided by taxes.
 
 





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04 Apr 2013 12:48 PM by Kathyslad Star rating. 329 posts Send private message

This seems to confirm some of the detail as discussed below, particularly the tax on interest being reduced to zero.. Presumably, combined with the new Statutory Residence Test, it will make it clearer !

"The UK/Spain convention has ‘substantial benefits’ for companies, pension schemes and individuals, HMRC said. ‘The dividend withholding tax rate in the existing treaty is 15% for portfolio investors and this will be reduced to 10% for portfolio investors and to zero for direct investors and pension schemes. The withholding tax rates for interest and royalties are also reduced to zero.’ The new convention also clarifies access to treaty benefits by participants in fiscally transparent entities, and includes an arbitration provision and updated anti-abuse measures, HMRC added."



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06 Apr 2013 9:05 AM by bilbo.s Star rating in Albuñol.. 14 posts Send private message

Mungry,

Admittedly I have never been there, but I know many people who have, and the unanimous opinion was that Gibraltar is a dump.

Noi doubt, however, there are those of a different opinion.





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06 Apr 2013 9:36 AM by DonLochnagar Star rating in Mazarron. 161 posts Send private message

It never ceases to amaze me how people think they can live in Spain and enjoy all the beneifts that brings and yet not help the country by paying whatever taxes are due here.  Disgusting.  BTW, Gibraltar is a dump.





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06 Apr 2013 10:00 AM by norm2002 Star rating. 19 posts Send private message

 If you want to read the new convention, it is here www.hmrc.gov.uk/taxtreaties/signed/spain-uk-protocol.pdf.





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06 Apr 2013 10:54 AM by mikesmith4 Star rating. 29 posts Send private message

I am interested in Don's statement relating to enjoying the benefits of Spain and paying taxes here. Oh and by the way I also have my car on Spanish plates etc. Therefore, please tell me if you pay all your taxes in Spain and are under the age of 65 what benefits do you get from the Spanish system other than good weather? You are not entitled to healthcare, nor social security, nada. So why would any body want to pay more taxes to a very corrupt state than one has to. I spend half the year here and half in the UK. This way I keep my money safe and retain my guiriship.



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06 Apr 2013 11:27 AM by DonLochnagar Star rating in Mazarron. 161 posts Send private message

Mike, if for moment you don't think the UK is just as corrupt as spain you are very naive.  Large building companies and we all know who they are without naming them, make large contributions to the Tory party and surprise, surprise, the planning laws are changed 18 months into their reign.  11 top Tory politicians will benefit through their companies with the current privatisation of the NHS in England and that is only the tip of the iceberg.  i would rather pay my taxes to a country that isn't contemplating spending £100 billion on nuclear weapons which they will never use.





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06 Apr 2013 11:28 AM by Roberto Star rating in Torremolinos. 4541 posts Send private message

Roberto´s avatar

 Basically agree with you , Mike, and splitting your time the way you do and choosing which bunch of greedy corrupt bastards to be screwed by is sensible if the option is available to you. By the way, though, you are now entitled to state health care in Spain if you want, but that should be for another thread. (search around, you'll probably find one).

As for Gibraltar, beauty is more than skin deep. Mungry, if you find any nice 2 for 1 offers let me know, I think your idea is AWSESOME!! 



_______________________

 

"Get your facts first, then you can distort them as you please"

Mark Twain

 

 

 




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06 Apr 2013 11:30 AM by bobaol Star rating. 2256 posts Send private message

bobaol´s avatar

 If you are a resident in Spain and under 65, you can get about 2 years free health cover by using the S1 if you have paid NI in UK.  And you don't have to be over 65, it is UK retirement age for one person in the household.  My missus, being 60 when we moved over, got free healthcare and I get it as a "beneficiary" despite having 4 years to go until UK retirement age (only 2 to go now, sigh).

Paying taxes in Spain is fine.  For me, it works out very well.  I have two pensions in UK, one a government service one and one a private one.  In UK, both pensions are lumped together for tax purposes so I paid the full tax on my private one.  BY being liable for tax in Spain, I now have my government pension taxed in UK and my private one in Spain.  As my private one is under the limit for tax in Spain, I no longer pay tax on it which saves me around £90 a month. 

So all circumstances are different.  Still, as I live here all year, I would fully expect to have to pay tax here as well.  Much the same as someone from Spain living in UK would have to pay tax in UK.  When I do get my state retirement pension, I am sure I will have to pay tax on it in Spain but I would have had to in UK as well.  I think it only fair that my tax goes to the "very corrupt state" in Spain rather than subsidise the MPs in UK for their very corrupt expenses.  





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06 Apr 2013 12:59 PM by camposol Star rating in Camposol. 1408 posts Send private message

Isn't it now the case that if you are in the EU,and have an income under100,000 euros a year, you can apply for free health care whatever age you are?

 


This message was last edited by camposol on 06/04/2013.



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06 Apr 2013 1:09 PM by bobaol Star rating. 2256 posts Send private message

bobaol´s avatar

 Not sure if that applies throughout Spain at the moment.  It certainly applies in the Valencia region.  I think it also depends on the length of time you have been here or the number of years you have been on the tax register but not sure.  Several people have mentioned they have been to the local INSS office in Torrevieja with proof of income and have been given a health card despite being under retirement age.  The other point is that the health card (here it is called a SIP) only used to be valid for the Valencia region but is now valid for use throughout Spain.

 

 





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06 Apr 2013 1:17 PM by camposol Star rating in Camposol. 1408 posts Send private message

I have heard of people under retirement age arriving in Spain and receiving their medical card without problem within a short time. I think it applies to the whole of Spain.





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06 Apr 2013 2:16 PM by pommers Star rating in Almoradi, Spain. 606 posts Send private message

pommers´s avatar

As I understand the SIP system

a) You have to have "residencia" to get health care
b) Prove income to support yourself

There is an alterrnative way to get a SIP card if you are under UK retirement age and that is for the DWP to write a letter saying that you are no longer eligible to received heathcare via the NHS - once again though you have to have resicencia, and be aware that if you talke this route you have now denied yourself health care in the UK

If you don't already have residencia then getting it now will be much harder as, once again as I understand it, not only do you have to prove annual income but also prove that you have €6000 lodged in a bank account.

I certainly discussed this with DWP recently and was told that I stood very little chance of getting one.

________________________

Regarding the double taxation laws themselves, I am stuck between a rock and a hard place. I split my time between UK and Spain - usually slightly more in Spain I have to admit so go over the 183 days which makes me a tax resident. However, after the 1st year away from the UK you only have to spend 90 days in the UK to be classed as tax resident. So just where am I tax resident as I ususally spend quite a few more days than the 90 in the UK?

Heaven forbid that someone will make it clear to me.



_______________________
Cheers Pommers



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06 Apr 2013 3:03 PM by DonLochnagar Star rating in Mazarron. 161 posts Send private message

Getting residencia at least here in Murcia is a piece of cake.





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