UK CROWN PENSION TO BE DECLARED IN SPAIN THIS YEAR

Good Lord, do you have tons of other money coming in? My tax bill has gone from zero to €1800 which is based on my state pension and the pittance I receive as interest on my savings. The person who did my return explained I wouldn't be charged on my government pensions as they had already been taxed but they cancelled out my Spanish tax allowance on the other things.

That 1800 euro is rather more than the estimated 960 euro she forecast last year.

The exchange rate for 2015 is 1.37.  I think it was about 1.23 for 2014, so that would explain some of the increase.

Bob    Good Lord, do you have tons of other money coming in? My tax bill has gone from zero to €1800 which is based on my state pension and the pittance I receive as interest on my savings. The person who did my return explained I wouldn't be charged on my government pensions as they had already been taxed but they cancelled out my Spanish tax allowance on the other things.

For many years the only income which was not taxable in Spain were Crown Pensions which were ignored(that is the military. police, civil servants, etc)and income from letting in say UK, although even that had also to be declared in Spain as top tax might have been due.

State Retirement pensions (OAP)  should always have been declared in Spain and taxed here.

The way that it was explained to me was that I had to declare my Civil Service Pension. It is not taxed here in Spain, just used to calculate my total 'Spanish' income. This then pushes up the band that I pay tax from say 10 to 20% (could be a higher band still if my CS Pension was more). My income that is taxed in Spain is then taxed at that higher rate. So in effect my tax has doubled!!!

Smoke and mirrors, I call it - taxed by the back door.

I am reluctant to say ‘Only in Spain’ but nevertheless it seems so,

 As I posted,  I made my income tax declaration last week.    The Gestor produced the form which showed I must pay 5,600 €.    Tax had been assessed on my Crown Pension.

A few days later I returned and showed her the (Spanish language) Double Taxation Agreement between Spain and UK which shows a Crown Pension can only be taxed in the country where it is paid.

She called a Hacienda helpline and was told what she had done was correct. When I insisted it was not she called again. This time she was told Crown Pensions are ignored. She did another declaration I was to pay 1,065 € tax. I believe I should pay around 3,000€.  We have now sent the paperwork to Hacienda for clarification.

I should be obliged if others who are tax resident in Spain,  and in receipt of a Crown Pension would let me know their experience, either here or by a PM.

As I said previously, I am not being taxed on my Crown pensions. However, the state pension and interest on savings are now taxed with no allowances hence my zero to 1800 euro tax bill this year. Previously the crown pensions were ignored completely and the allowance set against my other income which was under the allowances. Now it is the full tax rate on all other income which I believe is correct. Yes, we got away with it for a while. And the difference between the quote and the actual amount was, as Sanchez1 says, due to the difference in exchange rates.

I have yet to hear from my Gestor as to how she has chosen to interpret the "law", which seemingly is not understood by Hacienda (in parts) either.

In my view, yet to be confirmed, of course, is as follows:

Calculate the Spanish tax due on the whole of your income, using Spanish laws and rates as laid down in your Autonamous region, using the whole world income including any "exempt" Gov Pensions etc.

Having thus calculated the nominal tax due to Spain, divide that figure into the gross income as described. The reult is the marginal rate.

Then calculate the tax at that marginal rate on the Spanish Taxable income (excluding the "exempt" income as described above). The tax due would thereby not include any tax on the exempt income, but at the same time would provide an element of the Spanish personal reliefs etc.

Compare your own tax demand against the method above.

I may not be proved correct by the powers that be (assuming that Hacienda has people of that ilk), but that is my (ex)professional view.

Bob:    Yes, we got away with it for a while

Sorry if I appear pedantic, but that might be interpreted by some as dishonesty. 

Crown Pension income was ignored in Spain (and the equivalent for Spaniards in UK) because it was the law as defined by the Double Taxation Agreement between the two countries.   Such income is no longer ignored in Spain, nor UK, as the Double Taxation Agreement was written. 

This is first year for declarations under the new agreement.

(This morning a friend of mine in Hacienda has a meeting with a colleague who should be able to clear up the ambiguities.  However, I will not be holding my breath !  I will post the result of that meeting )

PS  Bob:   And the difference between the quote and the actual amount was ....  due to the difference in exchange rates.

In my case:  last year 1,100€ tax,  this year 5.600 €  with my Crown pension 'taken into consideration'  without that element this year it would be 1.065€.  

.

I have just spoken to my friend at Hacienda.

He has tried putting the crown pension in box 528  and found as I had said it treats that sum as income taxable in Spain, but on which the tax already paid in UK can be deducted.

On further investigation with the appropriate department in Hacienda, they have agreed that no provision has been made for declaring crown pensions and that they will now have to re-program the modelo 100

I have an appointment with tax inspector on 1^st July so that they can fully understand the failing

It would seem most likely that no declarations involving crown pensions can have been correctly completed !

What a shambles!!!

I bet the Hacienda will not be in any rush to refund the money that they will remove from our bank accounts at the end of the month, as result of being incorrectly assessed.

You can complete and submit a declaration if you use the Padre system, as I have said many times.

Kathyslad   You can complete and submit a declaration if you use the Padre system, as I have said many times.

But not according to Hacienda.

Quote from Tax Inspector at Hacienda, having experimented with box 528:- 

"Box 528  treats the sum entered there as, income taxable in Spain, on which tax has already been paid in UK. That tax is deducted from the sum due in Spain.  It does not cater for Crown Pensions."  

Kathyslad,  I know you know,  Crown Pensions are not taxable in Spain, although they do affect the amount of tax to be paid on income which is taxable in Spain, including UK State Retirement Pensions,  all  pensions other than Crown Pensions (civil servants, police, HM Armed Forces, diplomats, etc) bank and bonds interest etc.

i wonder if my IPad uses invisible ink.

This is my post from the 2nd June

"The government pension should be declared in Box 470 of the padre system and it will calculate the tax rate on your total income and then apply the rate to the income which is taxable in Spain. It's called "Rentas exentas excepto para determinar el tipo de gravamen", and is a standard inclusion in the padre model. Although it's new to the UK DTA it has been included in others since the early 90's."

i also sent you an extract from the padre system using your own figures, where I had entered your data in Box 470 and it had worked out the tax. Or did I imagine that in a parallel world.

Kaohyslad.  I do not see a box 470

This is a copy of one of the two declarations my gestor has made . As orginal forms,  they are identical in that neither appears to have a box 470.  That is, no box between 468 and 472.  Please tell me where I am wrong and where that box is .    Is it a mis-printed form ?

Thanks Kathyslad.

It doesn't appear becuase he hasnt entered it. I have entered an amount of €8.065 to demonstratete.

Thanks KL

I have forwarded that info to my friend in Hacienda

Edit:-

PS This was his reply:-

As Kathyslad has said all along,  the crown pension gross amount must be shown in box 470.   The form then automatically calculates the amount of tax to be paid when the crown pension is taken into consideration.

This morning I finally convinced my gestor to do that  and she produced a tax to be paid  figure of 2,828.99 euros. Which agreed exactly with the amount my friend in Hacienda said it should be when he calculated it.

Just for info, that is around 1,900 euros more than last year.   My income is just about the same as last year, so the Crown Pension  ‘being  taken into consideration’  accounted for the extra tax. Not exactly the 'insignificant extra amount of tax' which we were lead to believe.

PS I have lived in Spain almost 30 years so if I have saved  1,900 euros per year, I am not complaining that they have now changed the rules..

A big thank you to Kathyslad and johnzx for persevering with this. 

I know of an ex-uk teacher who has been going round in circles trying to get this sorted, I even think they were charged the extra tax last year.

I have directed them to this thread.

Blueyes:  I even think they were charged the extra tax last year.

I can 100% confirm that this is the first year that Crown Pensions can, by law, be taken into consideration.   If such a pension was 'taken into consideration'  last year make a formal complaint and get a refund.

http://www.gov.uk/government/uploads/system/uploads/attachment_data/file/412302/spain-dtc.pdf

Quote  Effective in Spain:

(i) in respect of withholding taxes, on income derived on or after 12 June 2014;

(ii) in respect of income taxes and other taxes (other than withholding taxes), for any tax year beginning on or after 1 January 2015.

So that is for declarations made in 2016.

An up date.

As I mentioned my gestor completed the tax declaration regarding my Crown Pension incorrectly.  She did not use box 470, which Kathyslad pointed out was the correct box for such pensions. (Thanks again Kathyslad for your help).

As a result of her error I paid Hacienda 2,801 euros more than I should have done.

 Since June 2016 I have been involved in discussions with my gestor and Hacienda. 

Yesterday my gestor said it will take a long time to get the overpayment refunded, so she transferred the amount  overpaid  (2,801 euros)  from her account to mine, with the understanding that when Hacienda make the refund I will repay here.

A friend in Hacienda is astonished she has done so.

For those with Crown Pensions, who are not aware

Such pension (previously ignored in Spain) as from last year, must be declared to Hacienda so they can be ‘taken into consideration’ when the tax due in Spain is calculated. 

Although such pensions cannot be taxed in Spain, as a result of mine being 'taken into consideration' I paid 150% more tax, on the same total income,  than I had paid the previous year.