Thread: I want to pay taxes in Spain, help needed

You can only do it with a recognized Government Pension. They are taxed at source. As a resident in Spain, any other pensions including state pension will be non taxable in the UK.I know the Police and Civil Service apply, and I thnk also The NHS and possibly The Post Office. Can anyone else confirm this for missisdavis. Mike, Is your wife also a state pensioner from the UK. If not, and she is not working, do you know that you can claim extra pension for supporting her until she reaches retirement age, and also free health care and prescrioptions in Spain. Thats also for anyone else who may not be aware of that.
CD

Originally Posted by CDThader

You can only do it with a recognized Government Pension. They are taxed at source. As a resident in Spain, any other pensions including state pension will be non taxable in the UK.I know the Police and Civil Service apply, and I thnk also The NHS and possibly The Post Office. Can anyone else confirm this for missisdavis. Mike, Is your wife also a state pensioner from the UK. If not, and she is not working, do you know that you can claim extra pension for supporting her until she reaches retirement age, and also free health care and prescrioptions in Spain. Thats also for anyone else who may not be aware of that.
CD

Hi CD, that's Maria, the Mike's Spanish wife, thanks for your interest on us you are really nice. Our case is even better, I have a Spanish pension, 100% of my salary tax free ( I was a nurse who worked for the Spanish Seguridad Social ) so i don´t have to declare any euro of that, however my husband can get some big discounts for me... ( wife, disability...etc. etc) so...that's better for us to pay taxes in Spain as he can save a lot of money. Now Mike is still in bed sleepy like a baby you know...the hard live in Spain!!! but when he gets up, he will send you his response to your helpfull advise. Good morning to you and to everybody !!! Maria

Originally Posted by CDThader

You can only do it with a recognized Government Pension. They are taxed at source. As a resident in Spain, any other pensions including state pension will be non taxable in the UK.I know the Police and Civil Service apply, and I thnk also The NHS and possibly The Post Office. Can anyone else confirm this for missisdavis. Mike, Is your wife also a state pensioner from the UK. If not, and she is not working, do you know that you can claim extra pension for supporting her until she reaches retirement age, and also free health care and prescrioptions in Spain. Thats also for anyone else who may not be aware of that.
CD

No the NHS pension does not get the same treatment as the civil service, police or army pensions which are taxed once in the UK and ignored for Spanish tax purposes. NHS pensions are treated like any other normal pension - if you are receiving one in Spain you should declare it here and pay tax on it. I don't know about pensions from the Post Office.

There's a lot of useful information on this thread which I am sure a lot of other people will find useful. To add a couple of points:

I didn't see mentioned anywhere the P85 which is a UK tax form which you should submit when you leave the UK. If you google it, the Revenue site (HMRC) page about the P85 comes up and tells you all about it and links to the form. This is what you use to terminate your UK tax residency and if you submit it, the Revenue will continue to send you tax returns even to a Spanish address.

Another point is that swapping over to the Spanish system is actually beneficial to most people as the allowances are a bit better. So besides being the correct thing to do it should save you tax. Also if you get all your income paid gross from the UK instead of being deducted at source, then pay the Spanish tax half way through the following year you get a significant cashflow advantage.

State (old age) pensions are always paid gross. Most pensioners don't pay tax so it would be unfair to deduct tax and make them claim it back later against their allowances.

There is at least one other situation besides the civil service/police pension where you might start declaring Spanish taxes but also keep declaring in the UK. This is if you rent out a property in the UK. You have to declare the rent there.

Hi

I hope this helps (bit of bedtime reading!)

Determining Residence Status

If an individual is resident in the UK and domiciled in the UK that individual will be liable to income tax in the UK on his worldwide income. An individual will always be resident in the UK if he is physically present in the UK for 183 days (6 months) or more. An individual is treated as being present in the UK if he is physically in the UK at the end of that day (midnight).
It is possible for an individual to be resident in the UK even if he spends less than 183 days in the UK in a particular year as there are other factors which could make an individual resident in the UK such as the location of their family, property, business and social connections.
An individual’s residence is determined by reference to a tax year.

Leaving the UK

If an individual leaves the UK permanently (will not return to UK to live) or indefinitely (intending to stay away from UK for a period of 3 years or more), he is treated as being not resident in the UK from the day after the date of departure. It is one instance where the tax year can be split into resident and non-resident periods. Before HM Revenue & Customs will give a ruling that the individual is no longer resident they require evidence that they have left the UK for a period of 3 years or more such as the acquisition of a property abroad, or the permanent disposal of a property in the UK.
Where you leave the UK on a full-time contract of employment and the period abroad spans a complete tax year then a tax year would also be split into resident & non-resident periods.
On leaving the UK it is necessary to complete a form P85, and if suitable evidence is not forthcoming HMRC will defer a residence ruling until they have been physically outside the UK for 3 tax years.
If an individual has left the UK permanently or infinitely they will remain non-resident whilst abroad subject to certain conditions:
- Any return visits to the UK must not exceed 182 days in any tax year.
- Must ensure that return visits to the UK average less than 91 days per tax year over a 4 year period. Return visits to the UK for exceptional circumstances, such as an illness of a member of a family, can be ignored.
The following formula is used:

Total visits to the UK x 365 = Average visits per year
Total days since leaving

Where you are regarded as not resident in the UK any overseas income arising in this period will not be charged to UK tax.
You do need to keep accurate records of any return visits to the UK & keep a diary of the dates of any journeys to & from the UK in this period, along with any airline tickets or copies of bookings made as proof of these visits.
Domicile

Domicile is a concept of general law, and is separate from residence and non-residence. An individual is generally domiciled in the country in which he has a ‘settled intention to permanently reside’. In simple terms this means an individual is domiciled in the country in which he has his permanent home.
You can have only one domicile and there are three separate types;
- Domicile of origin
You normally acquire this from your father when you are born.
- Domicile of dependency
A child will have a domicile of dependency until he is legally capable of changing it. A person has a legal capacity to change their domicile on reaching the age of 16, until then, if the parent or guardian changes his or her domicile status the domicile status of the child will change with them.
- Domicile of choice
To lose a domicile of origin in the UK, and establish a domicile somewhere else, the individual must leave the UK and settle permanently, or indefinitely in another country. If it is decided to establish a domicile of choice in another country HMRC will require evidence that the individual has abandoned his ties with the UK and settled permanently abroad. Again factors such as his intentions, his permanent residence, his business interests and ownership of property will be relevant.

Taxation of UK income

Income which arises from a source which is situated in the UK is taxed on everybody, regardless of their residence status. So if you are resident and domiciled outside the UK, but still get a pension from the UK, that pension will be charged to UK income tax. The non-resident will then need to continue to file a self assessment tax return and possibly pay UK income tax.
One exemption is ‘FOTRA’ securities (free of tax to residents abroad). An example being UK Treasury Stock. HMRC has a published list of FOTRA securities.

Personal (tax free) Allowances

These are available to all individuals who are resident in the UK and to the following for the year ending 5 April 2010:

- Commonwealth citizens.
- Citizens of EEA.
- Residents of Channel Islands & Isle of Man

From 2010/11 an individual who qualifies for a UK personal allowance solely by virtue of being a commonwealth citizen will lose their entitlement to UK personal allowances.

Double tax relief

This applies where tax is levied on the same income in more than one country. Most countries in the world have laws which state that income in that country is taxed in that territory and this principal applies in UK in that any source of income such as your pension and state pension will continue to be initially taxed in the UK, and any such relief will be given if this income is then also taxed in Spain by the Spanish tax authorities.

Taxation of Foreign income

Non-residents are not taxed in the UK on their foreign income.
If an individual leaves the UK and becomes non-resident from the day following departure he is not charged to UK tax on earnings from an employment carried on wholly abroad which arise after his departure. If an individual is paid for a period of leave spent in the UK following work overseas, HMRC treat this as arising during the leave period to which it relates, even if the individual’s entitlement to it was built up over a period of employment carried on wholly abroad.