UK Pensions, Tax In Spain - Buying Property In Costa Blanca

Buying Property In Costa Blanca is a wonderful idea but, you will still need to become acquainted with requirements that apply to a prolonged stay in Spain. A stay of more than 183 days per year will require you to become a tax resident whether you are still working or are retired. There are some benefits for those who declare their pensions in Spain but, your fiscal representative will be able to advise you of your specific obligations.

Double Taxation Agreement

Spain has an agreement with many other countries including the UK which helps you to avoid paying twice for the same income in both countries. However, the type of pension you receive will affect this, state pensions and any private pensions should be declared and paid in your country of residence. However, civil service pensions can only be taxed in the country where they are paid and can also only be paid to a UK bank account and then transferred to your Spanish account. Tax rules can change, and declarations can be complicated, so hiring a local tax accountant (Gestor) to file your returns once a year is a good idea. Once you are declaring your taxable income in Spain you should advise the UK Government by submitting the following form found on the following link so that you do not pay twice - https://www.gov.uk/government/publications/double-taxation-united-kingdomspain-si-1976-number-1919-form-spain-individual.

Specific information for this treaty will vary from country to country so you should check with your own Government in case yours differs from Spain’s agreement with the UK.

Basic Tax information for your declarable income and assets

If you have a single source of pensionable income which exceeds €22,000 per year, then you must declare this, and public pensions do not count towards this limit. If you receive pensions from multiple sources, you will need to file your tax return if the combined total exceeds €22,000 per year or if one source exceeds €12,000 euros and any others are higher than €1,500 per year you will also need to submit a return. There are several other criteria regarding this, so it is essential that you get advice. All worldwide assets must also be included in your tax return in Spain. Tax returns must be filed between April and June each year and can be paid or reimbursed by the authorities via a direct debit or automatic transaction system. If owe any tax it may be possible to split this into two payments.

Buying Property In Costa Blanca | Spanish Tax Rates

UK Pensions, Tax in Spain | Buy property in Costa Blanca

These can vary according to the amount earned and any personal allowance will increase according to age and ability, the older you are the lower the tax you will pay and if you are buying a property in the Costa Blanca, you will find that those residing in the Valencia region are now benefiting from new benefits introduced by the autonomous government. Generally, in Spain the lowest taxable rate is 7.7% and the highest 19% for pensioners. Personal allowances are €6,700 currently for those between 65 and 74 and increased to €8,100 once you are 75 years old and over. Again, these may vary from one year to another so it is wise to pay a nominal amount to a Gestor who can sort out all of this and advise you about exactly what you need to declare. As a result of current pensionable taxation laws though about 65% of pensioners are exempt from paying tax but, they must still declare their income annually to avoid any problems.

Care Required

UK Pensions, Tax in Spain - buying property in the Costa Blanca

If as you age your mobility is more restricted and you require either a paid carer or a family member who is also a tax resident in Spain to care for you, this is also something that your Gestor should be made aware of as you and, possibly your carer if they are an unpaid family member and also a tax resident, may be able to receive further tax deductions. This is particularly true in the area of the Costa Blanca governed by Valencia.

Conclusion

Providing you ensure that you follow the rules and advise your home country’s government, becoming a retired tax resident in Spain can be beneficial, particularly in the Costa Blanca region. Tax laws will be different for those who are working and self-employed so we will look at this another time but, you will always need to become a tax resident if you are staying here for most of the year and, therefore, ensure that an annual declaration is presented.

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