Anyone who is resident in Spain and spending more than 183 days a year in this country and receives worldwide income over the amount of the threshold set by the Spanish tax office is legally obliged to make an annual tax declaration. Remember that if you hold a residency certificate you cannot expect to be treated as non-resident for tax purposes so it is important to be consistent or risk the consequences. As a general rule, if a person is receiving income from two sources, for example, a private pension and a State pension, then if the total income is more than 12.000 € a year, that person will be obliged to make a tax declaration in Spain.
Once registered in the Spanish tax system, you can obtain a “certificate of fiscal residence” which is needed in order to receive UK pensions without deduction of tax at source and to sell a property without suffering a retention of 3% of the selling price. Some UK private pensions must remain subject to UK tax at source, however. These are civil service and local government pensions, including armed forces, police and fire service pensions. The Spanish tax office takes these pensions into account, not to tax individuals on them but in order to calculate tax coding for gross income and this can result in quite substantial income tax increases for some. The double taxation treaty states that where in accordance with any provision of the treaty, income derived by a resident of Spain is exempt from tax in Spain, Spain may nevertheless take into account the exempted income when calculating the amount of tax due on the remaining income.
Rental income from properties as well as sales of property during the calendar year 2017 and other capital gains, on investments for example, must be declared at the same time as part of the annual declaration. As you will be aware, the tax authorities in Spain are trying to increase revenue and are clamping down on non-declarers in a big way, especially those receiving pensions from overseas. Once they start looking into your tax affairs, they can go back 4 years with the consequent penalties.
For people who are genuine non-residents (spending less than 183 days a year in Spain), remember that you have a different deadline of 31st December to make your tax return. It is advisable for non -residents to appoint a “fiscal representative”, that is, someone who will receive all correspondence from the Spanish tax office and deal with it for you. That way, there can be no missed deadlines, unwanted fines and interest charges, or misunderstood communications. It also avoids the common problem of post not going to the correct address. Your fiscal representative can also take care of any changes in your details such as a new address or the correction of an existing address. We can act as your fiscal representative, giving you extra peace of mind.
Finally, a reminder that if you are resident in Spain you need to register on the “padron” (similar to the voter´s roll in the UK) with your local town hall and if you change your address then it is important to de-register in the old municipality and register in the new municipality. This is important for helping to prove your principal residence when claiming certain allowances against tax.
Information correct as at April 2018. This article is intended solely for information purposes; specific tax advice must be tailored to an individual´s circumstances.