Income Tax & Pension

Information and questions about the Law in Spain and Andalucia.
PavAmber
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Income Tax & Pension

Postby PavAmber » Wed Jun 28, 2017 7:49 pm

Hi
We are currently living on early draw down of 2 private pensions from the UK. I have effectively retired early (coming up 58) and will have a preserved armed services pension kick in at age 60 plus state pension further down the line.

My question is on tax. The draw down on the 2 private pensions are paid into my UK bank account, as they apparently could not pay direct to my Spanish account. Both are taxed in the UK.

For the Spanish 2017 tax year - Jan to Dec 2017, my wife and I will certainly be considered tax resident in Spain. We are not looking for a way to avoid this!

I have informed HMRC via form P85 that I have left the UK and will shortly submit my tax return for the 2016/17 UK tax year.

Will I be taxed twice on my pension income after declaring/completing my Spanish return in 2018 for the 2017 tax year? If yes, who do I get a request a refund from, the UK or Spain?

Thought I was ok with all this but am actually very confused.com!

Thank you.

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gerryh
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Re: Income Tax & Pension

Postby gerryh » Wed Jun 28, 2017 8:11 pm

I believe that you can get a refund from HMRC in the UK.
You will have already paid it via PAYE in the UK before you pay tax on the same amount here in Spain.
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Re: Income Tax & Pension

Postby Lyric » Wed Jun 28, 2017 9:04 pm

Different timing I guess but I paid Spanish tax and PAYE on my Private Pension and when I had the paper from Hacienda that I was a Spanish taxpayer I got a full and pretty rapid refund from HMRC.

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Re: Income Tax & Pension

Postby PavAmber » Wed Jun 28, 2017 9:17 pm

Hi
Still not getting this. I have no choice as far as I am aware but to pay tax at source in the UK. I haven't done the 183 days in Spain as yet to make me a definite tax resident but will certainly do and will be a tax resident for 2017. At the moment, I am too early to declare in Spain?

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gerryh
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Re: Income Tax & Pension

Postby gerryh » Wed Jun 28, 2017 9:59 pm

If you become tax resident in 2017 then you will pay tax for 2017 in 2018.
So you can't declare your income in Spain for tax purposes until 2018.
That is my understanding.
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Re: Income Tax & Pension

Postby elusive » Thu Jun 29, 2017 7:29 pm

You need to get a double taxation form from HMRC. You will continue to pay tax in the uk until you have filed your first tax return in spain then you can get a tax certificate which you send to HMRC showing that you have paid tax in spain.then they will send you a refund of the tax paid in the uk from the same period as otherwise you will have paid doublle tax.so basically everything stays as it is until you file a spanish tax return in 2018

The army pension is only taxed in the uk but now you do have to declare it on your spanish tax return

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Re: Income Tax & Pension

Postby El Cid » Thu Jun 29, 2017 8:02 pm

elusive wrote:The army pension is only taxed in the uk but now you do have to declare it on your spanish tax return


For some, this is proving to be a problem. It appears that the Spanish taxman (in some offices at least) have not got the faintest idea how to handle this.

I have a friend with a UK Govt pension (an ex teacher). Last year his gestor said he did not have to declare it and knew nothing about the new tax treaty. He insisted that they should enter it in BOX 480 for "Exempt income". Instead, they entered the tax he had paid in the UK in the box for double taxation (which is used if you have actually been taxed twice, such as UK rental income). The net result was that where he had paid €2000 the previous year he paid nothing. In fact, if you enter the UK income into the "exempt" box he would have ended up with a €6000 bill.

Unhappy with this he went direct to the tax office and they confirmed it was correct.

However, it gets worse. This year he went straight to the tax office and told them of his UK Govt pension and his normal income. They insisted that he did not have to declare his UK Govt pension as the only pensions that need to be declared are police pensions - no, I'm not making this up! Notwithstanding this, after discussion with the next tax officer up the hierarchy, they said they would make a note of his teachers pension, but not add it to his total income (which is what they should do if it really was no longer treated as exempt), but at the same time add that it was only a non obligatory situation, which I take it means they have no idea if it is correct and reserve the right to change it.

If they are correct, his tax bill based on his total income would be in the order of €12000 rather than the zero they have charged him, so it is not a trivial issue. How they can decide that some UK government pensions are exempt but not others is beyond me as it is up the UK Govt to determine this, not the Spanish taxman.

My advice, if you have a UK Govt pension and wish to declare it correctly is to do it yourself and sleep soundly.

Sid

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Wicksey
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Re: Income Tax & Pension

Postby Wicksey » Fri Jun 30, 2017 10:31 am

That is very confusing Sid as this affects me as I am getting my civil service pension that I started drawing early at 55. My gestoria declares it but explained that it counts towards my income purely to calculate if any tax is due, and if so at what rate. Last year my income was just in the taxable limit so I paid a bit of tax here but this year I am not, so did not have to pay any. My pension is well below the UK taxable rates so I'll never have to UK pay tax on my pension but it will sometimes affect my taxable income here in Spain..

Before the rules changed, I would never have come into the taxable bracket here. My gestoria did not ask what particular department of the civil service I worked for, so I cannot understand how the Hacienda seems to think that some government workers are treated differently.

I worked for central government whereas I thought teachers were treated as local government workers. I wonder if they think there is a distinction between those that were civil servants rather than local government workers paid by the local county council for instance.

Going back to the OP, are the private pensions annuities, as they are treated differently here and only a smaller % is treated as taxable income.

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Re: Income Tax & Pension

Postby El Cid » Fri Jun 30, 2017 12:05 pm

Wicksey wrote: I cannot understand how the Hacienda seems to think that some government workers are treated differently.

Neither do I. Personally, I think they are talking rubbish. The only people who know which pension is a Govt pension are HMRC and thay don't seem to publish a definitive list.

You will know if your Govt pension has been declared correctly if it shows up in the summary sheet unter Renta Exentas under the Datos Adicionales section.

The probable reason why your tax dropped was because your income went down due to the lower exchange rate.

Sid

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Re: Income Tax & Pension

Postby Wicksey » Fri Jun 30, 2017 4:36 pm

Yes Sid it has been declared, that's how I got over the tax threshold the previous year (when the exchange rate was higher) and you're correct, that the lower exchange rate for 2016 kept me just below the limit this year. I'm sure Hacienda had got it wrong and that all 'government'/civil service/local authority pensions should all be treated the same way. If it did only apply to police pensions then I want my money back :)

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Re: Income Tax & Pension

Postby El Cid » Fri Jun 30, 2017 6:02 pm

If it did apply, the consequences would be huge. You would not get your money back as the whole amount of the Govt pension would be added to the rest of your income and would result in a very large increase in tax. That's why I am convinced they are spouting rubbish as the tax increases for all the non police Govt pensioners would be serious. You have to remember that Govt pensioners who are exempt in Spain have the advantages of two personal allowances which is a huge benefit. Take that away by including the Govt pension in your total income will result in a big increase. To be fair the rest of us who do not have Govt pensions are paying the full amount now and have been doing so ever since we arrived in Spain..

Sid

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Re: Income Tax & Pension

Postby PavAmber » Fri Jun 30, 2017 6:05 pm

Wicksey wrote: Going back to the OP, are the private pensions annuities, as they are treated differently here and only a smaller % is treated as taxable income.


Unfortunately, they are not!

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Re: Income Tax & Pension

Postby Wicksey » Fri Jun 30, 2017 6:15 pm

That's a shame, that's one thing they are quite generous with, together with rental income!

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Re: Income Tax & Pension

Postby elusive » Fri Jun 30, 2017 8:30 pm

Maybe hacienda is thinking about some of the goverment pensions that dont come under the "public sector" interms of taxation.

Well at least thats one negative for retiring at 50+ on final salary :silent: :wink:


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