Tax returns for pensioners

[sunkissed]

Friends of ours living over here 3 years near Gaucin ( both over 65 and have residency and small property) receive their state pension paid into their Spanish bank account. They also have a very small private pension with tax deducted at source in the UK.

Do they need to complete an annual tax return in Spain? I assume they do, even though their annual earning are low, to be fiscally resident, but I'm not a tax expert and others expats have told them differently.

[Beachcomber]

I would say that they should present a negative return mainly in order that they qualify for a certificate of fiscal residency to alleviate capital gains tax liability if and when they sell.

Sid is the expert. I'm sure he will provide you with chapter and verse when he sees your post.

[El Cid]

The rules on who should declare are a little ambiguous but a family income of more than 10000 euros must be declared. In some cases the figure can be as low as 1000 euros.

All their income should be liable for tax in Spain. The private pension should not be taxed in the UK unless it is a government pension. It is easy to get it paid free of UK tax if the correct forms are submitted to both the UK and Spanish tax authorities.

For last year the basic UK pension for a couple was in excess of 10000 euros so most pensioners would have needed to make a declaration.

Currently the allowances against tax in Spain for a pensioner couple total just under 13000 euros so no tax would be due unless there was additional income.

So, to answer the original question, yes they should make a tax declaration in Spain and, as Beachcomber pointed out, that makes it easier to prove tax residency and get the considerable benefits with regard to CGT and IHT.

Sid

[country boy]

I understood that there was no CGT on your home property provided that you had lived in it for three years and were over 65, with the qualification of residency of course.

[sunkissed]

Many thanks for info which is what I'd assumed and didn't know about the limits.

I would assume being fiscally resident would be important in the event of one partner dying too.

[country boy]

We pay an accountant €40 a year to submit our joint "nil" tax returns; he does it online while we are in the office , we consider that to be money well spent, also keeps us legally Tax Resident.

[Beachcomber]

Yes, Country Boy, you are right. Just having a certificate of registration on the foreigners register does not prove tax residency. You need to apply to AEAT for a certificate of fiscal domicile for which a tax return (even a negative one) is usually necessary.

[El Cid]

I understood that there was no CGT on your home property provided that you had lived in it for three years and were over 65, with the qualification of residency of course.

That's true. My comments about the benefits was general rather than specific to this couple.

Sid

[wagon ropes]

I've never thought to ask this question as my income is always the same, month on month. It might be useful to know, however, if the Spanish fiscal year is the same as in the UK i.e. April to April?

[anis]

It's Jan1st to Jan, Wagonropes.

[wagon ropes]

Thanks Anis. That makes sense. How on earth did the UK make the tax year
start and end in April

[alisonb]

We're in a similar position to other pensioners - income less than allowances here. We didn't submit a return, but reading this, I think we ought to. But I know the annual return has to be in by end of June, or you have to pay a fine. Are you still fined if you make a late return if you don't owe any tax?

[El Cid]

Don't worry about it - just do it next year.

Sid

[wagon ropes]

Yep, that's what we did.

We had been here 4 years before we realized we should be registered so we just did it the next year. There were no problems. Neither the UK Pensions Office nor the Spanish asked why we had not done it before.

[Beachcomber]

Unless you happen to get an inspection there will be no problem.

There are seven hundred tax inspectors in the whole of Andalucía and if you take into account the millions of tax payers the chances of coming to their attention is pretty remote.