Low income allowance calculation help

[fyfin]

I hope Sid will see this as I'm sure he understands how it works. I have a friend who has finally gone to someone to sort out his tax as he had been told previously by a Gestor that he needn't do a return etc as his income was low.
I knew this was wrong as he has been resident for about 4 years and is still receiving tax allowances on his UK private pension where the code should be NT so obviously he is not registered on the Spanish system. I think confusion may have crept in as his total income in sterling is around £12,000 and maybe the original Gestor took it as euros but even so they should have advised him to do a tax return.
Anyway, I understand as he is 68 now he will get the €6,700 allowance and in Andalucia there is also a €2,000 allowance but as his calculated income in euros for 2019 is €15,500 I'm not sure how the low income reduction works.
I think I am right in saying that he will fall into the 24% tax rate category and so if there was no reduction he would pay tax on €15,500 - €6700 -€2,000 = €6,800 x .24 = €1,632 which seems a lot.
If I know how the low income reduction works and I can see from Sid's facts that it will apply as he is in the range of €13115 to €16825 but I don't think it's simple subtraction.
Anyway I will appreciate any help. The other big problem might be if he does this one right that they'll look back and wonder why he didn't submit a return before.!!!

[Manchesteral]

I don't know what the tax allowances are in Spain , I will be looking into this (with fear and trepidation) in the coming months, I can tell you that I have a Finnish friend who lives here with an annual income of €14000.00 give or take a few euros and pays no tax but he is legally obliged to fill in a tax report anyway !

[spanish_lad]

If you have income from 1 source and its less than €22,000 there is no legal obligation to make a tax return

[El Cid]

His income of £12,000 at 1.139 is €13668

The rules now say that incomes under €14000 do not need to be declared (it used to be €12000, but it's more complicated if you have income from more than one source.

The special low income allowance is worked out on a pro rata basis and there are a few ways of doing that, but the easiest way is to deduct €1.5 from the allowance (€5565) for every €1 that your income exceeds €13115.

In his case his allowance would be €4735,50 making a total allowance of €13435,50. That makes a taxable income of €232,50. The starting rate of tax is 19.5% so tax due would be €43,34.

With tax due this small, I doubt that they would be too worried about previous years.

Sid

[El Cid]

If you have income from 1 source and its less than €22,000 there is no legal obligation to make a tax return

That only applies if you have had tax deducted at source, UK pensions usually do not have tax deducted at source (PAYE).

Sid

[spanish_lad]

If you have income from 1 source and its less than €22,000 there is no legal obligation to make a tax return

That only applies if you have had tax deducted at source, UK pensions usually do not have tax deducted at source (PAYE).

Sid

Sorry Sid, i wasn't aware of that - hence it applies to people who work - all the miluristas like me dont need to - but if you recieve an un-taxed income then you still should make a tax return. Got it, ta.

[Wicksey]

When you say one source, do private, annuity and state pensions count as three or are they all pensions and count as one?

[fyfin]

Sorry Sid , his income for 2019 is €15,500 and is a private pension plus state pension.
The £12,000 was a few years ago.

[El Cid]

When you say one source, do private, annuity and state pensions count as three or are they all pensions and count as one?

As far as I am aware, they are separate, although only the total is declared on the form.

It should be noted that all Spanish citizens are tax resident by default, so it doesn't really matter if they don't submit zero returns or do not declare if they have insufficient income. That is why Spanish gestors do not really understand why some crazy foreigner insists on sending in a zero declaration.

Sid

[gerryh]

.... I understand as he is 68 now he will get the €6,700 allowance and in Andalucia there is also a €2,000 allowance .....

A question for Sid.
I assume/ hope that thee Andalucia allowance is automatically added to my tax declaration as my address is in Andalucia?
Or do I have to tick a box to say am in Andalucia?
Cheers
Gerry

[El Cid]

The €2000 allowance is not restricted to Andalucia. When you fill in your tax declaration you have to tick a box giving your region of residence. It can affect the tax rates.

Sid