Michael Shilan C.P.F.A.
Do I have to submit a Spanish Tax Return? - If you live in Spain for more than 183 days in any calendar year you are considered as resident for tax purposes and if you have a salary, wage or a pension bringing in 11,200 €uros in a year or have investment income of 1,600 €uros per year you are obliged to submit a Spanish Tax Return. If you earn less than this you can still voluntarily submit a tax return.
Why would I submit a tax return if I earned less than 11,200 €uros? - Submitting a tax return ensures that you are recorded as being a tax resident of Spain. When you sell your home you may need a certificate to prove you are tax resident. If you have not submitted a tax return you cannot get the certificate. If you inherit property from your spouse you may not need to pay inheritance tax if you can produce a tax resident’s certificate. Of course you may earn less than 11,200 €uros but be entitled to a tax rebate from the Spanish Tax Office. You cannot receive that rebate unless you claim it by submitting a tax return or submitting a signed “Borrador”.
What is a “Borrador”? and how do I get one? - A Borrador is a draft tax return which has been prepared by the Spanish Tax Office. If you agree with the figures all you have to do is to add your Spanish Identity number and take it to your bank. The Borrador will show if you owe tax or are entitled to a rebate. The Borrador does not include any income that comes from outside Spain i.e. your UK State Pension, Private Company Pensions, non Spanish investment income etc. If you have such income you cannot submit a Borrador because you would not be declaring the truth.
To get a Borrador you can order one on the Internet or go to your local Spanish Tax Office. You will need proof of identity if you go to the Tax Office. If you have submitted a Spanish Tax Return for the previous year you can order one by internet but you will be asked for an amount from a particular box that you have completed on last years return plus your Spanish Identity number
I pay tax in UK so I why should I pay again? - There is a Double Taxation Agreement between Spain and UK so that you do not pay tax twice on the same income. If you pay tax in UK you normally have to declare that income on your Spanish Tax Return but you receive a credit for any tax paid in UK.
If I am paying tax in UK can I get it back if I pay tax in Spain? - To avoid paying tax in UK you need to get a certificate of tax residence status from the Spanish Tax Office in your area and send it to your Tax Office in UK along with the UK tax form SPA/Individual which can be downloaded off the internet. Ex-government employees (i.e. Civil Servants and Local Government workers) cannot get their pensions exempt from UK but they can get their State Pensions and any other private pensions exempted.
Why does my accountant want to see my P60’s? - At times the Spanish Tax Office can ask you to present supporting documents for the figures that you have put in your tax return. Your accountant probably wants to ensure that you could present the documents if asked for. You may be claiming that you have paid tax in UK and your accountant should ensure that there is evidence of you having paid tax in UK.
I get my pension in sterling and only bring in my money when I need it so do I only pay tax on what I bring in? - You have to pay tax on what you earn. It does not matter that you do not bring the money into Spain. You should convert your sterling pension into €uros which was on average about 1.22 €uros to the pound during 2008.