Index

Spanish Taxation Underpins Everything in Life Here

Back in the UK, life is comparatively simple, compared to Spain. At 16 you get a National Insurance Number allocated, which links all the Tax and Social Security computer systems automatically. In Spain, it is different.

When you buy property here, or are beneficiary under a will. you need an NIE number. The National Identity Number here does NOT automatically register you as a tax resident, nor does obtaining the Residencia certificate (or in the past plastic card)

If you spend more than 183 days a year in Spain in the tax year, January to December, you have to become tax resident. Spain becomes your chosen home, therefore you have to abide by the tax laws of the country you live in.

Contrary to popular myths that circulate here, you cannot elect, where you pay your tax. The exceptions to this is if you were employed by the British Government, in some form. E.G Armed forces, civil service, teaching, national health. These pensions come from the public purse, so have to be paid and taxed in the UK. Whilst HMRC in the UK do not publish this information, it appears from clients we have, who are retired ex-service personnel, that the income tax rate charged is at Spanish rates, so it maybe possible that a tax rebate will be paid to cover the differences in the tax rates. I cannot guarantee that this will be so in every case, as each application is dealt on merit .Every other source of income is taxable in Spain.

To register in the system, under the double taxation agreement, you complete form FD9, which tells the UK, you are tax resident in Spain and that you want everything you earn payable gross of tax in the UK, so that you pay all tax in Spain. Refunds of tax will be calculated and paid to you in due course. This process can take 3-9 months depending on the letter of the alphabet you surname falls under, and how many annuities you receive from UK sources.

The documentary requirements are very onerous, and you can, now, only register from 1st July in the current tax year. For example, someone arriving in Spain in September 2007, could not register in the Spanish system until 1st July 2008, as they had not spent 183 days in Spain, in 2007.

Those people, who have been here full time for a number of years, need to act to correct the situation, otherwise they could get a shock, if the tax office catch up with them. The maximum back tax they can claim is 5 years, plus fine you for non-submission. If you did not have to pay tax, they can and do still apply a fine.

It is better to keep everything legal. So contact us today to find out where you stand.