PDA

View Full Version : Confused about taxation of pensions if we are resident in Tenerife



TOPGUN77
03-08-2013, 01:19
New to this forum so not sure if this has been covered.My wife and myself moved here to live we are both retired and want to know can we stay here as non residents.We live here from our pensions and savings back in the UK and I know if you apply for Resident status and have savings over here they tax you 21%.thanks.

junglejim
03-08-2013, 07:56
There is a lot of information on Goldenmaniac's site , she is a member on here and gives excellent advice .
http://www.diana-mcglone.com/

If you stay here for more than 3 months you are normally required to apply for a "residents certificate " and NIE which is covered in great detail .
Being a fiscal resident covers a whole lot more , especially if you stay full time - there are new regulations relating to proving income and health cover , all explained in Diana's website .
Good Luck !

TOPGUN77
03-08-2013, 11:20
Thanks for that I will contact Diana for more info:tiphat:

Goldenmaniac
03-08-2013, 12:06
New to this forum so not sure if this has been covered.My wife and myself moved here to live we are both retired and want to know can we stay here as non residents.We live here from our pensions and savings back in the UK and I know if you apply for Resident status and have savings over here they tax you 21%.thanks.
The simplest indicator of your fiscal residency status is length of stay in the country in any one tax year. Spain's tax year run's Jan to Dec not Apr to Apr like the UK. so as a rule of thumb if you spend more that 183 days in a Calendar year here then you are fiscally resident in Spain.
Incidentally "they" do not tax you 21%. Taxation is a complicated subject (as it is in any country) but if you are fiscally resident here then you have tax free personal allowances to deduct from your tax liabilty which is calculated once a year between Apr and June for the previous year= Declaracion de la renta
The 21% deducted at source from savings income or interest by the banking institutions is then put in the mix of your tax return as a pre-payment. Often for lower to medium income earners or pensioners they in fact receive a rebate from the Spanish government.
In my experience unless you are mega loaded :) there is very little difference in what you pay between the two countries. Plus resident home owners do not have to shell out the non-residents deemed income tax on property.

However none of this is a matter of choice , you vote with you feet so to speak - have a look at the Spanish Tax Authority web site (english bit) http://www.agenciatributaria.es/AEAT.internet/Inicio_en_GB/English/Non_residents/Non_resident_Income_Tax/Non_resident_Income_Tax/Residency_issues/Individual_resident_in_Spain.shtml and also the Revenue and Customs which covers a lot of info on Dual taxation agreements and what the two countries consider your liabilties are http://www.hmrc.gov.uk/pensioners/paying-abroad.htm#1.

What is true is that in the first "cross-over" fiscal resident year the UK will deduct tax at source and then you have to pay Spain in your self assessment declaration BUT the UK then refund the dual payment under double impositions rules.

The sequence of events is:
Certificate of residencia (civil after 3 months)
Modelo 030 after 6 months or if declaring your inention to be fiscally resident in any one Spanish Tax year
Declaracion de la renta in Apr- June of the year following the Spanish tax year (Jan to Dec) in question ... possible double tax paid
Form P85 - "Spain individual" from the UK tax authority - a dual language form which is authenticated by the Spanish tax office and then then English copy is sent to the UK tax office.
The Uk re-assesses your liability and if appropriate stops deducting tax at source there and gives you a rebate.
PLEASE NOTE this is VERY simplified and just to give you a flavour of what happens there are execptions one of which is for people who obtain any kind of civil service pension where the rules are different.

PLEASE PLEASE GET ADVICE ON YOUR INDIVIDUAL SITUATION

casabonny
03-08-2013, 14:25
The simplest indicator of your fiscal residency status is length of stay in the country in any one tax year. Spain's tax year run's Jan to Dec not Apr to Apr like the UK. so as a rule of thumb if you spend more that 183 days in a Calendar year here then you are fiscally resident in Spain.
Incidentally "they" do not tax you 21%. Taxation is a complicated subject (as it is in any country) but if you are fiscally resident here then you have tax free personal allowances to deduct from your tax liabilty which is calculated once a year between Apr and June for the previous year= Declaracion de la renta
The 21% deducted at source from savings income or interest by the banking institutions is then put in the mix of your tax return as a pre-payment. Often for lower to medium income earners or pensioners they in fact receive a rebate from the Spanish government.
In my experience unless you are mega loaded :) there is very little difference in what you pay between the two countries. Plus resident home owners do not have to shell out the non-residents deemed income tax on property.

However none of this is a matter of choice , you vote with you feet so to speak - have a look at the Spanish Tax Authority web site (english bit) http://www.agenciatributaria.es/AEAT.internet/Inicio_en_GB/English/Non_residents/Non_resident_Income_Tax/Non_resident_Income_Tax/Residency_issues/Individual_resident_in_Spain.shtml and also the Revenue and Customs which covers a lot of info on Dual taxation agreements and what the two countries consider your liabilties are http://www.hmrc.gov.uk/pensioners/paying-abroad.htm#1.

What is true is that in the first "cross-over" fiscal resident year the UK will deduct tax at source and then you have to pay Spain in your self assessment declaration BUT the UK then refund the dual payment under double impositions rules.

The sequence of events is:
Certificate of residencia (civil after 3 months)
Modelo 030 after 6 months or if declaring your inention to be fiscally resident in any one Spanish Tax year
Declaracion de la renta in Apr- June of the year following the Spanish tax year (Jan to Dec) in question ... possible double tax paid
Form P85 - "Spain individual" from the UK tax authority - a dual language form which is authenticated by the Spanish tax office and then then English copy is sent to the UK tax office.
The Uk re-assesses your liability and if appropriate stops deducting tax at source there and gives you a rebate.
PLEASE NOTE this is VERY simplified and just to give you a flavour of what happens there are execptions one of which is for people who obtain any kind of civil service pension where the rules are different.

PLEASE PLEASE GET ADVICE ON YOUR INDIVIDUAL SITUATION

Diana, form P85 is not the appropriate form, people should be completing the individual Double taxation Spain form available to download from HMRC site,trust me I know that as ex revenue.
if you have a digital certificate you can obtain a fiscal one online( once you have submitted your first Declaracion de la renta here) which you can attach with a covering letter to send to UK HMRC who are able to verify this , if and when they require, by following the link at the bottom of the form and the unique code provided.
Hope this helps somewhat.

Goldenmaniac
03-08-2013, 14:53
Diana, form P85 is not the appropriate form, people should be completing the individual Double taxation Spain form available to download from HMRC site,trust me I know that as ex revenue.
if you have a digital certificate you can obtain a fiscal one online( once you have submitted your first Declaracion de la renta here) which you can attach with a covering letter to send to UK HMRC who are able to verify this , if and when they require, by following the link at the bottom of the form and the unique code provided.
Hope this helps somewhat.
P85 is the pre advice to the Uk "if you have left or are about to leave" see here http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=5Ay4eloD0nw&formid=766, if you have no rebate to claim then there is no need for Spain Individual, if you do then as I did say "Spain Individual" which is the reclaim under double impositions and which is what the UK tax office currently sends out on receipt of the P85 or after a phone call, or as you say it can be downloaded To clarify here is the link to the Spain Individual dual language form http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=MDBA5kV0DXk&formId=982

What happens in reality, in Tenerife at least, is that Hacienda at Arona, which is where most people have to deal with, will not authenticate automatically the Spain individual dual language manually printed form, or issue a certificate of fiscal residency for 1st year residents whose income arises from outside Spain (ie in the case being discussed pensions from UK) They will do so if your income is earned in Spain ie wages or self employment, as is I imagine your experience.
For income arising outside Spain Hacienda requires written substantiation of the figures presented on the first Declaración de la Renta ie P60s for private pensions and Pension letters for state pensions plus proof of declaration of assets abroad (from this year) and bank statements etc to show interest received from foreign banks. Also a reconcilliation showing the tax year variations ie figures Jan to Mar and then Apr to Dec and average exchange rate calculations - this should have all been pulled together for the declaración de la renta

casabonny
03-08-2013, 16:56
I have obtained fiscal certificates for clients digitally and have submitted these to UK with Dual Taxation forms and covering letter and then there is no need to get Hacienda to verify as it has been done digitally.
I agree with your comments regarding the simple version of events but just pointing out that you do not have to wait for Hacienda to physically verify the forms, this can be done( as we have done successfully for many clients) almost as soon as the Declaracion has been submitted , sometimes you have to wait a week or two depending on where it was presented.
It makes it quicker to get HMRC to issue an NT ( no tax) code and make assessments for any relevant UK tax years.

cressrt
03-08-2013, 18:29
I have been waiting for almost 2 years for a rebate from the UK for the tax deducted, I have been paying tax in both countries for about 4 years now and do not seem to be getting anywhere. The form was submitted and authorised but has never appeared to reach the UK, which I have chased by email. I do not which to name the people dealing with it but from what is being written here, something appears to be wrong!

casabonny
03-08-2013, 18:47
It should never take that long.Have you confirmed that the forms have actually been received by HMRC? A. Phone call giving your full name and National insurance number and tax office reference number would be enough.You are in danger now of loosing out on the fourth oldest year as the time limit for back claims used to be six years now reduced last year to four .
A claim to refund is always marked as priority , so it would seem your papers never reached them.I suggest that if that is the case you do the forms again and resubmit pronto.
Ask the people who submitted it , for proof or to see any correspondence received but if they were not down before as your representative you should have at least received a form to complete giving authorization for them to receive , as well as yourself, any correspondence and/ or assessments .

cressrt
03-08-2013, 19:02
I have email confirmation that the forms have not been received, I have chased up my representatives but am getting frustrated at the lack of progress and communication, maybe I need to start again with someone else or might that confuse things?

casabonny
03-08-2013, 20:49
If nothing has been received by the UK HMRC then yes my advice would be to start again as it cannot cause confusion in the HMRc if they didn't have anything anyway.
Also if you have confirmation that the person acting has not done what they said , and you have paid them, ask for a Hoja de reclamation and claim your money back.

Goldenmaniac
04-08-2013, 12:58
The longest case that I have come across took a little over 4 months to get the Uk rebate after application to the Hacienda for the proof of fiscal residence in Spain and that was because of an issue with a disability allowance - in other words not the normal run of the mill claim. So yes I agree with CB start again.