Pensions, property and tax in Spain
The Spanish Government like many around the world have been very proactive in tightening up their tax legislation. Seen as an attempt to increase tax revenue prompted by the world recession. In most cases, they are going after the big boys who make a lot of money in Spain but are not paying tax because of all the loopholes.
Big corporations are the main targets in every country in the EU now. The Spanish people, however, love trading in the black economy. For that reason the Government wants it to shrink (they know they can never stop it) as much as possible because of the changes introduced.
As a result of all this, there have been many rule changes and that has produced a lot of miss-information and horror stories. Indeed many have left Spain in a panic over them. There has also been as usual those who want to cash in on the situation. Come and see us because you have to do this or you must do that.
In parts of the Costa Brava small towns became dead after the English, Germans, Dutch and Swiss fled back to their own countries. They did that after putting their properties up for sale. The Mayors of the said towns all complained to central Government when they saw the unforeseen consequences of the rule changes.
So this article is all about making life very simple for the person who is retiring here. Mr & Mrs Normal. No big mansions in the UK, no huge sums coming in every month from shares and of course not millionaires. If that is your life is about to get simple.
The tax year in Spain:
Firstly the Spanish tax year is not April to April like the UK. It is 1st Jan to 31st Dec which is very logical. So what next? Well, the answer is simple. In the first instance, you are not a tax resident in Spain as soon as you get here. You have plenty of time to decide what to do.
That said, if you buy a property in Spain (bricks and mortar) then you will be entering the Spanish tax system anyway. If you are renting or living in a mobile home park here in Spain it will be a matter of savings and property owned in the UK. Declaring that will affect your tax status in the long-term. However, read on as it is not scary at all.
Keeping life simple, which is what retiring to Spain is all about, means we only need the basic facts. If Spain is to become your retirement location it makes sense to deal with everything this end. Easy to do if your life is not complicated through business interests or huge investments.
Property and assets in the UK are what made everyone jump ship. New rules aimed at the Spanish property owners caught a lot of EU citizens in the net. Mr & Mrs Normal, however, did not need to panic.
So, what is the situation? Buying bricks and mortar puts you into the tax system anyway. You are going to need an accountant unless you speak Spanish. There are tons of them and most speak perfect English.
For between 100 and 200 Euros a year they will deal with the taxman for you if your financial life is not messy and it only requires a tax declaration.
If retiring to Spain on work and state pensions with your assets (houses in the UK and Spain as well as savings) not being the envy of the world then life is very simple. Tell the taxman in the UK that you living in Spain and you want your pensions tax-free, then declare the gross amount here in Spain.
They (the UK taxman) are going to know anyway because like most people you will sign up for the Spanish health care system which the UK pays for.
In doing a basic tax declaration here in Spain you will not lose out as you have personal allowances as in the UK. Better still use the services of an accountant to start with who will make sure you are declaring correctly and not overpaying tax.
For Mr & Mrs Welloff an accountant is essential the moment they think about becoming a resident in Spain. An hour with a Spanish accountant will be worth its weight in gold.
Remember, the Spanish hate paying taxes probably more than you do. Your accountant will know every little thing you can claim for.
To conclude, tax is an issue that if retiring to Spain can not be swept under the carpet. For Mr & Mrs Normal there will be very little difference (if any) at the end of the day and Mr & Mrs Welloff will be told what they are stepping into.
The accountant is the key. He, she (or they) are part of the Spanish retirement lifestyle and with that in mind come and take a look at Spain to see if retiring here is a good idea.
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