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Topic: UK/Spanish tax liablities
User: davethed (view profile)3 Mar 2008 - 14:37
Hi everybody, new to the site so please bear with me.

My wife and I are planning to retire in Spain in the near future and I am trying to gather as much information as possible regarding forthcoming UK/Spanish tax liablities before we go as I don’t want any nasty surprises when we get there.

We intend to take up residence in Spain and to initially rent a property while we are looking for a suitable location to purchase a property.

At the moment we are both receiving our UK State Pensions and we both have a small private pension which is taxed at source.

Our financial position on arriving in Spain would be as follows:-

£190,000 invested in UK Income Bonds, the interest from this would be 5.20% gross.

Interest from the UK Income Bonds £9,600.00p.a.
My UK State Pension               £6,397.00p.a.
My private pension                £2,908.44p.a.
My wife’s UK State Pension        £2,778.00p.a.
My wife’s works pension           £445.92p.a.

Our total monthly income will be £1844.00/ 2412 EURO per month at current exchange rates, this will be transferred to our Spanish bank account through a foreign currency exchange company to meet our monthly outgoing payments.

Property Rental payments of 700 EURO/ 534 GBP per month at current exchange rates.

Would you please advise on the following:

1. Would the capital of £190,000 invested in UK Income Bonds be subject to Spanish Wealth Tax?

2. Would the interest from the Income Bonds be liable for UK or Spanish income tax and would this be set against our UK or Spanish personal allowances?

3. If we are liable for UK and Spanish tax, how are our personal allowances given under the Double Taxation Treaties?

4. Would we get tax relief on our property rental payments, and if so what is that likely to be?

5. Can the Income Bonds interest be set against both our personal allowances, collectively?

Can anybody please give us any further advise and some sort of forecast as to what our tax liablities would be as we are trying to plan well ahead.

Kind regards


User: admin (view profile)25 Apr 2008 - 09:37
I think you need proper finncial advice.

however, as far as I know, if you are spanish resident you pay tax on your worldwide income (not wealth). you'd have to fill in a return showing all your income, and you'd also show any tax already paid in the uk, which would be deducted from your tax liability (i.e. you'd have the spanish personal allowance, not the uk one). as a non-uk resident you shouldn't pay any uk tax anyway though.

spanish personal allowances are calculated by the family so you shouldn't have any issue in sharing out the personal allowances. but at that income level, spanish tax tends to be a little higher than uk tax (not too much higher though). If you buy the new version of you and the law in spain, it has up to date tax tables.

Finally there is some tax relief on rental payments, but it's only up to 300E a year (I think) and you have to give your landlord's NIE number (and some landlords will not be happy for you to do this)

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