Taxes for residents

Information and questions about the Law in Spain and Andalucia.
Bob rosenthal
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Taxes for residents

Postby Bob rosenthal » Tue Oct 09, 2018 10:49 pm

My wife and i are buying a second home in Spain and plan to spend six months there and six months back home in the US. We know about the 183 day rule but have a question about world wide assets. We have annunities for which we take no dividends. We have a bank account which earns a small interest. In addition we own our home in the US. Are all these considered part of world wide assets for tax purposes, or just the amount of earned interest from the bank account. I should add that we are both 70 years old and retired.

Thank you,

Bob

El Cid
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Re: Taxes for residents

Postby El Cid » Wed Oct 10, 2018 7:48 am

Since you are aware of the 183 day rule, are you intending to exceed it or not? If you do not, then as a non tax resident you do not need to worry about assets or income. The only tax due will be non resident tax on your property.

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wollie
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Re: Taxes for residents

Postby wollie » Wed Oct 10, 2018 9:20 am

I know a few people in a similar situation and the general consensus is if you have substantial income stay non-resident.
Because Spain enconomy much lower level than US the income/assets threshold lower and you will basically be screwed...

Gasman
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Re: Taxes for residents

Postby Gasman » Wed Oct 10, 2018 10:27 am

Are there not special rules for US citizens, whereby they have to pay taxes to the US no matter where they are resident? Bit foggy on this one, but I am sure there is some complication for US folk ... so you need to find out before considering becoming Spain-tax-resident, and if you have the option, probably go for staying the shorter time in Spain, so avoiding Spain-residency.

The Spanish rule is that certain ASSETS (not incomes) held outside of Spain have to be declared by tax-residents of Spain, on the Modulo 720. Then you would have to declare your incomes from any source in the world to Spain for tax (Renta) to be paid - or reclaimed where dual-taxation-agreements may be in force. Also if you have enough world-wide-wealth (not income, but assets etc) to come into the Wealth Tax regime, you have to declare that separately also.

One advantage is that as retired folk, you should be eligible as Spain-residents to sign on to the Health Service!

elusive
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Re: Taxes for residents

Postby elusive » Wed Oct 10, 2018 12:54 pm

Dont believe they will be able to use the spanish NHS as U.S citizens even if retired unless theres some sort of S1 style agreement between the two countries. To do that they would have to become spanish residents aswell which isnt that easy.

If you become spanish tax residents then any income you earn anywhere in the world has to be declared for possible taxation. imo as said above theres issues re americans been taxed in the U.S regardless so prob alot easier to keep under the 180 plus days limit.keep things as simple as poss

Bob rosenthal
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Re: Taxes for residents

Postby Bob rosenthal » Wed Oct 10, 2018 1:17 pm

Thank you all for your feedback. Let me clarify a few things. Our intention was to exceed 183 days. But depending on the tax burden this could change.

There is an agreement in place between the US and Spain to avoid paying double tax. However we have no wealth tax and no tax on assets just on income. That is why I am confused about the laws in Spain.

From what I can gather from the comments so far is that the Spanish government would tax me on my total assets and probably impose a wealth tax on top of that.

Is the above correct or have I missed something.

Thanks again

Bob

El Cid
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Re: Taxes for residents

Postby El Cid » Wed Oct 10, 2018 1:38 pm

The only tax you could be liable for on your assets is wealth tax. However the starting point is very high - up to €2m for a couple.

Incidentally, when you start taking an annual income from your annuities, it is taxed extremely favourably- Depending on your age when you started drawing income. It can be as much as a 75% reduction in the taxable income.

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marios
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Re: Taxes for residents

Postby marios » Wed Oct 10, 2018 3:13 pm

We moved here 2yrs ago, we are now tax resident, looking back on the tax we have to pay as a couple my wife's is just below the threshold of paying tax in UK, mine is up to the 30% bracket, I find as a couple and even though I am over 65 my wife is 62(both retired) that we are paying 80% more tax here in Spain and we pay no wealth tax. If I had my way again I would not have come to live her or I would at least have kept a base in UK and kept below the 183 days but that was no an option.

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Re: Taxes for residents

Postby El Cid » Wed Oct 10, 2018 4:49 pm

Perhaps you should have done more research on the tax situation before making the decision to come to Spain.

Many people actually pay less tax in Spain than they would if they were UK resident - I am one of them. Also, anyone with a UK government pension plus the UK state pension saves a very large amount of tax from being able to split their income across two tax jurisdictions.

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marios
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Re: Taxes for residents

Postby marios » Wed Oct 10, 2018 4:54 pm

Cid It was either sell here in Spain or sell in UK,it would have been a bad time to sell in Spain a few years ago so we took the option of coming to live here, we have owned since 2005 but rented out here till 2016 and I knew it was a higher tax regime but never checked exactly how high.

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gerryh
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Re: Taxes for residents

Postby gerryh » Wed Oct 10, 2018 7:00 pm

marios wrote:We moved here 2yrs ago, we are now tax resident, looking back on the tax we have to pay as a couple my wife's is just below the threshold of paying tax in UK, mine is up to the 30% bracket, I find as a couple and even though I am over 65 my wife is 62(both retired) that we are paying 80% more tax here in Spain and we pay no wealth tax. If I had my way again I would not have come to live her or I would at least have kept a base in UK and kept below the 183 days but that was no an option.
Are you taxed, here in Spain,as a couple or separately?
We are taxed separately, my wife pays no tax and I pay tax.
If we were taxed as I couple the total tax bill would be much higher.
Cheers
Gerry
Gerry Harris

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Re: Taxes for residents

Postby wollie » Wed Oct 10, 2018 10:52 pm

Sid,
Can i ask what is meant by two tax jurisdictions?
I considered making a move to Spain last year but ruled it out as i thought i be screwed either way, if i sold be taxed on the money and if i kept i be taxed on the asset, i did not hear of the two tax thing...

El Cid
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Re: Taxes for residents

Postby El Cid » Thu Oct 11, 2018 8:14 am

UK and Spain.

Sid

wollie
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Re: Taxes for residents

Postby wollie » Thu Oct 11, 2018 9:04 am

Thanks lots of useful info in there...

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Re: Taxes for residents

Postby Gasman » Thu Oct 11, 2018 10:57 am

Bob said - <From what I can gather from the comments so far is that the Spanish government would tax me on my total assets and probably impose a wealth tax on top of that.
Is the above correct or have I missed something.>

The form 720 - done in March - is designed to show your assets abroad - there is no tax to pay on filling in this form - it is just for information ...
However, this information could be used by Spain tax authorities to consider whether the income you DO declare - by end-June -on your world-wide income from various sources, is likely to be correct!! It can give them grounds to follow up cases they think are suspicious!! If over the 2 million, then the Wealth Tax is dealt with separately ... most of us do not come into that category!!!!

On the other point, it is always worthwhile to get the calculation done on your couple's taxes as to whether (and in the majority of cases it seems to be) you are better taxed separately ... also consider in whose names the assets are held, and perhaps swap them about from shared ownership, to one or the other of you ... and make sure that things like capital gains are considered before you become tax resident, and even in which tax year or part of year you move definitively. You may like to contact a knowledgable adviser BEFORE you plan your move.

elusive
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Re: Taxes for residents

Postby elusive » Thu Oct 11, 2018 11:45 am

From what I can gather from the comments so far is that the Spanish government would tax me on my total assets
----------------

You are only taxed on your earned income.ie a pension a wage,intrest off investments etc.theres no tax just for owning assets if thats make sense

El Cid
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Re: Taxes for residents

Postby El Cid » Thu Oct 11, 2018 11:50 am

elusive wrote:theres no tax just for owning assets
There is - it's called Wealth Tax!

Sid

elusive
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Re: Taxes for residents

Postby elusive » Thu Oct 11, 2018 8:53 pm

True. something easy to forget.We so should be so lucky though .


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