Many tax questions

Information and questions about the Law in Spain and Andalucia.
booms81
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Many tax questions

Postby booms81 » Sun Nov 24, 2019 5:25 pm

Hi all,

Thinking of moving to Spain with my partner and trying to get a feel for what we'd realistically pay there for both income tax, wealth tax, and anything else I haven't thought of.

We're living in the UK now, and are 'low income, high asset' -ish. Generally the tax we pay in the UK is fairly low, and our investments are in tax-efficient vehicles (ISA's, SIPP's, premium bonds) so that a lot of the tax is generally zero.

A number of more specific questions:

- We'd be over the threshold for the wealth tax, although we may end up being a house which would help, but for now it's something I'm realistically trying to get a figure for. I've read that the wealth tax is capped at 60% of the income tax charge, but also floored at 20% of the original wealth tax charge. Which of these takes precedence? i.e if my income tax charge was £0, but my initial wealth tax charge was £10k, would I still end up paying £2k?

- How can I get a sense of what income tax would be charged on? How do accumulating funds within a SIPP or ISA work, if the value increase is a mixture of dividends and capital gain?

- Anything else I'm missing out that might be important?

pensure1988
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Re: Many tax questions

Postby pensure1988 » Sun Nov 24, 2019 7:38 pm

Hi

This website may answer some of your Questions. Other forum users may have other information for you, as well

https://www.spainaccountants.com/tax-rates#rates_7

David

El Cid
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Re: Many tax questions

Postby El Cid » Sun Nov 24, 2019 8:44 pm

It’s a very complex subject. Your ISAs and premium bond income is taxable in Spain.

I would suggest you take professional advice on this as there may be tax efficient alternatives. I can’t make any personal recommendations but Blevins Franks have a better reputation than most of the other advisors.

Sid

booms81
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Re: Many tax questions

Postby booms81 » Mon Nov 25, 2019 6:53 pm

Thanks Sid, it's much appreciated.

After doing my own worst-case scenario wealth tax calc, I'm a lot less worried than I was.

A question - if you happen to know the answer.

What's the income taxation treatment in Spain of a pension pot. To be clear, I've got a decent sized SIPP which I'm not planning on turning into an annuity or anything like that - it's just sitting around (I'm in my thirties).

The sense I get reading around is that 'pensions' are not included in the wealth tax calc, and that it's only the income from pensions (i.e. annuities etc) that get taxed under normal income tax.

Is that about right?

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marios
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Re: Many tax questions

Postby marios » Fri Nov 29, 2019 9:54 pm

Ensure any lump sum from your pension is taken before moving to spain as they will tax it.

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peteroldracer
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Re: Many tax questions

Postby peteroldracer » Sat Nov 30, 2019 10:24 am

booms81 wrote:
What's the income taxation treatment in Spain of a pension pot. To be clear, I've got a decent sized SIPP which I'm not planning on turning into an annuity or anything like that - it's just sitting around?
My understanding is that this “pot” would be an asset, and assuming it is over €50k it must be declared on Form 720.
I used to cough to disguise a [email protected] I f@rt to disguise a cough.

elusive
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Re: Many tax questions

Postby elusive » Sat Nov 30, 2019 5:41 pm

marios wrote:Ensure any lump sum from your pension is taken before moving to spain as they will tax it.
Not just before but in the previous tax year. You could take your lump sum in january. Move to spain in feb,you become tax resident 6 months later but that will make you tax resident for the whole of the year ie from january. Tax year here is jan-jan

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marios
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Re: Many tax questions

Postby marios » Sat Nov 30, 2019 8:04 pm

I don't think thats right, just because tax yr is from Jan does not mean you have to pay tax from then, it's surely from when you start living in Spain, I'm sure El Cid will confirm who is correct.

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Re: Many tax questions

Postby El Cid » Sat Nov 30, 2019 8:23 pm

No, when you become tax resident, you are treated as tax resident from January 1st in that year. Spain doesn’t allow split tax years like the UK does.

Sid

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marios
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Re: Many tax questions

Postby marios » Mon Dec 02, 2019 10:11 am

Does not make it clear below, just says if your not resident at the time.

Lump sums

Pension lump sums are fully taxable in Spain if received while you are a Spanish tax resident (unless it arises from a UK government service pension which are only taxed in the UK). However, in certain cases, it is possible to apply a 40% reduction for the proportion of the contributions made until 31st December 2006 to the pension plan. Any element of the lump sum to which contributions were made from 1st January 2007 are fully taxable in Spain.

So if you wish to protect a lump sum from Spanish income tax, you should receive it before you become a resident of Spain. Alternatively, if you believe you will qualify for the much reduced annuity taxation system, you may be better off not taking a lump sum at all and having a larger pension.

El Cid
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Re: Many tax questions

Postby El Cid » Mon Dec 02, 2019 11:47 am

marios wrote:Does not make it clear below, just says if you're not resident at the time.
 If you sell on Jan 1st and hit the 183 day rule on 31st December you are tax resident retrospectively on Jan 1st.


Sid

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marios
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Re: Many tax questions

Postby marios » Mon Dec 02, 2019 11:51 am

So just need to make sure you get your lump sum from pension at least 6 months before you move to Spain.

El Cid
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Re: Many tax questions

Postby El Cid » Mon Dec 02, 2019 12:20 pm

Not necessarily. You could take it on 31st December and move to Spain the next day.

Sid


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