Tax Clarifications - Resident/Non resident

I am not qualified to answer the tax questions. Anyone who knows anything about the tax regime will know more than me. I can answer the resident non resident question though.

The Spanish state needs some measure of whether you're living in Spain - and so whether you pay your taxes to them, register your car for the road with them, get your driving licence from them etc. - or whether you are liiving somewhere else. The measure is six months plus - hence 183 days. If you live in Spain for more than 183 days in any calendar year which is the same as the tax year then you are supposed to pay your taxes on your worldwide income in Spain.

Your question about a non resident only paying tax on local income may have a simple explanation. I don't know though, I'm just guessing. Imagine you did a summer job here and you did it legally. You would pay SS and tax on your income. if you weren't actually living here and so not  in a situation to go through the process of finalising your tax returns when they become available after the tax year has ended (I forget whether it's March or April but it's through till 30th June) then that tax would have been paid as you worked and maybe the legislation says that tax money is theirs and can't be reclaimed.

You don't have to apply to be resident. You become resident by living in Spain. You are supposed to do the green form registration after 3 months. You become "fiscally resident" when you do a tax return. You don't need to make a tax return unless you earn more than some amount which varies as to whether your income is from one job or several sources. I think it's around 23,000 for one job but much less for multiple income. I think, though I don't know, that it is more than either 9,000 or 11,000 though.

The 5151€ figure was on my tax return this year but there are other allowances and disregards that seem to just come naturally before the 5151 is taken into consideration. One of them applies to people who earn between 8,000 and 11,000. It starts as 400€ if you earn less than 8,000 but diminishes as you earnings go up towards the 11,000 ceiling. This 400€ though is appled to the tax bill right at the end of the calculations so it has a disproportiante (in the good sense for someone on low earnings paying tax) effect.

Thank you for the reply.
I am more concerned about any earnings in the uk which wouldn't be taxed there but might end up getting taxed in Spain.
I'm just trying to identify exactly how much I can earn without paying tax or having to make a declaration. I normally work through my uk limited company. I do not want to be self employed in Spain as it is too expensive. I haven't got the NIE yet and I haven't earnt any money in Spain but I have earnt a small amount of money in the uk  I haven't needed the NIE as all my bills are included in my rent which I pay cash. Is this a problem?

If you're living in Spain and you want to be legal then you need to tell the Spanish tax people about your UK income. The UK tax people will eventually tell the Spanish tax people about your earnings if they work out that you are in Spain. I pay tax in the UK on a governent (not state) pension and in Spain on the cash I earn here. The UK tax people told the Spanish tax people about a pension income from AVCs which amoounts to around 360 pounds per year. The Spanish tax people chased me for it.

There are plenty of other forums. A bit of trawling and yo'll soon find the answer to the amount you can earn before needing to do a declaration. As i said it's 23,000 for a single job but the multi stream amount is less.

You won't be able to get way without an NIE for long. Almost anything in Spain needs an NIE

For an EU Citizen,

If you move to Spain, then you must register on the EU Citizen's Register and you become tax resident immediately.

If you are in Spain permanently for 90 days you must register on the EU Citizens Register.

If you are in Spain for 183 or more in any year you also become tax resident, whether you have registered, as you should have, or not.

As tax resident, if you are from UK, then you pay tax in Spain on your worldwide income, with the exception of a UK Government employee pension (civil servant, military, police etc.)  which is taxable only in UK, and rental income in UK, which must be declared in UK for tax and then declared in Spain too.  The double Taxation agreement means the tax paid in UK on rentals can be off-set against Spanish Tax liability.

If you are employed, and your income is declared by your employer and tax is stopped, then you do not need to make a tax declaration if that income is less than 22,000 euros p.a. AND providing that you only have that one source of income, so if you have any other income, say investment income, premium bonds etc. then you need to declare all your income.

If you are Tax Resident but not employed, say with just an OAP from UK,  then no matter how small that income is it must be declared in Spain.  If that is under the tax threshold then you will not have to pay any tax,

I hope I have covered the points you need to know.

Hello from a soon to be Ex-Pat!

This information is outstanding.  I wonder, though, whether anyone has any knowledge of how the tax aspect may or may not apply to non-EU citizens (we're US) planning on retiring to Andalucía, not working.

Any thoughts or guidance (pointing to information) would be greatly appreciated!

Thank you,
Michele   

I don't know but my guess would be that you get all the disadvantages and none of the advantages that we EU citizens get.

So, once you've been in Spain for 183 days you would be subject to Spanish income tax and when tax returns are due you would be supposed to tell the Spanish tax people about your worldwide earnings. If you have to pay tax on those earnings in the US then you would presumably be doubly taxed.

I'm working from the simple premise that anyone resident in Spain is subject to Spanish taxes and Spain taxes worldwide income. I say again though that I do not know.

You have to apply for a non resident NIE at a local police station ( you may be sent somewhere else depending on the local setup but start there) within three months of living in Spain continuously.  After 183 days you must change your NIE to resident status unless you are planning to live elsewhere for the rest of the full year. 

When you become resident you must register for tax.  It has to be done on line, look up Agencia Tributaria.  It has some English translation in it, but you may be able to get help from the nearest Hacienda office.  You can find them on the web.  Other alternatives are if you don't have good Spanish to find an English speaking accountant or a local gestor who speaks English.  When you fill in the tax registration on line you need to give your bank account details. 

When you become resident also make sure you change your bank account to resident.  Mine was frozen out of the blue and it turned out that although I had become resident I did not think about changing the bank account.  I had to change the account to resident status and it was then unfrozen. 

I do not know whether you have to pay tax on pensions or earnings from the UK in Spain, Spain and the EU have a reciprocal arrangement as do other EU countries but I have just recently heard that you pay tax in Spain for UK income.  Previously I believed you could decide which country you paid tax in.  An accountant or a gestor will be able to clarify this, but I have found Citizens Advice Bureau Spain (look on line) very helpful.  Unlike myself who is picking things up piecemeal, they are answering these questions all the time.

If you own property in the UK or elsewhere than Spain and are paying tax in the UK, you also have to register for tax purposes even if you are non resident.  I don't know the thinking behind this but that's the rule.  If you are resident and living in your own property in Spain you do not have to declare it as it is your main place of residence.  If you own other property in Spain other than the one you live in you have to declare it, even if you are non resident.  They will assume you are renting it out even if you are not and you will be charged a nominal tax on it.  If you have a mortgage and only cover costs by letting it, it pays to declare it all.  The fines for hiding things can be pretty hefty.

A couple of other tips for those becoming resident.  According to the EU a couple of years ago they agreed that all EU countries could bring in laws to say that after being resident for two years you must obtain a local driving licence.  Spain has not yet put it in to law, though it is against the law to use the old UK paper licences in Spain.  You must have a pink plastic EU licence.  If you check with the DVLA they will tell you you do not need to change your address on the licence when you move abroad, and your EU plastic licence will last till it expires before having to get a local licence.  However having said that, the GDT (Spanish traffic authorities) have issued instructions for all traffic police to check the plastic licence if you are routinely or for other reasons stopped.  Its complicated but try to follow this.  If you have been resident for two years (your NIE will show this), and you have category C and D on your licence, and these categories are for over five years duration from date of issue ( the last date it was renewed ) to the date the licence expires, you will possibly be fined.  The Spanish licences only last five years for these categories.  Also the same applies if your A & B categories last for more than ten years.  If you are lucky you will just get a warning to change your licence to a Spanish licence within a set time.  If you are fined it is best not to object, as it will most likely increase and you will end up in court.  The Citizens Advice bureau Spain is asking for anyone who has been fined to contact them as they are working with the Spanish Government to get this practice halted until it becomes Spanish law.  They have recently managed to get a fine overturned for someone.  I DO NOT ADVISE REFUSING TO PAY THE FINE, BUT IT IS AGAINST EU AND SPANISH LAW.

Lastly the rules on inheritance and wills are pretty well governed in Spain.  With no will valid in Spain, any property you own here is divided by set rules to spouse and children.  Even if you want it to go to someone else it can be overridden by the notary dealing with it.  To prevent this happening, you can do two things.  First obtain a certificate from your UK solicitor to declare you want your UK will to be honoured.  This is in lieu of an addendum to your will.  Or if your will is getting a bit out of date, renew it, and ensure that this request is included in the will.  I believe this is being changed in August but these things often take a long time and without a crystal ball there is no knowing what will happen in the interim period.

Hope this helps a bit but I would advise going to a professional or to the CAB in Spain to clarify anything I have said.

I should have added for anyone not yet moved here, that unless you need them, it may pay to get the C & D categories removed from your driving licence.  That will give you ten years on the A & B categories before you need to change your licence.  Obviously if you are still younger, this wont be much use, but if you are an older pensioner who may not want to drive more than another ten years it could be helpful.

Whilst Campo has provided some very useful info she is not 100% correct in everything she has said, so please do not follow the advice blindly.

I do not intend to pick up all the points,  but for certain,  as I stated in my earlier post,   If you move here the 90 day / 183 do not apply, you are resident immediately.

And of course,   much of the info only applies to EU citizens.  So Mczwz  and other non EU citizens, be aware of that.

Sorry I did not make note that it only applies to EU citizens John.  I was mentioning the EU, not non EU immigrants.

I think you are being pedantic about being resident in Spain.  Yes you are automatically assumed to be resident, but what I was saying is you have to re register your NIE and bank accounts as resident in addition to registering for tax purposes etc.  Without that you are living in Spain illegally, even if you are an EU citizen.  You cannot just say I have been here 183 days so therefore I am a resident.

Just another tip for those that are not aware.  The Spanish tax year is from 1 Jan to 31 Dec.  If you become resident say for example in April and have already put in your tax in the UK for the previous April to April 4 of the year you become resident, you still have to include from January to April in your Spanish tax return for that year.  You can then claim back any double tax paid.  I nearly got caught out with this. 

Importantly, there is currently a tax amnesty for non Spanish residents which started in January 2015 and lasts to 30 June 2015, so only has another six days to go.  I have been unable to see if it is only for pensioners, as apparently it was pensioners not realising they had to submit tax returns for pensions from other countries that initiated the amnesty, and if you work in Spain you would have no reason to be late with tax returns.  If you have not already registered for tax and submitted your outstanding returns, you need to do it immediately.  In addition you need to print out forms G2299 and G9015 from the Agencia Tributaria web site and take them in to the nearest Hacienda immediately after you have registered for the tax and before the 30 June.  They are requests to submit late returns and to be exempt from fines for late submission.  They can go back three years on one form and six on the other (not sure why they are different).  This will save you being fined for late payment of taxes and is a one off chance to avoid them.

Just another tip for those that are not aware.  The Spanish tax year is from 1 Jan to 31 Dec.  If you become resident say for example in April and have already put in your tax in the UK for the previous April to April 4 of the year you become resident, you still have to include from January to April in your Spanish tax return for that year.  You can then claim back any double tax paid.  I nearly got caught out with this. 

Importantly, there is currently a tax amnesty for non Spanish residents which started in January 2015 and lasts to 30 June 2015, so only has another six days to go.  I have been unable to see if it is only for pensioners, as apparently it was pensioners not realising they had to submit tax returns for pensions from other countries that initiated the amnesty, and if you work in Spain you would have no reason to be late with tax returns.  If you have not already registered for tax and submitted your outstanding returns, you need to do it immediately.  In addition you need to print out forms G2299 and G9015 from the Agencia Tributaria web site and take them in to the nearest Hacienda immediately after you have registered for the tax and before the 30 June.  They are requests to submit late returns and to be exempt from fines for late submission.  They can go back three years on one form and six on the other (not sure why they are different).  This will save you being fined for late payment of taxes and is a one off chance to avoid them.

Hi Elainej

Non Resident
A non-resident is liable to pay income tax only on monies that are earned within Spain. A non-resident will not normally qualify for any deductions or allowances.  -   If you are non resident (only in Spain for 183 days or less in any one year, you don't pay tax in Spain unless you work in Spain while you are here.   But you have to register for tax even if a non resident if you own property and other assets and earn money outside of Spain.

Residents
Tax falls into two categories in Spain. There is general income (renta general) and income from savings (renta del ahorro). These are then combined into the ‘imponible' base. This is the equivalent of the gross income. Deductions and allowances take this down to the ‘liquidable' base, which is the net taxable income. There is a tax free allowance (minimo personal y familiar) for every person of €5151 is this now 9000 euros? or maybe 11000  -   I believe the base tax allowance is around 6000euros approx. for 2015.  however this is if you do not work and only depend on pensions or other (i.e. investments) income from outside Spain.  If you are working and being paid in Spain, there are other allowances.  You can find it all on the web.

er 183 days in Spain do you need to apply to be a Resident? or can you continue as non-resident? Does the non-resident tax status continue (i.e.. only tax on Spanish income)? or do you become automatically resident for tax purposes? ******If you are resident for tax purposes (but a non resident) are you also entitled to the tax free allowance (minimo personal). Do you have to make a declaration of worldwide earnings if (imponible base) is less than €9000? 0r 11.000?******   -   You cannot live here after 183 days without becoming resident even if you don't work and your entire income is from outside Spain.  And as a resident you must register for fiscal tax purposes even if you end up not paying any tax.

How will any tax declaration be done if you leave Spain?  -   If you have left Spain you can still submit your last tax return on line.  The best thing to do is to change your NIE or NIF and your bank account to non resident just prior to leaving the country or they may chase you up for your tax return.

How will EU countries know where you are if you travel around and don't open a bank account?? There is no border control !!! or customs !!! What if you have a Turkish bank account, a Uk Limited company and spend your time in France, Spain and wherever else takes your fancy for less than 6 months ??

Then you will be resident in your original country for tax purposes, wherever you may roam.  In your example, with a UK limited company, you would be paying tax in the UK I would assume if you were born in the UK.

Actually you can be non resident but be taxed as a resident if you go over the the 183 days. Not everyone can become a Spanish resident if they are not earning any money in Spain - what happens then? You have to go back to the uk? Then get a job and pay Spain for the privilege of being declined??

You could be back in the uk and working and living back there from day 184 for however many days and then have to pay tax to Spain for this money even though you would be below the uk tax threshold it seems. What about if you are in Germany or Russia instead. This is completely mad. It doesn't follow that you would necessarily be in the uk if you leave Spain. So retrospectively you need to tell Spain that you are now in Saudi Arabia with a tax free salary but you will declare this to Spain and pay tax on it !!!!!
All completely crazy.

Hi Elaine

Not sure where you are getting your information from.  If you know someone who lives here permanently or for more than183 days a year and is not registered as resident, they are breaking the law.  Residency is nothing to do with where you earn your money in that respect. 

Pensioners are resident after 183 days even if they get all their income from the UK.  I am and I do as are several pensioners I know.

Again - If you are here for more than 183 days even if you have not decided to immigrate here but change your mind about how long you will be here, you MUST register as resident.  You should already have an NIE as non resident by then so must update it to resident. 

When it comes to residency Spain is not a backward third world country.  They do follow up on non residents.  I know.  As I said before I had my bank account frozen for not updating it to match my residency.

Oh and John c  I am speaking only about EU citizens.  I do not have any knowledge or experience about non EU.

Also notice that if you had a property in Spain the imputed income non resident tax is payable even hough the property is not rented.

The Spanish Tax Authorities are cross-referencing information to find out possible irregularities, for example, with the electricity consumption. You can [link moderated] further information.

Orbas wrote:

Also notice that if you have a property in Spain the imputed income non resident tax is payable even though the property is not let.

To be accurate:    If such a property is let then income tax must be declared in spain for any such periods.

  Spanish  Imputed tax is payable only for any periods when the property is not let

This is an incredibly useful discussion thank you for all the information that has been given. I have been completely confused by the residency and taxation issues up to now and was simply going to have to hire a gestor. I probably will hire a gestor/tax advisor still but everything is a lot clearer.

I have one question though.
How is moved defined? I have bought a house here and am flying back and forth sorting it out but won't move for a bit yet. I have a non-residents NIE but the bank opened a resident's bank account. The electricity bills etc have been transferred to my name and electricity and water will be being used to water the fields. Can I wait 90 days from when I settle here or do I need to do it from when i got the bank account or when I got the house? No worries if this is all a bit precise, I can take it to a gestor.

Aysha

It varies a little but in your case it would appear to be the simple understanding. Where do you live UK or Spain?  If it is Spain you have moved here.

However, it can be simpler in the first instance to come to Spain, say to set up your new home and then within three months  'when you have decided to move here ' register on the EU Citizen Register (EX18 application form)

Re the bank.   When you have registered you will need to change your bank account from non-resident to resident. Easy to do.

PS        The NIE is your Fiscal ID number, it does not denote resident or non resident. When you register you will retain the same number.