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Residents' brochures with foreign income

United Kingdom

Tax residents in Spain with income from the United Kingdom

(The content of this document is merely informative and has been prepared for informative purposes. For more information, please consult the Spanish British Convention on Personal Income Tax (IRPF) directly to avoid double taxation).

I.- Tax residence

An individual is a resident in Spanish territory when any of the following circumstances occur:

  • That it remains more than 183 days, during the calendar year, in Spanish territory.

    To determine this period of permanence, sporadic absences will be counted unless the taxpayer proves their tax residence in another country (by means of a tax residence certificate issued by the tax authorities of that other country). In the case of countries or territories of those classified as tax havens, the Tax Administration may require that the permanence of the tax be proven for 183 days in the calendar year.

  • That it shows the main core or the basis of its activities or economic interests in Spain, either directly or indirectly.

  • That the non-legally separated spouse and children under the age of this individual are usually resident in Spain. This third case allows for proof to the contrary.

II.- Personal Income Tax

If an individual, in accordance with the above, becomes a tax resident in Spain, they will be a tax payer on Personal Income (IRPF) and must pay tax in Spain for your global income , i.e. you must declare in Spain the income you obtain anywhere in the world, without prejudice to what is available in the Agreement to avoid international double taxation between Spain and the country of origin of the income.

The agreements list certain types of income and have, for each of them, the tax authorities corresponding to each signatory State:

  • In some cases, exclusive authority for the taxpayer's country of residence,

  • In others, exclusive power for the country of origin of the income and,

  • Finally, in some cases, the power shared between both countries may both tax the same income but with the obligation for the taxpayer's country of residence to arbitrate measures to avoid double taxation.

The Personal Income Tax tax period is the calendar year. A person will be a resident or non-resident throughout the calendar year as the change of residence does not mean the interruption of the tax period.

The income tax return of natural persons resident in Spain is presented in the months of April, May and June of the year following the accrual date. The Personal Income Tax regulations govern certain limits and conditions that determine the obligation to file the tax return, which must be consulted every year. Exempt incomes are not taken into account to determine the obligation to declare.

Example: Taxpayer, tax resident in Spain, whose only income in 2019 is a pension from the United Kingdom, caused by having worked in a company in that country (Spain has the exclusive right to levy tax because it is a pension derived from a previous employment in the private sector . The processing of the Agreement is explained below). If the pension exceeds the amount of 14,000 euros a year, in accordance with the limits and conditions of the obligation to declare relating to the 2019 financial year, you would be obliged to file a Personal Income Tax return for 2019, since the payer of the British pension is not obliged to make withholdings on account of Spanish Personal Income Tax.

Spanish-British Agreement of 14 March 2013 (Official State Gazette of 15 May 2014)

(The text of the Agreement can be viewed at https://sede.agenciatributaria.gob.es on the following path: Home > Regulations and interpretative criteria > International taxation)

In a simplified way, taking into account the provisions of the Agreement between Spain and the United Kingdom (CDI), the taxation for tax residents in Spain of the most commonly obtained British source income would be:

Pensions:

Understood as remuneration that has their cause in a previously exercised employment, they have different treatment as granted for the purposes of services provided in the public or private sector.

  • Pension received for the dependent work provided to the State, political subdivision or local entity (article 18,2 of the Spanish Tax Act) .Its treatment is:

    1. In general, these pensions will only be subject to taxation in the United Kingdom.

      In Spain they would be exempt, with progressive exemption. this means that if the taxpayer is obliged to file a tax return for Personal Income Tax for the acquisition of other income, the amount of the exempt pension is taken into account in Spain to calculate the tax applicable to the remaining income.

    2. However, if the beneficiary of the pension resident in Spain has a Spanish nationality, the aforementioned pensions would only be taxed in Spain.

  • Pension received for reasons of previous employment in the private sector (article 17 of the Spanish Tax Act) : These pensions will only be subject to taxation in Spain.

Income derived from real estate (article 6 of the Spanish Tax Act):

Property incomes in the United Kingdom can be subject to taxation both in Spain and the United Kingdom. The resident taxpayer would have the right to apply the deduction for international double taxation in Spain in Personal Income Tax.

Dividends (article 10 of the ILC):

Dividends from a British source can be subject to tax in Spain in accordance with its internal legislation. These dividends, in general, can also be subject to tax in the United Kingdom, if this is the State in which the company that pays resides dividends and according to its internal legislation, but if the recipient of dividends is the beneficial owner resident in Spain the tax thus required in the United Kingdom will have a maximum limit of 10 per cent or 100 per cent of the gross amount of dividends. 15 100 The resident taxpayer would have the right to apply the deduction for international double taxation to the Spanish Personal Income Tax until that limit.

Interest (article 11 of the ILC):

Interest from the United Kingdom and whose beneficial owner is a resident of Spain can only be subject to tax in Spain.

Remuneration of members of boards of directors of resident companies in the United Kingdom (Article 15 of the Spanish Confederation of Companies):

They can be subject to taxation both in the United Kingdom and in Spain. The taxpayer would have the right in Spain to apply the deduction for international double taxation in Personal Income Tax.

Capital gains:

  • Derived from real estate (article 13,1 of the Spanish Tax Act): Gains on disposal of real estate assets located in the United Kingdom may be taxed both in Spain and the United Kingdom. The taxpayer has the right to apply the deduction for international double taxation in Spain in Personal Income Tax.

  • Derived from movable property belonging to a permanent establishment (article 13,2 of the Spanish Confederation of Companies'Associations): Gains on disposal of movable property belonging to a permanent establishment that a resident in Spain has in the United Kingdom for the performance of business activities, including gains derived from the disposal of the permanent establishment, may be subject to taxation both in the United Kingdom and in Spain. The taxpayer has the right to apply the deduction for international double taxation in Spain in Personal Income Tax.

  • Derived from the disposal of shares, other than those that are traded on a Stock Exchange, investments, or similar rights, whose value comes in more than 50%, directly or indirectly, of real estate assets located in the United Kingdom (article 13,4 of the Spanish National Securities Market Commission): They can be subject to taxation both in the United Kingdom and in Spain. The taxpayer has the right to apply the deduction for international double taxation in Spain in Personal Income Tax.

  • Derived from the disposal of shares or holdings or other rights that, directly or indirectly, grant the owner of these shares, shares or rights, the right to enjoy real estate assets located in the United Kingdom (article 13,5 of the Spanish Tax Act): They can be subject to taxation both in the United Kingdom and in Spain. The taxpayer has the right to apply the deduction for international double taxation in Spain in Personal Income Tax.

  • Derived from the disposal of any other good other than those referred to in paragraphs 1, 2, 3 and 4 of Article 5 (article 13 of the Spanish Tax Act): 13.6 Only subject to tax in Spain.

In addition to the above, the Agreement lists other types of income (business benefits, work remuneration, artists and athletes, public functions, other income, etc.), which can be consulted in the text of the same.

III.-Obligation to provide information on goods abroad

Persons resident in Spain must inform the Spanish Tax Administration about three different categories of goods and rights located abroad:

  • Accounts in financial institutions located abroad
  • Securities, rights, insurance and income deposited, managed or obtained abroad
  • Real estate and property rights located abroad

This obligation must be met, using form 720, between January 1 and March 31 of the year following the year to which the information to be supplied refers.

There will be no obligation to report on each of the categories of assets when the value of all the assets corresponding to each category does not exceed 50,000 euros. Once the informative tax return has been filed for one or more of the categories of goods and rights, the tax return will be filed in subsequent years when the value has increased by more than 20,000 euros compared to the one that established the last tax return.

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https://sede.agenciatributaria.gob.es