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, you can consult directly the Personal Income Tax Law and the Spanish-British Convention to avoid double taxation).

I.- Tax residence

A natural person is resident in Spanish territory when any of the following circumstances occur:

• They have stayed longer than 183 days in Spanish territory over the calendar year.

  To determine this period of permanence, sporadic absences will be counted unless the taxpayer proves his tax residence in another country (through a certificate of tax residence issued by the tax authorities of that other country). In the case of countries or territories labelled as tax havens, the Tax Administration can demand proof of stay in that tax haven over a period of 183 days within the calendar year.

• They situate the main base or centre of their activities or economic activities, directly or indirectly, in Spain.

• They have dependent not legally separated spouse and/or underage children who are usually resident in Spain. This latter situation accepts evidence to the contrary.

II.- Personal Income Tax

If a natural person, as described, turns out to be tax resident in Spain , they will be taxpayers for the Personal Income Tax (IRPF) and you must pay taxes in Spain for your worldwide income , that is, you must declare in Spain the income you obtain anywhere in the world, without prejudice to the provisions of the Convention to avoid international double taxation signed between Spain and the country of origin of the income.

The agreements list some types of income and establish, with respect to each of them, the tax powers that correspond to each signatory State:

• In some cases, exclusive power for the country of residence of the taxpayer,

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

• finally, in some cases, shared power between both countries, both being able to 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 since the change of residence does not imply the interruption of the tax period.

The income tax return of natural persons who are tax residents in Spain is submitted in the months of April, May and June of the year following the year of accrual. The Personal Income Tax regulations regulate limits and conditions that determine the obligation to submit the tax return, which must be consulted every year. Exempt income is 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 said country (Spain has the exclusive power to tax it as it is a pension derived from a previous employment in the private sector . Treatment in the Convention is explained below). If the pension exceeds the amount of 14,000 euros per year, taking into account the limits and conditions of the obligation to declare related to the 2019 financial year, you would be obliged to submit a personal income tax declaration corresponding to 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 March 14, 2013 ( BOE of May 15, 2014)

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

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

Pensions:

Understood as remuneration that has its cause in a previously held job, they have different treatment depending on whether they are granted for services provided in the public or private sector.

• Pension received due to dependent work provided to the State, political subdivision or local entity (article 18.2 CDI ) . Its treatment is:

  1. Generally, these pensions will only be taxed in the United Kingdom.

     In Spain they would be exempt, with progressive exemption. This means that, if the taxpayer is obliged to file a personal income tax return for obtaining 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 residing in Spain had Spanish nationality, the aforementioned pensions would only be taxed in Spain.

• Pension received by reason of previous employment in the private sector (article 17 CDI) : These pensions will only be taxed in Spain.

Income derived from real estate (article 6 CDI):

Income from real estate property located in the United Kingdom can be taxed in both 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 CDI):

British-source dividends may be taxed in Spain in accordance with its domestic legislation. These dividends, in general, may also be subject to taxation in the United Kingdom, if this is the State in which the company paying the dividends resides and according to its internal legislation, but if the recipient of the dividends is the beneficial owner resident in Spain, the The tax thus required in the United Kingdom will have a maximum limit of 10% or 15% of the gross amount of the dividends. The resident taxpayer would have the right to apply the deduction for international double taxation in Spain in personal income tax up to that limit.

Interest (article 11 CDI):

Interest originating in the United Kingdom and whose beneficial owner is a resident of Spain can only be taxed in Spain.

Remuneration of members of the boards of directors of companies resident in the United Kingdom (article 15 CDI):

They can be taxed in both the United Kingdom and 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 CDI) : Gains obtained from the sale of real estate located in the United Kingdom may be subject to taxation in both 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 that belongs to a permanent establishment (article 13.2 CDI ): Gains obtained from the disposal of movable property belonging to a permanent establishment that a resident of Spain owns in the United Kingdom for the purpose of carrying out business activities, including gains derived from the disposal of the permanent establishment, may be subject to tax both in the United Kingdom and in the United Kingdom. Like in Spain. The taxpayer has the right to apply the deduction for international double taxation in Spain in personal income tax.

• Derived from the sale of shares , other than those that are traded substantially and regularly on a Stock Exchange, participations, or similar rights, whose value arises more than 50 per cent , directly or indirectly, of immovable property situated in the United Kingdom (article 13.4 ILC ) : They can be taxed in both the United Kingdom and Spain. The taxpayer has the right to apply the deduction for international double taxation in Spain in personal income tax.

• Derived from the alienation of shares or participations or other rights that, directly or indirectly, grant the owner of said shares, participations or rights, the right to enjoyment of property real estate located in the United Kingdom (article 13.5 CDI): They can be taxed in both the United Kingdom and Spain. The taxpayer has the right to apply the deduction for international double taxation in Spain in personal income tax.

• Derived from the alienation of any other asset other than of those mentioned in sections 1, 2, 3, 4 and 5 of article 13 (article 13.6 CDI): They can only be taxed in Spain.

In addition to those mentioned above, the Agreement lists other types of income (business profits, remuneration for work, artists and athletes, public functions, other income...), the treatment of which can be consulted in its text.

III.-Obligation to provide information on assets abroad

People residing in Spain must inform the Spanish tax administration about three different categories of assets and rights located abroad:

• accounts in financial institutions located abroad
• securities, rights, insurance and income deposited, managed or obtained abroad
• real estate and rights over real estate located abroad

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

There will be no obligation to report on each of the categories of goods when the value of the set of goods corresponding to each category does not exceed 50,000 euros. Once the informative declaration has been submitted for one or more of the categories of assets and rights, the presentation of the declaration in subsequent years will be mandatory when the value has experienced an increase of more than 20,000 euros compared to that which determined the presentation of the last declaration. .

Telephone 91 554 87 70 / 901 33 55 33

https://sede.agenciatributaria.gob.es