The UK/Spanish Tax Treaty of 1975 avoids Spanish tax exposure in only a few limited cases. In most instances, pensions received in Spain by a Spanish tax resident will be subject to Spanish income tax even where such income would be deemed tax free in the UK. It is also recommended that pension advice is sought before taking up permanent residence in Spain especially if UK tax free lump sums are about to be received, as such sums received before moving to Spain would remain outside of the Spanish tax net.
Civil Service Pensions covered under the UK/Spanish Tax Treaty: Individuals who have worked within the British civil service such as policemen, people in the armed forces, the fire service, local authorities, the diplomatic service etc. are not subject to Spanish income taxes. However, it should be noted that people who worked for the National Health Service are not covered under the Treaty provisions and are subject to Spanish taxes whether or not tax has already been paid in the UK.
UK State Pensions: This is not covered under the Tax Treaty and hence will be taxable in Spain even if tax free in the UK.
Private Pensions: Private pensions received in Spain by fiscal residents are taxable in Spain. Notwithstanding this, some purchased annuities benefit from tax exemptions of up to 80% on the Spanish received lump sum. For this reason, it is always recommended that the structure of your pension is carefully analysed by a qualified expert BEFORE moving to Spain.
Avoiding Double Taxation: United Kingdom/Spain Double Taxation Convention (SI 1976 Number 1919) - As has it been stated, in most instances pensions received in Spain will be subject to Spanish taxes. To avoid the situation of being taxed on the same amount in both the UK and Spain it is necessary to complete a FD9 Form for an Application for the relief at source from United Kingdom Income Tax and Claim to repayment of United Kingdom Income Tax - This form is for use by an individual resident of Spain receiving pensions, purchased annuities, interest or royalties arising in the UK. When completing a FD9 Form, you are consenting to the Spanish Revenue (Hacienda) certifying to the UK Inland Revenue that you are resident in Spain for the purposes of Spanish tax. The exact procedure is that you would download a Pdf File form the Inland Revenue Website, complete the FD9 Form and send it to the Delegation de Hacienda del domicilio fiscal whereupon they would stamp it and return it to the Inland Revenue. Once received, the Inland Revenue would allow sums to be forwarded to Spain free of UK income tax. At the time of writing the website co-ordinates were: http://www.inlandrevenue.gov.uk/cnr/spain-individual.pdf
Contact Details:
UK Inland Revenue - Centre for Non-Residents, Filz Roy House,
PO Box 46, Nottingham, England NG2 1BD Or phone the Centre for Non-Residents during UK office hours. Our contact numbers are + 44 151 210 2222 if calling from outside the UK, or 0845 070 0040 if calling from the UK.
