Taxes in Spain for UK expats moving to Spain

Taxes in Spain can be a complex endeavor for UK expats moving to Spain. In this article, we will explore the key aspects of Spanish taxation to consider if you are planning to relocate to the country.

Determining Tax Residency

Tax residency determines where you owe taxes on your worldwide income.

In Spain, you are considered a tax resident if you spend more than 183 days within the calendar year in the country. These days do not need to be consecutive, and short trips away from Spain are usually counted as days spent in Spain unless you demonstrate residency elsewhere.

Additionally, your economic ties can establish tax residency. If your primary employment or main business activities are in Spain, you might be considered a resident for tax purposes. Family ties also play a role; if your spouse or dependent children are residents of Spain, you may be deemed a tax resident, barring evidence to the contrary.

Comparatively, the UK uses a similar 183-day guideline but also includes additional tests such as the presence of a home or full-time employment to determine residency under the Statutory Residence Test (SRT).

For UK expats, these distinctions are essential. While the Double Taxation Agreement between the UK and Spain prevents double-taxing the same income, professional advice is recommended to navigate these complex rules effectively.

The UK/Spain Double-Taxation Treaty

Understanding the UK/Spain Double-Taxation Treaty is essential for UK expats moving to Spain, as it significantly impacts how “Taxes in Spain” are applied to various forms of income. The treaty serves an decisive purpose and offers multiple benefits:

1. Purpose of the Treaty: The primary aim of the Double-Taxation Treaty between the UK and Spain is to prevent the same income from being taxed by both countries. This agreement facilitates tax relief and credit for taxes paid in one country when the same income is subject to tax in the other country.
2. Common Misconceptions: There are several misconceptions about the treaty that can lead to confusion. One major misunderstanding is that the treaty allows individuals to choose where they pay their taxes. In reality, the treaty does not provide the freedom to select the tax jurisdiction but rather lays out rules based on residency and the source of income to determine where taxes should be paid.
3. Impact on Various Income Forms: The treaty specifically details how different types of income—such as wages, pensions, rental income, and dividends—are taxed. For instance, while employment income is generally taxed in the country where the work is performed, pensions might be taxed in the country of residency. Importantly, tax credits are applied to prevent double taxation, which means if tax is paid in the UK, it can be offset against the tax due in Spain, and vice versa.

For UK expats, these treaty nuances are vital. They ensure that individuals do not pay more tax than necessary and help in planning tax obligations efficiently across borders. Understanding these elements often requires professional advice to navigate effectively and benefit from the protections offered by the treaty.

Current Taxes in Spain Structure

For UK expats moving to Spain, grasping the nuances of the Spanish tax system is necessary. The tax structure in Spain has specific implications for both residents and non-residents, and understanding these can significantly affect how Taxes in Spain are calculated.

Distinction Between General Taxable Income and Savings Income:

• General Taxable Income includes wages from employment, self-employment income, and rental income.
• Savings Income covers income such as interest, dividends, and capital gains from financial investments.

Tax Rates for Residents vs. Non-Residents:

• Residents are taxed on their worldwide income, which means that all income, regardless of where it is generated, is subject to Spanish tax. The rates for residents are progressive, meaning they increase as the income level rises.
• Non-Residents are taxed only on their income that originates in Spain. The rates for non-residents are typically fixed at 24% for general income and 19% for savings income derived from Spanish sources.

Progressive Tax Scales and Regional Variations:

• The progressive tax rates for residents vary not only with the level of income but also by region. Spain’s autonomous communities can adjust the state’s tax rates to better suit regional fiscal needs, which means the tax rate in one region can differ significantly from another.
• This regional variation affects both parts of the general income tax—state and regional—resulting in a combined tax rate that can vary from one part of the country to another.

Allowances and Deductions Specifics for Different Income Types

In addition to understanding the broad categories of income tax, UK expats should consider the specific allowances and deductions applicable to various income types. For instance, for general income like salaries and pensions, the tax rates in regions like Andalucia start from 19% for income up to €12,450 and escalate to 47% for income over €300,000. Meanwhile, income from savings and investments is taxed at rates ranging from 19% to 27%, depending on the amount, reflecting the progressive nature of Spain’s tax system.

Personal Tax Allowances for Spanish Tax Residents

Allowance Type	Criteria	Amount (in EUR)
Individual Allowance	General adult allowance	€5,550
Age-Based Allowance	65 years and over	€6,700
Senior Age-Based Allowance	75 years and over	€8,100
Pension Income Allowance	Additional for pension income	€2,000
Minimum Income Requirement	No tax return if earned income is below	€14,000

Child Allowance for Spanish Tax Residents

Child Number	Allowance Amount (in EUR)	Additional Info
First child	€2,400	–
Second child	€2,700	–
Third child	€4,000	–
Fourth & additional children	€4,500	–
Additional for child under 3	€2,800	Applies to each child under 3

Understanding these distinctions and how they apply can help UK expats plan their finances more effectively while living in Spain. Given the complexity of the tax system, particularly with regional variations, consulting with a tax professional is often recommended to ensure compliance and optimize tax strategies.

Taxes in Spain and Your Pension

The taxation of pensions can vary significantly depending on one’s residency status and the source of the pension. It’s essential to understand how both UK state and private pensions are taxed for residents and non-residents of Spain, especially in light of Spain’s tax laws and international agreements like the UK/Spain Double Taxation Treaty.

Taxation of UK State and Private Pensions in Spain

• Residents: : Individuals who are tax residents in Spain are required to pay Spanish income tax on their global income, including both UK State pensions and private pensions. These pensions are treated as general income, which means they are subject to Spain’s progressive tax rates. Residents must notify HMRC about their tax residency status and provide a certificado de residencia fiscal (NEN form) obtained from their local Spanish tax office to ensure they are not taxed in the UK under PAYE conditions.
• Non-Residents: UK expats who are not tax residents in Spain will generally have their pension taxed in the UK. However, any pension income from sources within Spain would be subject to Spanish taxes at non-resident rates. Until HMRC is notified of the individual’s tax residency via the appropriate certificate, UK income tax may still apply under PAYE, with any overpayments being reclaimable.

Special Considerations for Public Pensions

Public pensions, such as those for government service, typically continue to be taxed in the UK regardless of the tax resident’s status in Spain. However, there are exceptions, like for NHS pensions, which may be subject to different rules under the Double Taxation Treaty.

Effects of the Double Taxation Treaty on Pensions

The UK/Spain Double Taxation Treaty ensures that pensions are taxed only in one country—typically the country of residency. This treaty provides relief from double taxation, meaning any tax paid in the country of source can be offset against tax liabilities in the country of residence. It’s crucial for pension recipients to understand how this treaty affects their specific types of pension income.

Considerations for Non-Residents and Lump Sum Withdrawals

With the introduction of new pension rules, if a resident in Spain considers taking a lump sum from their pension (whether tax-free or otherwise in the UK), it may be taxable in Spain under the Spanish Savings Income Tax. Therefore, it’s essential to seek independent financial advice to understand the tax implications of any lump sum withdrawals or other significant decisions regarding pensions.

Treatment of Annuities and Temporary Annuities

For UK expats with annuities, the taxable amount in Spain varies with the age at which the annuity was purchased. Life annuities purchased before the age of 40 have 40% of their payments subject to tax, decreasing progressively with age. This tax structure ensures that the older the individual at the time of purchase, the less tax impact on the annuity payments, with those purchasing past 70 years only taxed on 8% of the payments. Temporary annuities have a fixed term and are taxed on a smaller portion of the payments, ranging from 12% to 25%, based on the term length.

Taxes in Spain and Your Investments

For UK expats moving to Spain, understanding how investments are taxed is essential for efficient financial planning and managing “Taxes in Spain.” The Spanish tax system categorizes various forms of investment income, each subject to different tax treatments depending on the resident’s status.

Categories of Taxable Investments for Residents:

• Residents in Spain are taxed on their worldwide income, which includes all forms of investment income. This encompasses dividends from shares, interest from bank deposits, rental income from property, and capital gains from the sale of assets.
• The tax is levied on a progressive scale, with rates increasing with the amount of income. This comprehensive approach ensures that all investment income is integrated into the taxable base and taxed accordingly.

Special Tax Considerations for Dividends, Capital Gains, and Insurance-Related Income:

• Dividends: Received from company shares, dividends are subject to a savings tax, which applies at progressive rates starting from 19% up to 23% as the income increases. This is part of the broader savings income tax structure.
• Capital Gains: Income from selling assets such as stocks or real estate is also taxed under the savings income category. The rates are the same as those for dividends, encouraging careful planning around the timing of asset sales.
• Insurance-Related Income: Proceeds from life or disability insurance that involve an investment component (e.g., certain types of annuities) are taxed as savings income. However, if there’s an excess over what is considered a return on capital, it might be taxed as general income.

Understanding these nuances is critical for UK expats to manage their investment portfolios effectively while residing in Spain. Considering the complexity of tax implications for various investment income types, professional advice is highly recommended to ensure compliance and optimize tax liabilities.

Taxes in Spain on Property

For UK expats moving to Spain, the taxation of property, both in Spain and the UK, is a significant consideration. Different rules apply to rental income, capital gains from property sales, and local taxes, all of which impact “Taxes in Spain.”

Taxation of Rental Income from UK and Spanish Properties:

• UK Properties: Rental income generated from UK properties remains taxable in the UK. However, if the owner is a tax resident in Spain, this income must also be declared in Spain. The UK/Spain Double Taxation Treaty allows for a tax credit for taxes paid in the UK to be offset against Spanish tax liabilities.
• Spanish Properties: Rental income from properties located in Spain is taxed differently for residents and non-residents. Non-residents from EU/EFTA countries are taxed at 19%, while non-EU/EFTA residents pay 24%. Residents incorporate this income into their general taxable base, with rates depending on the overall income.

Capital Gains Tax Considerations for Property Sales:

• When selling property, capital gains tax is applicable in the country where the property is located. In Spain, residents pay a rate of 19% to 26% on the gain, the difference between the selling price and purchase price, adjusted for any allowable expenses. Non-residents pay a flat rate of 19%.
• Special exemptions may apply to residents over 65 or those reinvesting the proceeds into another primary residence in Spain.

Capital gains tax in Spain not only applies to the sale of properties but also to other assets such as stocks and securities. The tax rate varies depending on the autonomous community and can significantly affect financial outcomes for UK expats. For example, in regions like Andalucia, there are substantial exemptions for capital gains on inheritances passed to immediate family members, highlighting the need for detailed understanding of regional tax laws.

The impact of Tax residency on where capital gains tax (CGT) is paid

Here are two examples to illustrate the impact of tax residency on where capital gains tax (CGT) is paid when selling a house, based on the timing of the sale and subsequent move to Spain:

Example 1: Becomes a Tax Resident in Spain

Scenario:

• John sells his house in the UK in January 2024 for a significant profit.
• He moves to Spain in April 2024 and stays there for more than 183 days within the calendar year, making him a tax resident of Spain for the year 2024.

Tax Implications: Since John becomes a tax resident in Spain in the year of the sale, he will be subject to Spanish tax rules regarding global income, which includes capital gains from the sale of his UK property.

• Capital Gains Tax: As a resident, John must declare the gain from the sale of his UK property on his Spanish tax return. Spain has a double taxation agreement with the UK, which generally means he won’t pay tax on the same income in both countries. He would declare the gain in Spain and could claim a credit for any taxes paid in the UK to prevent double taxation.
• Rate: The applicable CGT rate in Spain for residents ranges from 19% to 26%, depending on the total amount of the gain.

Example 2: Does Not Become a Tax Resident in Spain

Scenario:

• Emma sells her house in the UK in January 2024, also realizing a significant profit.
• She moves to Spain in July 2024 but does not stay long enough to become a tax resident within the year 2024.

Tax Implications: Emma does not become a tax resident in Spain during the year of the sale; therefore, she is not required to declare her UK capital gains on a Spanish tax return for 2024.

• Capital Gains Tax: As Emma remains a non-resident of Spain for the tax year 2024, she only needs to address the tax implications in the UK. The UK will tax the capital gains from the property sale, and since she does not become a Spanish tax resident, Spain will not tax this income.
• Rate: In the UK, the capital gains tax for residential property sales can vary, but it includes a higher rate for individuals with higher income, typically around 28% after accounting for the annual exempt amount.

Local Taxes Applicable to Property Owners in Spain:

• All property owners in Spain are subject to the local property tax known as “Impuesto sobre Bienes Inmuebles” (IBI), which is calculated based on the cadastral value of the property and varies by municipality.
• Additionally, non-residents owning property in Spain are subject to an imputed income tax, calculated on a notional rental value of the property, even if it is not actually rented out.

These taxation nuances are important for UK expats to understand, whether they own property in Spain, the UK, or both, and whether they are residents or non-residents, as they influence overall tax liabilities and investment returns on property.

At SpainGuru, we emphasize the importance of consulting experienced tax advisors who specialize in both Spanish and UK tax regulations. By doing so, you can ensure that your unique circumstances are thoroughly considered and that you meet your tax obligations both efficiently and within legal bounds.

Owning Spanish Property

Owning property in Spain entails several tax obligations that UK expats must consider when moving to Spain. These include annual local taxes, taxes on imputed income for holiday homes, and specific tax implications that differ for residents and non-residents.

Annual Taxes for Property Owners (IBI):

• All property owners in Spain are required to pay the local property tax known as “Impuesto sobre Bienes Inmuebles” (IBI). The amount of this tax is determined based on the cadastral value of the property, which is an assessed value set by municipal authorities. The rate applied can vary significantly from one municipality to another, impacting the overall tax burden for property owners.

Tax on Imputed Income for Holiday Homes:

• For properties that are not rented out but are considered second homes or holiday homes, owners must pay tax on imputed income. This tax is calculated based on a notional rental value assigned to the property, which is considered as income by the tax authorities. The rate of this tax for non-residents is set at a fixed percentage of the cadastral value.

Tax Implications for Both Residents and Non-Residents Owning Spanish Properties:

• Residents: Those who are tax residents in Spain and own property must declare any income from these properties as part of their worldwide income, including potential rental income or gains from the sale of the property. They benefit from certain deductions and allowances that might lower their taxable base.
• Non-Residents: Non-residents owning property in Spain are taxed only on income derived from Spain, such as rental income or gains from property sales. The rates are fixed and generally do not benefit from the deductions and allowances available to residents. Non-residents are also subject to the aforementioned imputed income tax on properties that are not let out.

Understanding Taxes in Spain is imperative for UK expats who own or are considering purchasing property in Spain, as they affect the total cost of ownership and the investment’s profitability.

Taxes in Spain and Offshore Banking

For UK expats moving to Spain, managing offshore banking and understanding the associated tax implications are key aspects of financial planning. Taxes in Spain can significantly affect the treatment of income from offshore sources, and the UK/Spain Double Taxation Treaty plays an important role in how this income is taxed.

Tax Implications for Offshore Accounts Held by Spanish Residents:

• Spanish residents are subject to tax on their worldwide income, which includes any income derived from offshore accounts. This encompasses interest, dividends, and potentially other forms of income depending on the nature of the offshore investments. The tax rates applied are consistent with those for domestic income, falling under the general or savings income categories depending on the income type.
• It’s important for residents to declare all such income on their Spanish tax returns. Failure to report income from offshore accounts can lead to penalties and interest on unpaid taxes.

Impact of the Double Taxation Treaty on Offshore Income:

• The UK/Spain Double Taxation Treaty helps mitigate the risk of double taxation on the same income in both the UK and Spain. For income earned in offshore jurisdictions, the treaty ensures that tax paid in one of the treaty countries can be credited against the tax owing in the other, depending on the nature of the income and the specific provisions of the treaty.
• This treaty affects how offshore income is taxed by allowing for deductions or credits in Spain for taxes paid elsewhere, thereby reducing the overall tax burden on the taxpayer. This is particularly relevant for interest and dividends from UK sources, where withholding taxes might have been applied.

Wealth Tax in Spain

Wealth tax is an important consideration for UK expats living in or moving to Spain, as it applies to both residents and non-residents with assets in Spain. Understanding the liability for wealth tax and how it varies by region can significantly impact financial planning and tax liabilities.

Liability for Wealth Tax for Both Residents and Non-Residents:

• Residents: In Spain, residents are subject to wealth tax on their worldwide assets. This includes real estate, bank balances, investments, and valuable items like art and jewelry. The tax is calculated based on the total value of all taxable assets minus any debts or liabilities.
• Non-Residents: Non-residents are only liable for wealth tax on their Spanish assets. This means that only property and other investments located within Spain are subject to this tax.

Regional Variations in Wealth Tax Rates and Allowances:

• The rates and allowances for wealth tax can vary significantly from one autonomous community to another within Spain. Each region has the authority to set its own rates and allowances, which can result in a substantial difference in tax liability based on where an individual’s assets are located or where the resident lives.
• Generally, there is a tax-free allowance of €700,000, which can be increased by regional adjustments. For instance, some regions offer higher allowances, and others might provide relief measures such as increased deductions for certain types of assets.

This knowledge is particularly important for high-net-worth individuals who might face significant wealth tax liabilities without proper planning.

Tax and Marriage in Spain

For UK expats moving to Spain, understanding the tax implications of marriage is key. Spain offers specific taxation options and benefits for married couples, which can lead to potential savings and more efficient tax planning.

Taxation Options for Married Couples in Spain:

• Married couples in Spain have the option to file Taxes in Spain jointly or separately. Joint filing can be beneficial in situations where one spouse earns significantly more than the other, potentially leading to a lower combined tax rate due to the averaging of income. Alternatively, couples may choose to file separately if it results in lower overall tax liability, depending on individual incomes and deductions.

Allowances and Benefits Available to Married Couples:

• When opting for joint taxation, married couples can take advantage of specific allowances that increase their deductible income. The primary taxpayer can claim a general allowance, and there is an additional allowance for the second taxpayer, which can substantially reduce the taxable base.
• Spain also recognizes same-sex marriages, which are entitled to the same tax benefits as heterosexual marriages. However, it’s important to note that UK civil partnerships are not recognized as marriages in Spain for tax purposes. Couples in a civil partnership may need to undertake additional steps to enjoy similar tax advantages.

These taxation options and benefits are designed to provide flexibility and financial advantages to married couples living in Spain. Understanding these rules is essential for UK expats to ensure they are maximizing their tax benefits related to their marital status.

Inheritance Tax in Spain

Inheritance tax in Spain can significantly affect the financial planning of UK expats, both residents and non-residents. Understanding the general rules, rates, and the differences in tax liability based on residency status is crucial for anyone managing or inheriting estates in Spain.

General Rules and Rates for Inheritance Tax in Spain:

• Inheritance tax in Spain is applied to all assets and rights transferred through inheritance, including money, real estate, and other valuable items. The tax rates vary based on the relationship between the heir and the deceased, the value of the inheritance, and the autonomous community where the assets are located or where the deceased was a resident.
• The rates are progressive, starting at a low percentage and increasing with the value of the assets inherited. Each autonomous community in Spain can apply its adjustments to the base rates, potentially offering reductions or increased allowances.

Differences in Tax Liability for Residents and Non-Residents:

• Residents: Residents of Spain are taxed on their worldwide assets received as inheritance. This means that no matter where the assets are located, if you are a resident of Spain, you are likely to pay inheritance tax on them in Spain. However, residents can benefit from regional variations which may offer more favorable tax treatment depending on the autonomous community.
• Non-Residents: Non-residents are taxed only on Spanish assets. This includes real estate located in Spain or rights associated with Spanish entities. The tax rates are generally the same as those for residents, but non-residents do not benefit from the potential regional variations and must adhere to the state’s general rates.

It is key to ensure proper estate planning and to avoid unexpected tax liabilities. Given the complexities involved, particularly with regional variations, consulting with a tax professional is advisable to navigate the inheritance tax laws effectively.

Special Tax Regimes: The ‘Beckham Law’

The ‘Beckham Law’ is a special tax regime in Spain designed specifically for high-earning expatriate workers. Understanding this regime is crucial for UK expats who are considering moving to Spain and expect to earn a substantial income, as it can offer significant tax advantages.

1. Overview of the Special Tax Regime for High-Earning Expatriate Workers:
   • Initially popularized by the famous footballer David Beckham, this regime allows qualifying expatriate workers to be taxed under a more favorable system. Under this regime, an expat is taxed as a non-resident, despite being a resident in Spain. This primarily means they are taxed only on their Spanish-sourced income and not on their worldwide income.
2. Eligibility and Benefits of Opting for This Regime:
   • Eligibility: To qualify for the Beckham Law, expatriates must not have been a Spanish tax resident in the last 10 years before moving to Spain. Additionally, the work must be performed for a Spanish company, or if performed for a non-Spanish company, the majority of the work duties must be carried out in Spain.
   • Benefits: One of the primary benefits of this regime is the flat tax rate of 24% on incomes up to €600,000. Any income exceeding this threshold is taxed at a higher rate of 47%. Moreover, this regime simplifies the tax situation for new residents by excluding foreign-sourced income, which can be particularly advantageous for high earners who might otherwise be subject to Spain’s higher tax rates on global income.

This special tax regime is designed to attract skilled and high-value workers to Spain by offering them a reduced tax liability compared to standard resident rates. For UK expats who meet the eligibility criteria, opting for the Beckham Law could result in substantial tax savings and simpler tax compliance during their initial years in Spain.

Modelo 720: Declaration of Overseas Assets

The Modelo 720 is a mandatory declaration for Spanish residents concerning their overseas assets. It’s a critical compliance requirement for UK expats residing in Spain, especially for those with assets outside the country. Understanding the requirements and compliance details can help avoid potential fines and penalties.

Requirements for Declaring Overseas Assets by Spanish Residents:

• Spanish tax residents are required to report any overseas assets if the total value of these assets exceeds €50,000. These assets include bank accounts, investments, real estate, and rights or insurances held outside of Spain. The obligation to declare these assets is aimed at preventing tax evasion and ensuring that all relevant assets are known to Spanish tax authorities.

Deadlines and Compliance Details for Modelo 720:

• The deadline for filing Modelo 720 is between January 1st and March 31st of each year. It is important to note that this form is only required to be filed once unless there is a subsequent alteration in the asset value or ownership, such as acquiring new assets, disposing of existing ones, or if the value of an existing asset increases by more than €20,000 from the last declared value.
• Failure to file the Modelo 720, or incorrect filings, can lead to severe penalties, including fines that far exceed the undeclared assets’ value. Therefore, it is crucial for expats to ensure accuracy and timeliness in their declarations.

For UK expats living in Spain, the Modelo 720 is a significant declaration that must be handled with care to ensure full compliance with Spanish tax laws. Given the complexities and potential consequences of non-compliance, many expats benefit from seeking professional advice to navigate this requirement effectively.

A Case Study of a Retired Couple in Alicante

This detailed examination will focus on John and Mary, a 65-year-old couple residing in Alicante, who receive UK state pensions and have rental income from property in the UK.

Background and Income Details
John and Mary each receive a UK state pension of £40,000 annually, totaling £80,000. They also own a UK property valued at £300,000, generating £10,000 per year in rental income. As tax residents of Spain—spending most of the year there—they must declare their worldwide income, including these pensions and rental earnings.

Conversion to Euros
Using an exchange rate of 1 GBP = 1.14 EUR, their pension translates to €91,200, and their rental income to €11,400, summing up to a total income of €102,600.

Spanish Income Tax Obligations
In Spain, the tax system incorporates state and regional levies. Assuming Alicante’s tax rates, the couple faces the following brackets:

Up to €12,450 at 19%
€12,451 to €20,200 at 24%
€20,201 to €35,200 at 30%
€35,201 to €60,000 at 37%
Above €60,000 at 45%
After applying a personal allowance of €6,700 each for their age, their taxable income is adjusted down to €89,200. Their total Spanish tax liability then calculates to:

€2,365.50 for the first €12,450
€1,860 on the next €7,750
€4,500 on the next €15,000
€9,176 on the next €24,800
€13,140 on the remaining €29,200
Total Tax in Spain: €31,041.50

UK Tax Responsibilities
The UK taxes the rental income, with the first £1,000 exempt due to the property allowance, leaving £9,000 taxable at a basic rate of 20%, equating to £1,800 (or €2,052 after conversion).

Wealth Tax Considerations
As Spanish residents, the couple might be liable for wealth tax on their global assets, including the UK property. With a basic allowance of €700,000 each and an additional €300,000 for their primary residence in Spain, their net wealth needs careful calculation to determine any further tax liability.

Total Tax Summary
John and Mary’s total income in Euros stands at €102,600, with a combined tax burden from both countries totaling €33,093.50:

Total Spanish Tax: €31,041.50
Total UK Tax on Rental Income: €2,052

Tax Calculation Summary for John and Mary (Illustrative Purposes Only)

Description	Amount in GBP	Amount in EUR	Tax Rate	Tax Amount in EUR
Total Pension Income	£80,000	€91,200	–	–
Total Rental Income	£10,000	€11,400	–	–
Total Income	£90,000	€102,600	–	–
Taxable Income in Spain (after allowances)	–	€89,200	–	–
Tax on first €12,450	–	–	19%	€2,365.50
Tax on next €7,750	–	–	24%	€1,860.00
Tax on next €15,000	–	–	30%	€4,500.00
Tax on next €24,800	–	–	37%	€9,176.00
Tax on remaining €29,200	–	–	45%	€13,140.00
Total Tax in Spain	–	–	–	€31,041.50
UK Rental Income Taxable	£9,000	€10,260	20%	€2,052.00
Total Tax in the UK	–	–	–	€2,052.00
Grand Total Tax Paid	–	–	–	€33,093.50

Additional Notes

• Exchange Rate Used: 1 GBP = 1.14 EUR. This rate is applied to convert all GBP amounts to Euros for consistency and comparison purposes.
• Personal Allowances: John and Mary each benefit from an individual allowance of €6,700 for being over 65, which has been subtracted from their gross income to determine the taxable income in Spain.
• UK Property Allowance: The first £1,000 of rental income is not taxable under UK property income rules, with the remaining £9,000 taxed at the basic rate.
• Wealth Tax Considerations: Not included in this summary but significant for high-value assets owned by the couple in Spain and potentially in the UK.
• Modelo 720 declaration of Overseas assets: Given that John and Mary own a house in the UK valued at £300,000 (approximately €342,000 at an exchange rate of 1 GBP = 1.14 EUR) and have bank accounts or investments that might also exceed the €50,000 threshold, they are required to file the Modelo 720.

Summary

This overview has touched upon several key areas of Spanish tax law that are particularly relevant for expatriates.

1. Recap of the Main Points Covered:
   • Tax Residency: Determining tax residency based on physical presence or economic and personal interests is foundational for understanding tax liabilities in Spain.
   • Double-Taxation Treaty: The UK/Spain treaty helps prevent double taxation on the same income, providing mechanisms for tax relief.
   • Tax Structures: Different tax regimes for residents versus non-residents, and the specific treatment of income types like employment, pensions, and investments.
   • Property Taxes: The implications of owning property in Spain, including local taxes like IBI and imputed income taxes.
   • Wealth and Inheritance Taxes: Regional variations in wealth tax and the specific rules governing inheritance tax for residents and non-residents.
   • Special Regimes: The Beckham Law offers a favorable tax treatment for high-earning expatriates.
   • Asset Declaration: The Modelo 720 requirement underscores the need for transparency in declaring overseas assets.
2. Reminder of the Complexity of Tax Laws and the Importance of Personalized Professional Advice:
   • The intricacies of Spanish tax law can present significant challenges, particularly when dealing with international factors and various types of income and assets. Missteps in tax filing or planning can lead to severe penalties or missed opportunities for tax optimization.
   • It is highly recommended that UK expats seek personalized professional advice. A qualified tax advisor can provide tailored guidance that considers individual circumstances, ensuring compliance and optimizing tax strategies in accordance with Spanish laws and international agreements.

This article is provided for informational purposes only and does not constitute tax advice. Navigating the complexities of taxes in Spain, especially for UK expats, requires detailed and personalized understanding. At SpainGuru, we recommend consulting with experienced tax advisors who are experts in both Spanish and UK tax laws to ensure that your specific circumstances are properly addressed and that your tax obligations are met efficiently and legally.

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