Spain Non Lucrative Visa: Understanding the Spanish Tax System for Pensions and Savings

By
Bruno Bianchi
-

Question

Could someone please explain the tax system in Spain? We will have an Spain Non Lucrative Visa, so I am particularly interested in how pensions and savings are taxed.

Answers

These are the answers of Spainguru’s Facebook group members:

“Here are some key points to understand about Spanish taxes:

  1. Tax Residency:
    If you live in Spain for more than 183 days in a calendar year, you become a tax resident and are taxed on your worldwide income.
  2. Income Tax (IRPF):
    Spanish income tax is progressive, ranging from 19% to 47%, depending on your income level and region.
  3. Pension Income:
    UK or US state and private pensions are generally taxable in Spain if you are a tax resident. However, under the UK-Spain Double Taxation Agreement, taxes paid in the UK or US can reduce your Spanish tax liability and viceversa.
  4. Savings and Investments:
    • Interest, dividends, and capital gains are taxed at savings income tax rates:
      • 19% on income up to €6,000.
      • 21% on income from €6,001 to €50,000.
      • 23% on income exceeding €50,000.
    • ISAs and similar tax-free accounts in the UK are not exempt in Spain.
  5. Wealth Tax:
    Spain imposes a wealth tax on global assets above €700,000 (varies by region, some starting at €500,000), with an exemption of up to €300,000 for your primary residence.
  6. Spain Non Lucrative Visa (NLV):
    The NLV prohibits employment or business activities in Spain, but passive income like pensions, savings, or rental income is allowed. Ensure your pension income and savings meet the minimum income requirements for visa renewal (around €28,800 + 7,200 annually for a couple in 2024).
  7. Tax Reporting:
    • As a tax resident, you must file an annual income tax return (Declaración de la Renta) by June 30 for the previous year.
    • If your worldwide assets exceed €50,000, you must also file Modelo 720 to declare foreign assets.
    • Practical Steps for UK Nationals on the NLV:
    • Check the UK-Spain Tax Treaty: It determines how pensions are taxed. Usually, private pensions are taxable in Spain, while some public sector pensions remain taxable in the UK.
    • Exchange Rate Impact: Your pension and savings income will be converted to euros, so be mindful of currency fluctuations.
    • Seek Professional Advice: A Spanish tax advisor or gestor can help you optimize your taxes, ensure compliance, and navigate complexities like wealth tax.
    • Check out this article: Taxes in Spain for UK expats moving to Spain “
Spain Non Lucrative Visa Understanding the Spanish Tax System for Pensions and Savings

“Based on where you live in Spain, the annual worldwide wealth tax can be very significant. We were given inaccurate advice before moving to Catalunya and are now considering relocating to a region with a lower wealth tax rate.”

“If your income comes from a single source and is below €17,000 annually, you might not need to file a tax return.”

“As a tax resident, reporting is mandatory:

  • Income Tax: Reported from March to June for the previous year.
  • Asset Reporting: Modelo 720 is filed in January to declare worldwide assets above €50,000.”

“Government pensions like teacher or police pensions are often taxed in the country of origin, not in Spain, due to tax treaties.”

“Private pensions are taxed in Spain, but public pensions (like those for teachers or police) are taxed only in the US if you’re a US citizen.”

“Consulting a tax advisor in the region where you’ll live is highly recommended. Every region has different tax rates and rules, and expert advice can save you money.”

Conclusion

Understanding Spain’s tax system is crucial for those moving under a Non-Lucrative Visa. Spanish tax residency is determined by spending over 183 days annually in the country, with taxation on worldwide income and assets.

Pensions are often taxable in Spain, except for some government pensions under tax treaties (E.g. USA or UK with Spain).

Wealth tax varies significantly by region, so researching or consulting a local tax advisor can optimize your financial planning.

Compliance with tax reporting obligations, including income tax and Modelo 720 for asset declarations, is essential for a smooth transition. Consult with recommended tax experts here.

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Make sure to join our dedicated Spanish Non Lucrative Visa group here!

Disclaimer:
This article is for informational purposes only and is based on general insights about the Spanish tax system and Non-Lucrative Visa requirements. It does not constitute legal, tax, or financial advice.

Tax laws and regulations in Spain may vary by region and are subject to change. For personalized guidance tailored to your specific situation, consult a qualified Spanish tax advisor or legal expert.

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