Moving to Tenerife : Fiscal Residence and Keeping things straight
Getting a residencia certificate (a green wallet sized piece of paper) with your NIE printed on it is often confused with being fiscally resident.
Theoretically you could be staying for longer that 90 days in a Spanish tax year – and so required to comply with immigration regulations and get a residencia certificate – but then you could revoke the certificate after 170 days and go to another country outside of Spain. In that example you would not be fiscally resident in Spain.
Realistically if you have cut ties with the UK and only return infrequently (see UK statutory residence test rules) http://www.hmrc.gov.uk/international/personal.htm and here then you will most likely be both resident for immigration purposes and also fiscally resident.
The following is a new arrival check list – this is VERY simplified basic aid and you should check on your own individual circumstances.
• Purchase or rental of permanent home in Spain – in order to do this you will need an NIE number, initially you obtain this on a NON Residents A4 white certificate (see NIE info) you will most likely also have a non residents bank account in Spain at this stage.
• Register on the local authority (Ayuntamiento) census list “Padron”
• Obtain your green Residencia certificate complying with health care and income regs.
• Advise the Spanish Tax office that you will be liable to pay income tax in Spain (modelo 30) – The Spanish tax year is from January to December, so you may not necessarily do this in the first year you arrive:
eg Mr Smith arrives in Tenerife and purchases a property on the 1st November, as he intends to stay for longer than 90 days he applies for a residencia certificate but as there are only 61 days left in the tax year of his arrival, he does not advise the Spanish Tax office of his obligation until the 2nd Jan of the next year.
• Advise all pension and income providers including the UK tax authorities of your new fiscal status and address.
• Advise your Spanish bank and obtain a Residents Bank Account
• You may well still be paying tax in the UK at this point until you can provide them with a certificate of fiscal residence in Spain.
• If you are employed or self employed you will be making Spanish tax contributions and can obtain your certificate of fiscal residence in Spain straight away.
• If your income is derived from Pensions or private means you will have to make a “Declaración de la Renta” – a Spanish individual’s tax return before the Spanish authorities will confirm you fiscal status. This is done between the end of April and the end of June of the year following the tax year in question.
Eg: In our example above let’s say Mr Smith arrived in November 2017, his first full tax year in Spain is Jan to Dec 2018 his first Declaración de la Renta will be in 2019.
• Once you have your certificate of fiscal residence in Spain you can use form “Spain individual” together with a copy of your Spanish Fiscal Residents certificate to reclaim tax paid to the UK under the double impositions agreement. You should also forward a copy of the certificate to your UK Bank or banks to confirm your fiscal status with them.
• Exceptions to this are some“functionary’s pensions (teachers, civil servants etc.) -( this part of your income is taxed in the country of origin although the amount received contributes to calculating your taxable base) and income from rents of property located in the UK – you can apply for inclusion in the Non Resident Landlords (NRL) Scheme – http://www.hmrc.gov.uk/international/nr-landlords.htm
• In simplified terms from the moment you are classified as fiscally resident in Spain your world wide income is taxable in Spain.
AMNESTY 2015 In 2015 there was an amnesty quote – The Spanish government has discovered though exchanges of information with other countries that many residents of Spain are receiving pensions from overseas but not declaring them properly for taxation in Spain. The government decided that as these circumstances applied to mainly older people recently moved to Spain, there would be a voluntary period from 1 January 2015 until the 30 June 2015 for them to regularise their tax situation without penalties, surcharges or interest on the back tax owed.
So, anyone who had been resident in Spain for tax purposes (generally living here for more than 183 days in a calendar year) who received but did not properly declare their pension income from overseas had an opportunity to remedy the position without penalty. Unfortunately that ship has sailed and late submissions will be penalised.
New UK/Spain Double Taxation Agreement from 2015
A new version of the double tax agreement between Spain and the UK came into full force on 1 January 2015.
One of the changes closes the loophole whereby persons resident in Spain and receiving a UK government pension may obtain the benefit of personal allowances in both countries.
Spanish tax returns from 2015 will account for UK government pensions (Crown pensions) as using up the Spanish personal tax-free band. The pension income itself will continue to be taxed only in the UK, but other income such as a UK state pension may now be pushed into a higher tax rate band.