I am frequently asked about tax on UK pensions, questions along the lines of whether residents should be paying tax here on UK pensions, both state and occupational pensions where providers deduct any tax necessary at source. People ask if they should be filling in tax returns here as well, and whether that actually means they’ll be paying tax twice. Mostly, they ask for easy-to-understand information in English.
As I’ve said before, I’m not able to answer tax questions, because I’m neither informed nor qualified, but I know a man who is! Given the number of times I’m asked these sorts of questions, I’ve now asked for clarification from Paul Montagueof Blevins Franks, and as usual he has come up trumps. I’m very grateful to him for the following answer, and recommend him for any further assistance anyone requires.
If an individual is a tax resident in Spain, or a de-facto tax resident meaning that they are living here but not making a declaration of any kind (and these are being hunted as we speak), then under normal circumstances they have an obligation to declare their total incomes received from anywhere in the world on a yearly tax return here in Spain. This return should be made sometime from the 1st of May and before the end of June and refer to income(s) received from the previous tax year; which is a calendar year here in Spain. State pensions, company pensions and private pension fund/SIPP payments should be included.
When you make your first tax return in Spain, you will be met with a tax bill which you obviously have to pay. So for a period, you are/have actually paid taxes on the same income in both the UK and Spain but be assured that this can be dealt with. As follows…when you pay your Spanish taxes for the first time, your accountant can then ask the Hacienda (the Spanish tax office) to provide a tax certificate which is written in both Spanish and English and clearly states that from a certain date, you are a tax resident in Spain. This certificate should be included with THIS form (also available HERE), completed and sent to the tax office – address included on the front page of this form. The individual would then receive a return of tax paid (from the HMRC) when he or she became tax resident in Spain and there would be no future tax collections taken from your UK sourced income.
It sounds messy but is quite a simple affair which usually takes about 6 weeks to complete. I would advise that everyone makes a return even if this would be a nil return as you would benefit from this for example, you would not have to pay the non-resident tax on your main home in Tenerife or importantly, your main home could avoid succession taxes on death if certain criteria is met. Be aware that you do not have a choice where you pay your taxes.