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Don't Get Caught by the Taxman!
You have lived in Spain for 6 years, your lawyer told you that you did not need to pay tax, when you bought your house "because you get a pension fron the UK". Wrong!! The Spanish Tax Laws, which have not changed, state CATEGORICALLY that if you spend more than 183 days per calendar year in Spain, you have to register in the Spanish Tax system. "Double taxation agreement" does not mean that you can CHOOSE where you pay your taxes. There are exceptions, for example if you have worked for the British Government as a civil servant or member of the armed services, you can only be taxed in the UK on that income. If you get a state pension and other private pensions from occupations you may have had after leaving government service,then those incomes must be declared and taxed in Spain. Failure to register can result, not only in fines for non-submission of tax declarations, but the tax itself. The Spanish Tax Authorities presume that if you haven't registered, you are "non-resident" therefore should be paying "wealth tax" (which we believe was abolished in January 2008, though you will still have to pay it for 2007). This may become a problem, if you are lucky enough to sell your house in the current market place, as the notaries will only accept evidence from the Agencia Tributaria that you are registered as a tax resident. If you cannot prove it, they will not only withold 3% to cover capital gains tax (from which you would be exempt if you have been a tax resident for 3 years and are over 65), but they willl ask if you have paid wealth tax. If your answer is "no" then they will calculate 5 years worth of wealth tax and deduct from your net sale proceeds. Tax residency also gives you higher Succession Tax allowances, once you have been in the system3 years and in the same house, which must be your main residence for 2 years. Should you have any doubts as to your tax status, please consult an adviser, who speaks your language and take steps to become "legal". |
Taxation
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February, 2012
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