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UK Income / fiscal residency

Posted: Tue Sep 8, 2020 9:26am
9 replies382 views6 members subscribed
Vpicton

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We live in the UK and are just starting to think about our long-term future. Our intention is to move to Mojacar and maybe own a rental property in the UK. Our income would likely Come from a share of a UK-based business and the rent from the house. From my understanding taxes are generally higher in Spain and we could take advantage of the double taxation rule, which should reduce our tax liability, but does anyone already have a similar situation, and have you ever done the calculations to verify that to be the case? 

Alicia 11

Posted: Tue Sep 8, 2020 10:08am

Alicia 11

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Posted: Tue Sep 8, 2020 10:08am

i don't think you can live in Spain and not be a tax resident and pay the relevant taxes.  you'll need an annual income of a set amount after Brexit and health care cover which is not cheap.  your tax here will depend on the income you receive which includes all of your worldwide income you need a qualified tax expert to advise you on that one.  if you are taxed on anything by the UK you may be able to claim it back from HMRC but you will have to pay it in Spain first.     

Alicia 11

Posted: Tue Sep 8, 2020 5:28pm

Alicia 11

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Posted: Tue Sep 8, 2020 5:28pm

check Dario's latest posting on the after Brexit position for UK coming to Spain tells you a lot

DarioMartin

Posted: Tue Sep 8, 2020 11:24pm

DarioMartin

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Posted: Tue Sep 8, 2020 11:24pm

Alicia 11 wrote on Tue Sep 8, 2020 5:28pm:

check Dario's latest posting on the after Brexit position for UK coming to Spain tells you a lot

I also had Ian remind me that a Non Lucrative Visa doesn’t give you the right to work in Spain - so you can’t come here with an NLV then get a job - you need a work permit, which is not easy to get.

Vpicton

Posted: Wed Sep 9, 2020 4:46am

Vpicton

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Posted: Wed Sep 9, 2020 4:46am

Thank you for your answers. It was really the OECD Model Tax Convention that I was thinking about. It states:

a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests);b) if the State in which he has his centre of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

This (to me) makes it sound like if I have a UK business and UK family then I could be taxed in the UK. I may be wrong and realise that I will need to consult an expert, but just wondered whether anyone else had done something similar.

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DarioMartin

Posted: Wed Sep 9, 2020 7:34am

DarioMartin

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Posted: Wed Sep 9, 2020 7:34am

Vpicton wrote on Wed Sep 9, 2020 4:46am:

Thank you for your answers. It was really the OECD Model Tax Convention that I was thinking about. It states:

a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital ...

...interests);b) if the State in which he has his centre of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident only of the State in which he has an habitual abode;c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident only of the State of which he is a national;d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

This (to me) makes it sound like if I have a UK business and UK family then I could be taxed in the UK. I may be wrong and realise that I will need to consult an expert, but just wondered whether anyone else had done something similar.

Spain regards you as tax resident if you spend more than 183 days a year here, which you are obliged to do to fulfill the continuing residency requirement required to maintain Residencia.

You will need a good Tax specialist, but I’m certain he or she will also tell you the same but also not to try arguing OECD rules with Spanish Tax Authorities, as they tend to take a more simplistic view, along the lines of “pay your tax Here or receive an extraordinarily heavy fine”

You can get get a reduction in the difference  of tax paid of up to 60% I believe, but you will still be liable to pay tax on worldwide income in Spain.

This link may assist - it is only a guide but it does explain Spanish requirements and tax rates https://www.expertsforexpats.com/expat-tax/expat-tax-advice/tax-in-spain-for-expats/

EDIT:  if you are coming over post transition period, you are obliged to spend no more than 10 months aggregate in 5 years outside Spain in order to maintain continuing residency requirement of your visa.  So you will very definitely be tax resident here.

Judith31

Posted: Wed Sep 9, 2020 1:44pm

Posts: 2

Location: Mojacar

Joined: 20 Oct 2019

Posted: Wed Sep 9, 2020 1:44pm

DarioMartin wrote on Wed Sep 9, 2020 7:34am:

Spain regards you as tax resident if you spend more than 183 days a year here, which you are obliged to do to fulfill the continuing residency requirement required to maintain Residencia.

You will need a good Tax specialist, but I’m certain he or she will also tell you the same but also not to try arguing OECD rules with Spanish Tax Authorities, as they tend to take a more simplistic view, along the lines of “pay your tax Here or receive an extraordinarily heavy fine”...

...

You can get get a reduction in the difference  of tax paid of up to 60% I believe, but you will still be liable to pay tax on worldwide income in Spain.

This link may assist - it is only a guide but it does explain Spanish requirements and tax rates https://www.expertsforexpats.com/expat-tax/expat-tax-advice/tax-in-spain-for-expats/

EDIT:  if you are coming over post transition period, you are obliged to spend no more than 10 months aggregate in 5 years outside Spain in order to maintain continuing residency requirement of your visa.  So you will very definitely be tax resident here.

Would suggest that you read Citizens  Advice Bureau Spain site for general info on tax matters, however the best way is to contact a very good accountant who can give you chapter and verse

Vpicton

Posted: Thu Sep 10, 2020 11:21pm

Vpicton

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Joined: 20 Jun 2020

Posted: Thu Sep 10, 2020 11:21pm

Thanks for your input, I get the feeling the Spanish tax authorities spend a lot of time with their fingers in the air ;-)

DarioMartin

Posted: Fri Sep 11, 2020 6:32am

DarioMartin

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Posted: Fri Sep 11, 2020 6:32am

Vpicton wrote on Thu Sep 10, 2020 11:21pm:

Thanks for your input, I get the feeling the Spanish tax authorities spend a lot of time with their fingers in the air ;-)

Far from it - when it comes recovering what is due, they are very efficient ...

maxchef

Posted: Mon Sep 14, 2020 11:51am

maxchef

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Posted: Mon Sep 14, 2020 11:51am

we all know the rules and we all have to follow them ESPCIALLY from 2021 simples 

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