All foreigners residing in Spain who are currently receiving a pension for services rendered, (whether a public or private pension), from their countries of origin, should declare this income in their tax declaration form in the monetary compensation section under income from work, only of course when they are obliged to file an income tax return form.
It is important to note that all tax residents in Spain must declare their total personal global income for taxation, irrespective of the source of that income.
Normally foreign pensions are not included in the drafts sent by the Treasury, but you must bear in mind that foreign pensions are taxed in the monetary compensation section, and are considered as income from work. Therefore, it is an obligation to include your pension/s in the annual declaration.
However, it is necessary to take into account the corresponding Double Taxation Agreements, which prevail over Spanish Law. Most of the agreements to prevent Double Taxation which Spain signed with other countries establish the following rules with respect to pensions:-
- Generally, no tax is paid in Spain for PUBLIC PENSIONS received, for example, for having worked as an official abroad. These should be taxed in the country in which they are paid. They should be exempt from tax in Spain, however, there are exceptions. Agreements for example with Germany and the United Kingdom establish that these public pensions should be taken into account in the Spanish Income Tax Declaration which means that by this inclusion, the tax rate applied to the total income would be higher.
- ALL PRIVATE PENSIONS from private employment, even when paid by the social security department of another country, must be declared in Spain, Most of the Agreements signed stipulate that they should only be taxed in the country of residence.
What is clear is that the Spanish Tax Office is receiving consistently more and more comprehensive information on pensions paid by other countries to residents in Spain, so it does not make sense to omit them in your income tax return, when officially they should be declared. This improvement in procedures for exchanging information with other countries and public administrations, especially with those in Europe, allows the Tax Office to acquire tax information that could not be accessed before, and for this reason, the tax office could claim outstanding debts due to non-taxation when foreign pensions have not been declared, and these debts could be backdated to 2012.
In addition, it would be appropriate for all foreign pensioners who are tax residents in Spain to provide the Tax Authorities of their countries of origin with a Tax Residence Certificate from the Spanish Tax Offices thus avoiding the necessity of paying taxes in that country and only paying your taxes in one place, your country of residence, Spain.
José Manuel Garzón – Senior Partner
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Axarquía Solicitors is part of Marbellasolicitors SLP, a group of bilingual lawyers and tax experts that have more than 15 years experience assisting foreign buyers and vendors in Andalucía, both on the coast and inland.