Does anybody know if Spain taxes residents on foreign earned income? Flying for a Uk ariline but living in Spain. I am looking for a good accountant specialized in international tax planning. Gracias
Last edited by Count4 : 20th September 2008 at 21:08.
Spain is not a fiscal heaven, you will have to pay taxes up to 45% I think. You can always pay UK taxes by the systems of bilateral taxes agreament, if uk is cheaper than spain
Otherwise, you can choose to live in Gibraltar or Andorra
Does anybody know if Spain taxes residents on foreign earned income? Flying for a Uk ariline but living in Spain.
The Ley 35/2006 del impuesto de la renta de las personas físicas (income tax act) sets in its second article that our law will apply to any resident in Spain (like you) for any kind of income(*), regardless the country in which this income was earned or the nationality of the payer. (*) In this case, by "income" I mean ANY income:
"Rendimientos del trabajo": the amount you earn being paid by your employer if you have a salary.
"Rendimientos de las actividades económicas": € earned by freelance (self-employed) workers (except when this activity is done by a moral person, in which case these amounts are taxed by the Impuesto de Sociedades and paid by this moral person, not by "you").
"Rendimientos del capital inmobiliario": € generated by real estate properties. (for instance, imagine that you are the landlord of a building or whatever and that each month you get X€ because you leased this building.)
"Rendimientos del capital mobiliario": € generated by personal properties. (for example, dividends received).
"Imputaciones de renta": € that you virtually receive because the law sets that it's like that and that you are obliged to count them as income. (example: if you are the owner of an appartment where nobody lives --because it was not leased to someone else, etc.--, you have to consider as if you were receiving a monthly fee (as if you had self-leased your own property).
"Ganancias y pérdidas patrimoniales": profits & losses of your patrimony. (as an example, imagine that you own a peace of land where you are not allowed to build, but just cultivate something. If the status of your piece of land changes and suddenly it is declared as a place where you can build, then your patrimony increase its value, and this is an a gain.)
ARTÍCULO 2.- Constituye el objeto de este impuesto la renta del contribuyente, entendida como totalidad de sus rendimientos, ganancias y pérdidas patrimoniales, y las imputaciones de renta que se establezcan en esta ley, con independencia del lugar donde se hubiesen producido y cualquiera que sea la residencia del pagador.
If you live in Spain but your income is generated abroad, you'll have to pay the Spanish Income Tax (IRPF) but if for whatever reason you already paid taxes abroad (example: when your employer retains you a part of your salary as an income tax retention paid to the UK government), then you'll be able to deduce this amount thanks to the "non double taxation" principle and the UK-Spain double taxation convention. (Deductions are done according to the rules set by this convention.)
Quote:
I hear the first €60 100 are not taxed.
Year 2008:
Minimum non taxed income: €5.151
- if you are 65 to 75 (included) years old, this base is €6.069 instead. - if you are +75 years old, this base is €7.191
Amounts that complement the amount shown above:
- For your children (**) + (***): €1.836 for your first child; 2.040 for the second; 3.672 for the third; and 4.182 for the others. (+ 2.244 if you of your children are less than 3 years old.)
(**) Requirements: (a) 24 years old or younger (the limit doesn't apply to disabled persons) + (b) they have to live with you + (c) they have to have a less than €8.000 yearly income.
(***) If your family presents only one income tax form, that' it. If you and your wife declare separately, then divide by two these amounts and assing one half of the non taxed amount to you and one half to your wife.
- For your ascendancies (****): €918 (or 2.040 if he/she is +75 years old)
(****) Requirements: (a) 66 years old or older (the limit doesn't apply to disabled persons) + (b) they have to live with you + (c) they have to have a less than €8.000 yearly income.
- For disabled persons: check article 60. (I don't think this is going to apply to you).
€60100 tax relief as foreign earned income, in other words, spanish residents income earned abroad
You wish. Gato Volador has posted an annotated translation of the relevant part of the Spanish tax code.
You do also understand that €60,100.- is about twice the Spanish per capita GDP?
Quote:
I am looking for a good accountant specialized in international tax planning
I understand the aforementioned Gato Volador is a finance type (with an interest in aviation, obviously), perhaps he might be able to recommend someone suitable.
All I can offer from my side, perhaps you might be able to get off lightly on grounds of not being normally resident? i.e., less than 185 days a year. But that probably won't fly unless you do long haul/bizjet or somehow spend most work nights away from home.
I just checked again the Income Tax Act and I found the famous tax release you are speaking about. It appears here:
ARTÍCULO 7.-Rentas exentas Están exentas las siguientes rentas: [...] p) Los rendimientos del trabajo percibidos por trabajos efectivamente realizados en el extranjero... (under two requirements: a. your employer has a to have a domicile outside Spain and b. the country where you work has to have an income tax and cannot be a fiscal heaven.
==> LIMIT: 60.100€ /year
You're right but notice that:
- This doesn't mean that your first 60.100€ of income are not taxed. It means that your first 60.100€ of income earned abroad and paid by your employer (salaries of an employee) are not paid in Spain but in the UK, but any other income generated by other sources (ex: you sell stocks or whatever) are taxed in Spain.
- Even if these first 60.100€ don't count to calculate your IRPF, this amount is still subject to the IRPF: this means that you have some obligations, such as declare them on a yearly basis. So... ok, you won't have to pay, but you stil have obligations. If you ever received an income abroad and you didn't presented your declaration (autoliquidación del IRPF) on time, you could be fined.
- This tax relief is for somebody who worked abroad during the whole year. If not (ex: you just worked abroad 6 months) you would need to take the proportional part.
If you need more information, hire a tax advisor. You can find many fiscal planners "everywhere" and they deal every day with this kind of particular cases.
Regarding the double taxation convention, here it is. It's the last version: [+]
Only the days in which you haven't been in Spain at all count. Any day that you fly into or out of Spain does not count. Also, the days spent outside Spain have to be work days( no holidays) and you must provide evidence that these days were spent abroad and working.
Salary----- 100000 , 100000/365days=274, 274x100 days abroad working in the year=27400
These 27400 euros or pounds are tax free.
Say for example in Spain your total tax for 100000 euros would have been 35000 euros, then you will have to pay. 100000-27400= 72600 euros. The Spanish tax man would calculate what the taxes owed on 72600 euros is (instead of 100000 euros). Imagine the new amount owed on 72600 is now 26000 euros. You save 9000 euros.
This is a best case scenario, because if the company you work for has already deducted a certain percentage of taxes of your total salary, say 15%, then that will mean that these 27400 euros would have already been taxed at 15% and the Spanish tax man would not take that into account.
The new savings then would be 9000-(15% of 27400=4110)= 4890 euros.
This is approximately how it works.
Last edited by suchiman : 21st July 2008 at 00:33.
Just one thing: Watch out for the NI contributions in the UK. Spain does legally recognise these as deductions however the agency responsible for collecting tax does not and therefore you will be taxed on these as well... You then have to go to court and claim the extra tax back. This will take approx 3 years....
mmm. I'm pretty sure mine are taken into account. You have to submit an E101 form to the UK HMRC and tell them that although you won't be paying tax (NT tax code) you wish to carry on paying NI to the UK. They then inform the Spanish, who send you a bit of paper to sign, with this you declare that that you are aware that you have no right to healthcare in Spain.
However, the maximum period for this is 5 years, after this time you either return to the UK or you leave the UK NI scheme and start paying to the Spanish one.
Suchiman that is fantastic news for me. where did you find this law? let me see if I understood you: if you are spanish resident but work for a UK airline you are only taxed in spain for the proportion of days spent in spain? say you spend 180 days away and flying for a UK based airline (long haul in my case) that means only half of my UK salary is taxable in spain?can you PM me with contact of an accountant who knows about this law. gracias count 4
Last edited by Count4 : 20th September 2008 at 21:09.
I'm a bit confused with what suchi said. I guess that he wants to say that the exemption of €60.100 is proportional to the days you are outside Spain. So, if you spent 100 days abroad, the €60.100 tax relief is not 100% considered but only the part corresponding to these days. Of course, you need to be able to show that you were outside Spain. For you guys that's easy because you have documents of your airline (roosters and so on) that show this fact.
Did I understand correctly? If not, send me a private message.
This is quite "simple" but at the same time it's confusing for people that do not work with the IRPF act on a daily basis, mainly because this law is constantly changing (each year), so you have to be very updated. If I were you, I'd ask a fiscal advisor. For a fiscal advisor, this is an easy question. You don't have to ask a very particular one.
OK, to sum up:
- Residents in Spain are taxed by the Agencia Estatal de Administración Tributaria for their income, even if this income was earned abroad. - In the case of income linked to a salary paid by your boss (let's say in the UK), there is a tax relief of the first €60.100 (only considering the salary, not other kind of income such as dividends, etc.). This exemption is proportional to the days spent working abroad. - Anything else is taxed by Spain (ex: dividends, income generated by the sale of your house, etc...) but if you already paid something abroad, you can use the double taxation convention in order to avoid double taxation. Spain would discount you what you already paid abroad but always according to the rules set by the convention.
I don't know if I was clear enough.
PS: Sorry for the delay. We had this week the BA-IB merger and the new structure of AENA. That's why this topic was "parked".
Last edited by GatoVolador : 1st August 2008 at 16:36.
All the material is here, translation is different and CHANGES!!!
This is probably an exemption not designed to help the likes of you. Rather designed to help Spaniard working abroad. The rub for you is in double taxation. If you us the Spanish exemption, Hacienda will not credit you for foreign tax witheld at source by your boss. Go for pro advice, the expensively cheap option that works.
Last edited by Der absolute Hammer : 14th September 2008 at 21:21.
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