For those living in Spain but required to file a UK self-assessment return, we prepare and file the return on your behalf.
Where applicable we ensure that a claim for double taxation relief is made when compiling your Spanish tax return.
Once resident in Spain most income arising in the UK will be paid gross and taxed in Spain. We arrange for HM Revenue & Customs to issue a no tax (NT) PAYE code where appropriate.
Some UK income is not taxed in Spain; including pensions received by Teachers, Police, National Health employees and Civil Servants.
Some income arising in the UK is taxed in the UK first; rents, business income, and then declared in Spain. Any Spanish tax due is reduced or cancelled out by the amount of the UK tax paid.
The Spanish tax year runs to December 31st. It is about the only thing simpler than in the UK system, which runs to April 5th for historical reasons.
Spanish annual self-assessment returns (declaracion de la renta) must be submitted between May 1st and June 30th of the following year. 60% of the liability is paid at the time of submitting the return and 40% the following November 5th.
Annual Tax Return
a) Spanish Tax Return – Declaracion de la Renta
We complete this on your behalf in May of the following year. e.g. in May 2018 the declaracion de la renta will be made for the year 2017.
This is a very important document for obtaining credit, mortgages etc.
The 20% income tax paid quarterly does not take into account tax free personal allowances, mortgage repayments etc. So the declaracion de la renta often results in a tax refund.
Your bank will send certificates of fiscal information necessary for your declaracion de la renta at the beginning of each year. We will need that document, plus escrituras on property owned by you.
b) Tax deductions
These are many tax deductions available in Spain e.g. mortgage repayments, pension contributions, etc. We can provide more details re these matters on request.
c) Personal allowances
Click here for details of income tax bands and allowances for 2016 For details of tax on self-employed persons see Notes On Self Employment.
For the rates of income tax see Tax Rates
Corporation tax rules are similar to the UK with technical differences as would be expected. Nearly 100% of small companies have December 31st as their financial year-end, to coincide with the tax year.
National Insurance, called Social Security, contributions for Directors are treated differently for director/ shareholders. Whereas in the UK one would pay Class 1 contributions, as do other employees, here an owner- director would pay Class 2 contributions, the same as a self employed person. This does not affect the limited liability laws but was brought in to prevent owner-directors claiming unemployment benefit.
One advantage is the contributions are a flat rate of euros 260 per month and are not linked to the Director’s earnings.
For loans taken out after 31/12/2012 no tax relief is given on mortgage payments. On loans prior to that date tax relief is given on payments up to € 9,000 per annum. The tax relief is at 15%.
The unusual feature is that the tax relief is not on the interest only, but on the capital as well.
The 9,000 is a maximum, so if the mortgage payments were 12,000 per annum, tax relief could only be claimed up to 9,000.
A property cannot qualify for the above unless it is your home. It cannot be your home unless you are living here, and you cannot be considered as living here unless you have a Spanish Residencia Certificate. See Spanish Bureaucracy.