UK Spain Tax Treaty

Simon Misiewicz

Simon Misiewicz

Expat & Property Tax Specialist

20th December 2021

UK Spain Tax Treaty

In 2013 the UK Spain tax treaty was renewed to secure a double taxation convention.

First created in 1976, the agreement stipulated how individuals and ex-pats should be taxed if an individual is classed as a tax resident in both countries. The double tax treaty between the United Kingdom and Spain also focused on those living in one country and deriving income in another.

The UK Spain tax treaty is designed to prevent individuals from paying tax twice on the same income.

The agreement enables individuals to offset tax declaration through specified deductions and allowances.

Individuals may have to pay tax in the UK and in Spain if they are resident in the UK and have income or gains in Spain, or if they are non-resident in the UK and have income or gains in the UK.

This is called double taxation.

Free Online Tax Calculators

We continue to develop brand new U.S and UK tax calculators for you to use. We focus on tax calculators such as: Income Tax, Capital Gains Tax, Stamp Duty Land Tax, Inheritance/Estate Tax

Use our online tax calculators today to help you make money-saving decisions tomorrow

Free online tax calculators

What are the basics of the tax treaty between the UK and Spain?

As property accountants serving thousands of UK landlords who purchase buy to let properties, we know that the UK Spain tax treaty can be daunting and difficult to understand.

The double taxation convention between the UK and Spain entered into force on 12 June 2014 and is effective for the following:

– In the UK for withholding taxes on income, for Corporation Tax, for Income Tax and CGT

– In Spain for withholding taxes on income and for income tax.

Double Taxation Agreements (DTAs) can protect individuals and businesses from the risk of double taxation when the same income can be taxable in two jurisdictions.

DTAs can also protect a government’s taxing rights and stop evading or avoiding tax attempts.

Different countries also have different tax laws.

Suppose you are resident in two countries simultaneously or are resident in a country that taxes your worldwide income, and you have income and gains from another country. In that case, you may be liable to tax on the same income in both countries.

An individual who is resident in the UK with rental income from a property in Spain will probably have to pay tax on the rental income in both the UK and Spain.

In practice, the remittance basis helps prevent double taxation where a UK resident has foreign income and gains abroad.

A DTA overrides the domestic law in the UK and Spain.

If you are a UK resident, HMRC will generally give credit for overseas tax paid in Spain.

The method of double taxation relief will depend on each individual’s circumstances, the nature of the income, and the specific wording of the UK Spain tax treaty.

Free Online Tax Calculators

We continue to develop brand new U.S and UK tax calculators for you to use. We focus on tax calculators such as: Income Tax, Capital Gains Tax, Stamp Duty Land Tax, Inheritance/Estate Tax

Use our online tax calculators today to help you make money-saving decisions tomorrow

Free online tax calculators



What types of income are affected by the double taxation agreement?

The UK-Spain double tax treaty is a 24-page document that specifies which types of income qualify for deductions or tax relief under potential double taxation, including:

– individual income tax
– Corporation tax
– Income tax for non-residents
– Capital Gains Tax
– Local tax on income and capital

How the double taxation agreement affects you will depend on your circumstances as a Spanish ex-pat.

Tax rates and reliefs are also subject to change, so we recommend that you speak to a UK tax specialist.

Why is residency important for tax purposes?

The United Kingdom and Spanish Double Taxation Agreement (DTA) confirms that you will be a resident in the country where you meet the requirements under the national laws of either the UK or Spain.

It can be difficult to determine which country you should be paying your taxes in if you are travelling between the UK and Spain.

Under Spanish laws, you will be considered a resident for tax purposes when you have your usual residency in Spanish territory. This occurs when:

– You spend more than 183 days a year in Spain (January to December)

– Your economic activities are based in Spain

You are automatically resident in the UK if:

– You spent 183 or more days in the UK in the tax year

– Your only home was in the UK, and you spent at least 30 days there in the tax year

As a result, some individuals meet the UK and Spain’s tax resident requirements.

You will be considered a tax resident of the country where you have permanent property disposal.

If you possess property in both the UK and Spain, your country of residence will be based on where you have more significant personal and economic ties.

The UK and Spain will also review which country you live in on a more regular basis to determine tax residency.

You will need to file tax returns to the Spanish or British tax authorities when it is established where you are a resident.

Several types of taxes such as income, wealth or corporation tax require you to declare your worldwide income no matter which country it derives from.

Free Online Tax Courses

Want to save tax in the future?

We have now created free online tac courses to help you build wealth whilst paying less tax. Learn today and save tax tomorrow. We have covered the basics of tax filing with HMRC and IRS. We have created courses on advanced planning strategies that will save you tax in the future.

We have training programmes for UK tax and US tax. Learn today and save tax tomorrow

Free online tax course

Free – Access NOW!!

Where do I pay taxes if I'm resident in the UK and Spain? 

You automatically become a fiscal resident in Spain if you reside there for more than 183 days in any 12 months.

For individuals who live and work the majority of the year in one country and use their property in the other country as a second home or to gain rental income, it follows that taxes will be paid into the first country’s tax system.

If you are a resident but do not work in a permanent establishment in either country, do not work at all, or cannot provide your means of subsistence, your tax is due in the country where you have your habitual abode.

Alternatively, you will be taxed in the country for which you are a national and hold a passport.

If you are deemed a tax resident in both the UK and Spain, the tax treaty comes into effect for your tax obligations.

If you spend more than 183 days per year in that country in both the UK and Spain, you are considered a resident; these days do not need to be consecutive.

There are also other scenarios to consider.

– You are obliged to declare the income on Spanish rentals to the tax authority, no matter where you are a resident.

– If you are a resident of the UK, the tax treaty comes into effect.

As the property is based in Spain, you will be legally required to present a declaration to the Spanish tax authorities.

As a UK resident, you will also have to declare that income to HMRC and the tax already paid to the Spanish government will be offset against your tax bill in the United Kingdom.

Free Online Tax Calculators

We continue to develop brand new U.S and UK tax calculators for you to use. We focus on tax calculators such as: Income Tax, Capital Gains Tax, Stamp Duty Land Tax, Inheritance/Estate Tax

Use our online tax calculators today to help you make money-saving decisions tomorrow

Free online tax calculators

Which taxes are affected by the UK Spain tax treaty?

The DTA covers Spanish taxes such as Income Tax, Corporation Tax, Non-Resident Income Tax and Wealth Tax.

UK taxes including Income Tax, Corporation Tax and Capital Gains Tax are also covered.

You can read the full tax treaty documents here.

How am I taxed if I live in the UK and own property in Spain? 

UK British buy to let investors may decide to invest in property in Spain. This does not make you a Spanish resident, especially if you only visit for a couple of weeks each year, to maintain the holiday let.

Does this rental income need to be declared to HMRC, and will the Spanish tax authorities need to know about it?

As a UK national, the income must be declared to HMRC. As the income is sourced in Spain, you will also need to declare it there.

By paying what you owe in non-resident tax to the Spanish tax system, you qualify for tax relief from HMRC.

This application of the double taxation agreement under the UK Spain tax treaty ensures that you only get taxed once on your income.

Read this guidance from HMRC about being taxed on UK income twice if you live abroad.

Does the UK Spain tax treaty impact property income?

Income received from a property at your disposal will be taxed at the state of source or where the property is based; according to the DTA,

This includes rental income and capital gains when selling.

So if you are a tax resident in Spain but rent out a property in the UK, you must pay UK tax to HMRC.

You will then be able to claim tax relief for tax paid abroad and avoid double taxation.

Free Online Tax Courses

Want to save tax in the future?

We have now created free online tac courses to help you build wealth whilst paying less tax. Learn today and save tax tomorrow. We have covered the basics of tax filing with HMRC and IRS. We have created courses on advanced planning strategies that will save you tax in the future.

We have training programmes for UK tax and US tax. Learn today and save tax tomorrow

Free online tax course

Free – Access NOW!!



Is salary earned in the United Kingdom taxed in Spain?

Foreign individuals who become Spanish residents are subject to Spanish Personal Income Tax (PIT) on a worldwide basis.

Non-residents will be subject to PIT, but only on income arising and gains obtained from Spanish sources.

As tax residents are subject to taxation on their worldwide income, work income obtained from services delivered abroad is taxable.

Exemptions are available as long as services are rendered out of Spain for the benefit of a non-resident company or if the country where the services are rendered does not have a tax haven but has a tax regime similar to Spanish PIT.

Spanish Tax On UK and other Foreign Income

Understanding Spanish tax on foreign income is essential for British expats and tax residents in Spain.

If an individual is a tax resident in Spain, they will be a taxpayer for Personal Income Tax (IRPF) and must pay tax on their overall income in Spain.

This means that a tax resident in Spain must declare their worldwide income.

If any of that worldwide income comes from a country with which Spain has signed a double taxation agreement, this could mean that the individual will be exempt from being taxed in both countries.

In the event of double taxation, Spain will be responsible as the country of residence for applying a deduction.

If foreign income comes from a country with no double taxation agreement, that income is taxed in Spain.

In the case of the UK-Spain double tax treaty, the agreement outlines the rights of UK nationals with assets or living in Spain and vice versa.

In the case of the UK and Spain, people can be classified as legal residents in both countries due to each nation’s domestic tax regimes.

In general, non-resident taxpayers are taxed at 24% of income obtained in Spanish territory or from Spanish sources.

Non-resident taxpayers are taxed at 19% on capital gains and financial investment income arising from Spanish sources.

Free Online Tax Courses

Want to save tax in the future?

We have now created free online tac courses to help you build wealth whilst paying less tax. Learn today and save tax tomorrow. We have covered the basics of tax filing with HMRC and IRS. We have created courses on advanced planning strategies that will save you tax in the future.

We have training programmes for UK tax and US tax. Learn today and save tax tomorrow

Free online tax course

Free – Access NOW!!



How much tax do non-residents pay in Spain?

Non-resident taxpayers are taxed at a flat rate income obtained in Spanish territory at 24% for work income and at the rate of 19% on capital gains and financial investment income arising from Spanish sources.

Specific rates apply to certain other types of income.

Non-residents must file their tax returns on an individual basis. There is no joint filing responsibility.

Payers of Spanish-sourced income must withhold the tax at source on each payment made.

If you are a Spanish tax resident, you’ll receive a personal allowance for your Spanish income tax.

Unlike in the UK, where this personal allowance rises year-on-year, the allowance has been reduced in Spain in recent years.

For the 2021 Spanish tax year, there is a basic personal allowance for people under 65 of €5,550.

Once reaching 65, the allowance rises to €6,700, and from the age of 75, this increases again to €8,100.

There are also many other allowances, including married couple allowance, child allowance and disability allowance.

Due to the complexity of these allowances, it is recommended that British expats speak to a Spanish tax expert before establishing their overall tax allowance.

Free Online Tax Calculators

We continue to develop brand new U.S and UK tax calculators for you to use. We focus on tax calculators such as: Income Tax, Capital Gains Tax, Stamp Duty Land Tax, Inheritance/Estate Tax

Use our online tax calculators today to help you make money-saving decisions tomorrow

Free online tax calculators



When is an individual classed as a resident in Spain for tax purposes?

An individual is considered a Spanish resident for tax purposes if they meet the following requirements:

– They remain in Spain for more than 183 days in a calendar year

– Their business/economic interests are directly or indirectly located in Spanish territory

Individuals are presumed to be tax residents in Spain if their spouses and children (under 18s) are Spanish tax residents.

Spanish regulations do not consider partial-year residence status, meaning that a Spanish tax resident or non-resident will be regarded as such for the entire tax year.

Free Online Tax Courses

Want to save tax in the future?

We have now created free online tac courses to help you build wealth whilst paying less tax. Learn today and save tax tomorrow. We have covered the basics of tax filing with HMRC and IRS. We have created courses on advanced planning strategies that will save you tax in the future.

We have training programmes for UK tax and US tax. Learn today and save tax tomorrow

Free online tax course

Free – Access NOW!!

What tax concessions are there for British ex-pats in Spain?

A tax regime is available in Spain for ex-pats.

Under this regime, individuals who become Spanish tax residents can choose between being taxed as Spanish tax residents, thus taxed on their worldwide income according to the PIT progressive scale of rates with a general 45% marginal rate.

Or they can be taxed as non-residents, meaning their Spanish-sourced income is taxed at the flat rate of 24%.

The main requirements that must be met to apply for this tax regime were amended on 1st  January 2015 and include the following:

– The ex-pat has not been a Spanish resident during the past 10 tax years before their assignment in Spain.

– The assignment in Spain is derived from a work contract or acquiring a director position with no participation in its share capital.

– The taxpayer does not obtain income that would qualify as being obtained through a permanent establishment in Spain.

These requirements must be met throughout the period during which the regime is applicable.

Tax relief to avoid double taxation is available under the tax regime for foreign taxes paid.

It is limited to 30% of the tax payable on the total employment income received in the fiscal year.

The 24% non-resident tax rate is only applicable to taxable employment income up to €600,000, while any employment income over that amount will be taxed at the marginal rate of 47%.

Free Online Tax Calculators

We continue to develop brand new U.S and UK tax calculators for you to use. We focus on tax calculators such as: Income Tax, Capital Gains Tax, Stamp Duty Land Tax, Inheritance/Estate Tax

Use our online tax calculators today to help you make money-saving decisions tomorrow

Free online tax calculators



Are there any tax exemptions under the UK Spain tax treaty?

Under the UK & Spain double tax treaty, certain UK pensions are exempt from taxation in Spain.

The UK will continue to deduct tax at source from UK pension income (except for UK state retirement pension, which is always paid gross) until they are satisfied that you are both resident and paying tax on this income in Spain.

Where are capital gains taxed under a DTA?

Capital gains obtained from selling the property will be treated as a gain in the country of origin.

Capital gains derived from selling other assets will be taxed in the country of residence.

Often gains made on a property will far exceed your tax-free allowance, so Capital Gains Tax (CGT) can be very costly, especially when combined with your income tax.

Many landlords and property investors in the UK and Spain pay far too much tax when they sell their properties because they do not know how to minimise Capital Gains Tax.

Free Online Tax Courses

Want to save tax in the future?

We have now created free online tac courses to help you build wealth whilst paying less tax. Learn today and save tax tomorrow. We have covered the basics of tax filing with HMRC and IRS. We have created courses on advanced planning strategies that will save you tax in the future.

We have training programmes for UK tax and US tax. Learn today and save tax tomorrow

Free online tax course

Free – Access NOW!!

Are pensions and investments affected by the UK Spain tax treaty? 

Double Taxation Agreements differentiate between two types of pensions:

– Public pensions – including civil servant pensions, will always be taxed in the country in which you served. They will not be taxed in your state of residence, but they may be considered to determine the applicable tax rate.

Private pensions will be taxed in the country where you are resident, regardless of where the company you worked for or received the pensions income from.

The UK Spain tax treaty allows you to only pay interest in your state of residence.

Dividends will be taxed in your country of residence.

Nevertheless, the DTA may allow them to be taxed in the country where the company that distributes the dividends is resident.

This will generally be set at a 10-15% rate limit, which you can deduct from your tax return in your country of residence.

To further discuss tax allowances in the UK and Spain, speak to one of our tax team.

You may be interested in our main Article on UK Tax status if you want to move to the UK or from the UK.

Free Online Tax Calculators

We continue to develop brand new U.S and UK tax calculators for you to use. We focus on tax calculators such as: Income Tax, Capital Gains Tax, Stamp Duty Land Tax, Inheritance/Estate Tax

Use our online tax calculators today to help you make money-saving decisions tomorrow

Free online tax calculators



British VISA and HMRC UK tax rates for Spanish ex-pats

UK tax rates for Spanish ex-pats depend on whether you are classed as ‘resident’ in the UK for tax.

If you’re not a UK resident, you will not have to pay UK tax on your foreign income.

If you are a UK resident, you will normally pay tax on your foreign income, but you may not have to if your permanent home or domicile is abroad.

In the case of the UK and Spain, people can be classified as residents in both countries due to each nation’s domestic tax regimes.

The UK/Spain Double Tax Treaty has a tie-breaker clause that comes into effect if you are resident both in the UK under UK rules and in Spain under Spanish regulations.

If you are a dual resident, you are deemed a tax resident in the country in which you are domiciled.

How does a Spanish ex-pat get a British VISA?

Spanish ex-pats can get a British VISA by taking the following steps:

– Find out if you need a British VISA
– Chose the correct type of UK VISA
– Complete the online application form
– Collect the required documents for a British VISA application
– Schedule a UK VISA appointment
– Attend the UK VISA interview

Spanish nationals can stay in the UK for up to six months without a VISA.

Do non-UK residents pay tax on UK income?

Non-residents only pay tax on their UK income.

Permanent UK residents usually pay UK tax on all their income, whether it is from the UK or abroad.

There are special rules for UK residents whose permanent home (domicile) is abroad.

If you live abroad and visit the UK for more than 183 days in a tax year, then you would be classed as a UK resident for tax purposes.

This is worth checking, especially if you make capital gains from the disposal or sale of assets in the UK as a Spanish ex-pat.

You do not pay UK tax on the first £1,000 of income from self-employment, or the first £1,000 of income from property you rent, unless you use the Rent A Room Scheme.

Spanish ex-pats also do not pay UK tax on income from tax-exempt accounts like ISAs and National Savings Certificates.

Free Online Tax Courses

Want to save tax in the future?

We have now created free online tac courses to help you build wealth whilst paying less tax. Learn today and save tax tomorrow. We have covered the basics of tax filing with HMRC and IRS. We have created courses on advanced planning strategies that will save you tax in the future.

We have training programmes for UK tax and US tax. Learn today and save tax tomorrow

Free online tax course

Free – Access NOW!!

 

Can I live in Spain and work in the UK?

After Brexit, both Spain and the UK are keen to reach an agreement that allows Spanish ex-pats to live and work in the UK.

If you work in the UK, you will always pay tax in the UK on that income.

If you are self-employed and only working in the UK, you will also have to pay National Insurance contributions.

As you would also still be living in Spain, you will be considered a tax resident in Spain.

Under the recently-introduced Startup Act in the Spanish Parliament, people working remotely for foreign companies can live in the country without needing a full work visa.

If you spend more than 183 data per year in Spain, you will be regarded as a tax resident.

Living for between 1-182 days in the country will imply that you are a non-resident, meaning you would have residency in Spain and still be considered a non-resident.

It is important to research all the options before deciding to work or live in the UK as a Spanish ex-pat.

How can Spanish ex-pats avoid paying UK taxes?

To be classed as a non-resident and exempt from UK tax, you will need to:

– work abroad for at least one full tax year
– spend no more than 182 days in the UK in any tax year
– spend no more than 91 days in the UK on average over four years

You can live in Spain and still be a UK resident for tax if you visit for more than 183 days in a tax year.

You would need to pay tax on your income and profits from selling assets such as shares in the normal way.

You would also have to pay tax on any income from outside the UK.

We recommend that Spanish ex-pats speak to British tax experts to ensure that they minimise or completely negate the amount of tax paid in the UK.

You may be interested in our main Article on UK Tax status if you are looking to move to the UK or from the UK.

What other taxes are there in Spain?

If you’re not a tax resident of Spain, you’ll only be taxed on income from Spanish sources.

If you are a Spanish tax resident, you must report your worldwide income.

Up to €6,100 of earned income for work performed outside of Spain can be excluded under certain conditions.

Other taxes in Spain apart from income taxes include:

– VAT – this is a 21% tax applied to consumer goods, while the VAT on essential items is reduced to 10%. Some items are further reduced to 4%.

– Wealth Tax applies to assets above €700,000, with an additional €300,000 allowed for a home. Inheritance tax is handled on a regional level and depends on where the taxable event occurred.

– Property Tax – this will be identified based on the region in which an individual lives. Motor vehicle taxes are also assigned based on the vehicle’s registered city.

The Spanish tax system is similar to the USA, good news for US ex-pats living in Spain.

You may be interested in our main Article on UK Tax status if you want to move to the UK or from the UK.

You may also be interested in knowing more about our property tax services if you are looking to invest in the UK buy to let properties.

Need advice?
Contact us now

Enquire about our ongoing services

Book a call to discuss our property accountancy services

Get in touch

Book a paid for tax consultation

Use the code “Art20” to get 20% discount

Book now

Book a call to see how we can help you.

Consultation options.

We offer the two following options for initial consultations.

CALL OPTION ONE

Our Ongoing Accountancy Services

Fixed price irrespective of how many properties you have

We charge on a fixed monthly fee

  • - Accounts submitted to HMRC & Companies House

  • - 60 minute onboarding tax call

  • - Unlimited 30 minute tax calls

  • - An holistic review of your tax structure and future plans

  • - Annual tax return review to discuss future tax plans

Our Monthly Accountancy Services

CALL OPTION TWO

Tax Consultation + Tax Report + Video Recording

(Free for clients)

Want tax advice right now? Book today

  • - Upload your questions in advance

  • - Our Tax Advisors collectively discuss your questions

  • - A qualified tax advisors discuss the very best solution with you

  • - A tax report & meeting recording is sent within 24 hours

  • - Clarification questions are answered via email

Tax call from £124.95

Booking your appointment.