Whilst many British expats rushed to register for residency before 31st December 2020 in order to take advantage of the Withdrawal Agreement following Brexit, giving the right to live and work in Spain, many were also in Spain in 2020 for more than 183 days, which means that they become resident for tax purposes. so what does that mean?
As a Tax Resident a Personal Tax Return is due before the end of June 2021. This may come as a surprise as if the TIE card obtained has a date of late 2020 or early 2021 it indicates the first tax return would be due in 2022. But, this is not the case and if 183 days or more were spent in Spain then tax residency is obtained. Unlike the UK and many other European countries, Spain has not allowed any leniency on travel restrictions during COVID-19 and are standing firm. In their view there were opportunities to return to the UK if the principal home was there.
So, what is required for a Personal Tax Return? Firstly, all worldwide income is declared. This includes income not taxed elsewhere such as property rental income on a property in the UK if below the UK Personal Allowance.
Secondly, to be able to obtain relief for tax paid in UK under the Double Taxation Agreement, proof of tax paid needs to be provided.
Finally, all income and tax need to be calculated on a calendar year basis and not the UK tax year of April to April.
Many Spanish Gestors are unaware of these aspects and will unwittingly file an incorrect return. This is because many are not trained in International Tax and are not familiar with the UK system. Similarly many UK Accountants are not aware of the Spanish system and do not advise correctly.
Prior to moving to Spain I owned my own tax practice in the UK and have spent more than 15 years learning the system in Andalucia (each Region also has differences). I am therefore able to offer advice and help regarding both UK and Spanish tax. Please contact me if you need help!
Thank you Glenda, lots of things to take into account if we become residents in Spain. I am intending to buy a house in Spain. As I am going to transfer a significant amount of money (from the UK to Spain), do you know whether that money needs to be declared to the Spanish tax authorities? I am wondering whether they might request explanations when they see that money suddenly in my Spanish bank account. Would there be any tax to pay for transferring money to one's own bank account? Thanks a lot. I'll have a look at your website.