Are you are one of those retired residents in Spain getting income coming from your country of origin and think that due to that you pay your taxes there, you are free of submitting any income tax in Spain? If you are in this situation I must tell that you are not doing your things correct.
If you are tax resident in Spain, you will be liable to pay Spanish taxes on your income and assets and will need to file a Spanish tax return.
If you are tax resident in Spain you will be subject to Spanish taxation on your worldwide income.
If you are tax resident in Spain you will have to tell to your country of origin´s tax agency and they will not withhold any income tax there.
If you are tax resident in Spain you will receive same benefits as any Spanish citizen and paying your taxes here you are contributing to get better services as the country will be richer.
As an example we are going to explain how UK pensions are taxed in Spain. First thing we can say is that there is a double taxation agreement between Spain and UK where you can understand the tax situation of companies and individuals that have fiscal matters in both countries. Specifically it deals with situations where a taxpayer is obliged to pay tax on the same income under the rules of both countries and detail how to operate in these circumstances. Spain and the UK have had a double tax treaty since 1976. (It has been updated during 2014 with most changes applying from 2015.). Here you can find a link to the actual treaty . (see more)
UK occupational and state pensions are taxed only in Spain. The state retirement pension is always paid gross but any other taxable pension will be taxed in the UK until you confirm to the UK authorities that you are registered and paying tax in Spain.
Government service pensions (for example, civil service, local authority, fire service, police, most teachers) remain liable only to UK tax and are not directly taxable in Spain. However, under the new UK/Spain double tax treaty updated recently and which has been in force since 1st January 2015, the income is taken into account when determining the effective tax rate on your other directly taxable income.
If you get your income through an Annuity, we must say that this are products that under the Spanish financial and tax system are difficult to locate and due to their specific conditions a proportion of the income is treated as non-taxable capital, and only the balance is subject to income tax. The taxable income element of the annuity is determined by applying a fixed percentage (between 40% and 8%) to the amount received, depending on the age of the beneficiary at the time the annuity vests.
Annuities which have been acquired as a result of inheritance, legacy or other means of succession or where an employer has not contributed to fund are not treated under the explanation above. Temporary annuities, the relevant percentage applied to the income depends on the duration of the annuity.
If you need further advice just contact us and we will happily give you our best opinion,