Expats warned of spanish tax changes

Photo: Alf.Melin

A new Double Taxation Convention between the UK and Spain, which was signed in London on 14th March 2013, came into force in June 2014. The full document - which is available on Legislation.gov.uk - will take effect in respective of witholding taxes on income (including that from immovable property) on or after 12 June 2014.

Richard Way, Editor of Overseas Guides Company, comments: “From June 12th, rules for withholding tax on income has changed under the new treaty, while January 1st 2015 will see new rules governing income and other taxes in Spain kick in, which could affect expats’ income."

The warnings come as Spain announces a discount in income tax for domestic residents. Indeed, income tax will fall by an average of 12.5 per cent in the next two years, Deputy Prime Minister Soraya Sáenz de Santamaría confirmed last week, while also resisting pressure from the IMF and European Commission to raise VAT to compensate for the lower income tax.

It follows a recent order from Spanish officials for British people living in the country to declare all assets held outside of Spain worth more than €50,000 to help tackle tax evasion. Failure to do so would result in Fines, the authorities warn, which British press reported at the time was causing some expats to reconsider their life in the Costas.

The Foreign Office estimates that 800,000 Brits currently live for at least part of the year in Spain.

The ever-changing financial landscape means that expats should always take care to keep abreast of the latest legal requirements, advises Way.

"Keeping on top of your tax affairs as a foreign property-owner or expat is best done through employing a specialist tax firm," the OGC Editor comments. "Typically, preparation and foresight are key to arranging your affairs in the most tax efficient way - which means consulting a tax expert before you leave the UK or purchase a property."