Spain Explained

How the UK-Spain double tax treaty affects you

Double tax treaties are agreements made between two states to determine the rights of nationals living in the respective countries. For instance, a double tax treaty determines the taxation regime for people who have assets located in one country but are resident in the other. 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.

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In the case of the UK and Spain, it is possible for people to be classified as legally resident in both countries due to each nation’s domestic tax regimes. To overcome this complication, the UK-Spain double tax treaty was drawn up. Here, we explain what you need to know about the agreement.

2013 UK-Spain double tax treaty

In 2013, the UK and Spain renewed their double taxation convention. First created in 1976, this agreement between the two nations stipulates how individuals should be taxed in the event of the two following scenarios:

  • If the individual is classified as a tax resident in both countries under their domestic tax regime; or 
  • If they are living in one country but have income derived from assets in the other. 

This is necessary because, in theory, you should not have to pay tax twice on the same income. Therefore, if you fall into either of the two categories stated here, you are able to offset one tax declaration through deductions and allowances to make sure you do not pay tax twice.

A closer look and an example

Generally speaking, you can only be tax resident in one country. However, it is certainly not outside the realm of possibility that you fulfil the domestic criteria set out by two different countries. In this scenario, your tax obligations will be defined by a double tax treaty. These will depend on where you have your permanent home, your centre of vital interests, or habitual abode. If this is unclear, it will come down to your nationality.

In both Spain and the UK, if you spend more than 183 days per year in that country, you are considered a resident. Remember, these days do not need to be consecutive. If you are resident in Spain, it is your responsibility to declare your global income to the Spanish tax authority, or Hacienda.

However, there are other possible scenarios. We will set out an example; let’s say you have a holiday apartment in Spain that you rent out while you are not there. In Spain, you are obliged to declare income on Spanish rentals to the tax authority, no matter where you are resident. But what if you reside in the UK?

This is where the tax treaty comes into play. As the property is situated in Spain you will  be legally required to present a declaration to the Hacienda, however as a UK Resident  you will also have to declare this income there, the tax you have already paid to the Spanish  government will be offset against your bill in the United Kingdom. 

Types of income affected by the double taxation convention

The UK-Spain double tax treaty is a 24-page document that specifies which types of income qualify for deductions or relief under the auspice of double tax. These include:

How the double taxation agreement affects you will depend on your individual circumstances. Moreover, tax rates and reliefs are subject to change. Therefore, we strongly advise seeking professional advice on how to make sure you are tax compliant in both the UK and Spain.

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Experts in fiscal matters

Ábaco Advisers have been assisting our clients with fiscal matters in Spain since 1999. With a detailed, up-to-date knowledge of the taxation regime, we help you navigate your tax obligations in Spain based on your individual circumstances. For a free consultation, without obligation, complete this form. One of our team will be in touch at a time that is convenient for you.

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8 comments

Jennifer McWlliam

26 September, 2020 4:45 pm

We paid the SUMA, in full, on our villa in Quesada last year on 10/09/2019 but completed the sale of our property on 20/08/2020.

Does this mean we do not pay the SUMA anymore?

Oscar Paoli

28 September, 2020 8:14 am

Hi Jennifer,

The legal responsibility to pay the SUMA bill regarding the IBI is of the legal owner of the property on January 1st 2020. If you did not agree on something different at the signing of the selling contract or the sale at the notary, you will have to pay the IBI for the year 2020.

Please do not hesitate to contact us should you have any further queries.

With kind regards,

Ábaco Advisers

Rob Horgan

24 December, 2020 9:38 am

Hi. My wife is a resident in the UK but sold a property in Spain in January this year.
Does she have to pay the CGT in Spain or the UK?
Thanks

Oscar Paoli

28 December, 2020 11:00 am

Hi Rob,
As the property is situated in Spain under the double Taxation treaty it should have been declared in Spain within three months of te sale in a form 210H, there would have been 3% deducted in the sale which is discounted from any Capital Gains Tax this may mean if a loss has been made that the 3% would be refunded and if the 3% was not sufficint then any extra should have been paid. The sale will also have to be declared in the United Kingdom and nay Tax paid here is deducted from any liability here.
With kind regards,
Ábaco Adviser

Geraldine Lesley

10 January, 2021 4:56 pm

I bought a house in Asturias 2005 and have a NIE card which says residente, this expired 2011. My health card expired 2012, am I still classed as a resident. My husband who is German and myself want to become residents of Spain and also the UK. We pay our house mortgage in Spain through the bank plus all our utility bills through the bank. I have a UK state pension and we are owners of a UK based travel company but do not have an income in Spain (at the moment) We´ve looked through the various articles on your site which are clear and helpful but >I guess what we need to know is how does it relate to being a German /UK couple. My husband and myself pay tax in the UK?

Oscar Paoli

14 January, 2021 1:12 pm

Hi Geraldine,
Thank you for your query. The NIE is a tax identification number which is a life long number but it does not signify residency in Spain. The document format for an NIE is an A4 certificate.
You will not still be classed as a resident if you have not renewed your padron registration at your local town hall in the last five years.
If you wish to become residents in Spain you will have to meet the new criteria for non EU citizens as although your husband has German nationality he is a UK resident as you state that you are both tax residents of the UK.
The criteria to become resident in Spain as no EU citizens is for you to have private health cover at a comprehensive level and prove a sufficient income or have substantial savings.
Please do not hesitate to contact us should you have any further queries.
With kind regards,
Ábaco Advisers

S J Becker

3 February, 2021 3:30 pm

Dear All,

Is it correct, that as a UK tax resident you can’t deduct any expenses from the income of your rental property since Brexit?
You could you let me know as well how much you charge for the quarterly tax computation filing for poor rental income.

Looking forward to hearing from you

Oscar Paoli

4 February, 2021 2:42 pm

Thank you for contacting us.
That is correct as of after Brexit you can’t deduct any expenses from the income of your rental property.
Our quarterly tax declaration for rental income is 50 € per quarter.
With kind regards,
Ábaco Advisers