Get Brexit Ready!

Get Brexit Ready!

by | Mar 11, 2020 | Sin categoría

As we all know after the approval of the Brexit Withdrawal Agreement the UK now finds itself in a transition period which will last until the 31st December 2020, assuming that it is not extended. During this transition period UK citizens can continue to live, work and study in the EU as they did before the 31st January 2020, but it is important for those who have not done so yet to start preparing for their stay in Spain after the end of the transition period.

Legal residency and NIE

If you are living in Spain, but have not yet obtained your legal residency certificate (green A4 or card size document) you can still do so before the 31st December under current EU regulations, which we highly recommend. Any application made after this date, unless the transition period is extended of course, will be considered under whatever new regulation is agreed between the UK and EU, or under Spain’s current regulation for non-EU citizens if no agreement is reached on residency. This could mean a substantial increase in minimum income requirements, employment law requirements, etc. depending on the basis for your residency application.

The NIE document (white A4 document), as you will already know, is not proof of residency and is a way of assigning a legal and tax identification number to non-residents, which is required for certain transactions, such as buying a property, registering a vehicle, etc. The regulation surrounding this document will not change after the 31st December, as it is already a document which has exactly the same requirements for EU and non-EU citizens alike.

For more information you can refer to our post on “Living and working in Spain”.

Tax residency

Fiscal residency should not be confused with legal residency. You are considered to be a tax resident of Spain if you spend more than 183 days of the year in Spain.

For more information you can refer to our post on “Income Tax in Spain: Am I liable to pay it?”.

However, even as a non-resident you will still be liable for Non-Resident Tax if you own a property in Spain.

For more information you can refer to our post on “Non-Resident Income Tax: What is it and why do I have to pay it?”.

Healthcare

Life-long healthcare rights in Spain have been guaranteed to those who are resident in Spain before the 31st December, provided they remain a resident.

Pensions

You can continue to receive and can still claim your UK State Pension if you live in the EU.  If you are resident in Spain by the 31st December you will get your pension uprated each year as long as you continue to reside here, and even if you start claiming your pension on or after the 1st January 2021 as long as you meet the conditions set out in the new State Pension guidance.

Driving license and vehicle registration

Once you become a legal resident in Spain you are required to exchange your UK driving license for a Spanish one. Again, before the 31st December this can be done in the same conditions as before under the regulation of EU license exchanges, which is to say a straight exchange of one for the other.

Equally, if you are a resident or spend more than 6 months a year in Spain you are required to register your vehicle in Spain.

For more information you can refer to our post on “Bringing your vehicle to Spain”.

Wills, Inheritance and Inheritance Tax

It is essential, even more so if you are a Spanish resident or in the process of obtaining residency, to make sure you have a Spanish will in place for your assets in Spain with an express choice of law clause allowing your inheritance to be governed by UK law. The importance of this is addressed in more detail in our post “Why is it more important than ever to have a Spanish Will?”.

The majority of regional Inheritance Tax allowances that UK citizens currently enjoy in Spain do not apply to non-EU residents. This means that, save for a tax agreement to the contrary, UK residents will have Spanish State Inheritance Tax regulation applied to their inheritance. It is therefore important to seek the right advice when structuring you will, in order to keep this in mind.

If you need help or advice with any of these proceedings, do not hesitate to contact us.

Gabriella Mary Trussler Rowland
Lawyer
4408 Ilustre Colegio de Abogados de Almería

Non-Resident Income Tax: What is it and why do I have to pay it?

Non-Resident Income Tax: What is it and why do I have to pay it?

by | Nov 25, 2016 | Tax

The determining factor regarding what kind of Income Tax a natural o legal person pays in Spain is residence. Residents pay regular Income Tax (IRPF) or Corporation Tax (IS), and non-residents, both natural and legal persons, must pay Non-resident Income Tax (IRNR).

Who is a resident?

The first question to answer is who is considered a resident for tax purposes. This consideration must not be confused with the legal status of resident, which I have explained in detail y my previous post “Living and working in Spain”.

Natural persons (private individuals) are considered resident in Spain for tax purposes if they remain in Spain for more than 183 days of the calendar year.

Anyone who does not find themselves in this situation will be considered a Non-Resident Income Tax payer insofar as they obtain income or own real-estate in Spanish territory.


Income to be declared on real-estate in Spain

According to Spanish law, non-resident natural persons who own urban real-estate assets in Spanish territory, for their own personal use, rather than for economic activity or which are vacant, are subject to Non-Resident Income Tax for the income obtained from these buildings. To clarify, although there is no actual income received in these cases, a “fictional” income is calculated based on the value of the said property. This is not to be confused with the local Property Tax (I.B.I.), the payment of which does not exempt you from Non-Resident Income Tax.

If you are renting out your property you will have to declare the income you obtain from said rental.

Will I be notified I have to pay?

The system for collecting taxes in Spain is different to that in many other countries. Under the Spanish system you will not necessarily be reminded that you owe tax, it is your responsibility to make sure you are up to date on your tax payments.

However, this does not mean you won’t be caught for not paying your Non-Resident Income Tax. The Spanish Tax Authority is increasingly cross-referencing information to identify where there are irregularities (including monitoring electricity consumption and Land Registry records, among other measures).

A letter may be sent to your Spanish address notifying you of your obligation to pay Non-Resident Income Tax, though this is not necessarily the case and not receiving such a letter does not exempt you from your tax obligation. Even in the event that this letter is sent out, if you are not there to receive it at the time it is issued, as many who are not residing permanently in Spain may not be, then the letter will be returned to the Spanish Tax Authority.

When do I have to pay?

The 31st December is the deadline every year, by which time non-residents must have filed their annual Non-Resident Income Tax return for the previous year (e.g. deadline for 2019 tax return is 31st December 2020).

Consequences of failing to pay

The main consequence of non-payment is that the debt with the Spanish Tax Authority will be held against your property and, as a result, will have to be settled before you are able to sell your property, or before your heirs are able to inherit it.

In addition, you may have to pay late payment interest, as well as the appropriate tax sanctions, the funds in your bank account could be seized, or you could become the subject of one of the Spanish Tax Authority’s anti-fraud campaigns.

It is for all of these reasons that it is essential that non-residents seek a professional and experienced fiscal representative who is in a position to make sure your taxes are paid on time, receive notifications on your behalf, represent you to the Spanish Tax Authority, inform you of changes to Spanish tax law and answer all your queries on the matter.

Gabriella Mary Trussler Rowland
Lawyer
4408 Ilustre Colegio de Abogados de Almería