TAXATION OF PENSIONERS IN SPAIN

It did change in 1992, and since then pensions have been taxed according to the source of the income. Taxation of investement capital and insurance-based pensions can be very complicated and you should obtain expert professional advice from an accountant or tax advisor before deciding where and how to receive your pension.

Employement-based pensions

Employment-based pensions are taxed in the same way as salary income. You are entitled to the same allowances and deductions, and the same tax rates apply. However, the situation is not as straightforward if your pension is paid from a savings scheme such as a pension fund established through an employment relationship with tax advantages in your home country.

Investment capital pensions in Spain

Whereby you pay a sum of money or transfer assets such as property to another party in return for annuity payments (or a monthly income) for a fixed period or until death, may give rise to capital gains and interest income, each of which is taxed differently in Spain.

Insurance-based pensions in Spain

Insurance schemes that permit you to choose between taking the whole amount accrued in a lump sum and having it paid in the form of annuities may be taxed as capital gains or as ordinary income.

Civil service pensions in Spain

Foreign civil service pensions are usually tax free in Spain may not need to be declared to the Spanish authorities if they are your only source of income, although this depends on the country paying your pension and whether it has a double-taxation treaty with Spain; you may need to provide to the tax office with proof that your pension is taxed at source. Civil service pensions do not include United Nations pensions, as the UN cannot tax its former employees (unlike individual countries). However, that if you have another income that is taxable in Spain, your civil service pension is usually taken into account when calculating your Spanish tax rate and it must usually be declared. If you pay tax in error on a pension that was not in fact taxable, you can claim a refund only for the previous five years, which is Spain's statute of limitations (if they are not collected, taxes are also usually lapse after five years).

Non-resident pensions in Spain

Non-resident pensions received from Spanish source are subject to special tax rates depending on the amount: Up to 12.000 E the tax rate is 8%. From 12.000 E to 18.700 E the tax rate is 30% and over 18.700 E the tax rate is 40%