Generally speaking, if you live in Spain for 183 days or more in a calendar year (Spanish tax years run in calendar years, not from April to April), you will be considered as resident for tax purposes and will therefore be liable to pay taxes in Spain, just like any other Spanish citizen would.
Paying your taxes in Spain will benefit you and the area where you live, as tax revenues are used to improve local infrastructure and services that are all available to you.
You will be taxed on your worldwide income and double taxation treaties are in place to avoid paying tax twice – so if you are still paying taxes in the UK, do not worry, you will be able to reclaim these or offset them when completing your Spanish tax return.
The deadline for filing the return, known in Spanish as the ‘Declaración de la Renta’ is the 30th June 2016, but if there is any tax payable and you wish to pay by direct debit rather than in person at the bank, the latest the return can be filed is the 25th June 2016.
If you are a pensioner, and only receive state and/or private pensions from the UK, these will need to be declared on your Spanish tax return once you become a fiscal resident in Spain. Many people are under the impression that just because they continue to pay tax in the UK and receive correspondence from the UK tax office that they are exempt from filing Spanish tax returns – this is not the case (although there are exceptions, for example, if you only receive pensions from a public source for example a military, police or teacher’s pension. You should check your individual situation with your fiscal adviser).
You should complete a Spanish tax return and pay any additional tax which may be payable and complete the UK Tax Office’s Form called a ‘Spain Individual’ which will inform them that you are now resident in Spain and filing your tax returns here and that they should therefore pay your pensions gross (without deducting any UK income tax).
In the first year, there is often a transition period, where you will have had tax deducted in the UK as well as being liable for tax here in Spain. With the double taxation treaty in place, you should be able to offset the tax paid in the UK – so in other words, you shouldn’t be taxed twice.
After the first year, once the ‘Spain Individual’ form is submitted, you should see that things will operate more smoothly.
The tax allowances and rates obviously vary from those in the UK. In Spain for 2015, the lowest rate of tax is generally 19.5% in total, but this can vary regionally. It also goes up relative to your taxable income. Your tax adviser should be able to calculate your liability based on your income as shown on your UK P60’s and other documentation.
So ask for advice now! Do not leave it to the last minute as fines are placed on late returns!!