Is my Civil Service Pension taxable in Spain?

We have recently seen some clients with the following question: Is my Civil Service Pension taxable in Spain?

tax treaty

Since we started working for Expats, we have seen many of them receiving “Old Age Pensions” or a “State Pension” and “Civil Service Pension”. Some of them do not really know what has to be taxed in England or Spain and why. The answer is on the “Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital” that the Kingdom of Spain and the United Kingdom of Great Britain and Northern Ireland signed years ago, the 18th November 1976, to avoid the taxation of the same income in both countries and facilitate the change of residency and freedom of movements between both countries.

On this specific case, Public Pensions or Civil Service Pensions, article 18 of the Convention speaks about Civil Service Pensions and states that it can only be taxed in the country that pays the pension if the person is a national of that country (England) and resident in the other country (Spain). In this particular case, these pensions can only be taxed in The United Kingdom. (Please find below a link to the Double Taxation Agreement in English on the web page of the Spanish Tax Office and also a link where you can find any other)

Last year there was too many people confused about a change on this agreement, some newspapers published the obligation of including those pensions on the annual income tax returns in Spain and, as it was not clear enough in the law and there were contradictory criteria from different unofficial sources, we visited the Director of both Tax Offices in Murcia and Alicante to ask about this. The answer was that the change only affected Spanish Nationals who had worked in England and now are paid a Civil Service Pension, if they are tax residents in Spain (And only on this particular case) those pensions have to be taxed in Spain even if they are paid from the United Kingdom.

Once the situation was clarified, for us there is no discussion and even when other unofficial sources do not agree with this criteria, we have recently recovered overpaid taxes for clients who were including their Civil Service Pensions on the Annual Income Tax Return in Spain in the past.

Remember it is always better to discuss this technical information with a professional on that particular sector and not a General Adviser.

Double Tax Treaty between United Kingdom and Spain: http://www.minhap.gob.es/Documentacion/Publico/NormativaDoctrina/Tributaria/CDI/BOEIN_RUnido.pdf

All Tax Treaties signed by Spain with other countries:

http://www.minhap.gob.es/es-ES/Normativa%20y%20doctrina/Normativa/CDI/Paginas/CDI_Alfa.aspx

1 Comment

  1. I have my private pension paid into Spanish bank account I Almeria and have always paid tax on this income since us moving here in 2006. My wife and I have our state pension paid into uk bank since we qualified by age ( 65 ), however the last 2 years our tax has escalated from 900 euros per yr paid on our private pension, upto a whopping 4800euros per yr. so we are paying tax on every pound sterling of the state pension? We use the uk pension to top up our living expenses in Spain as and when required! Our total uk pension totals little over £890 per month made up of £520 for me & £365 for my wife. We have been told by Spanish hacienda that this is correct, but feel that the increase levied is disproportionate to a system that we have always paid into, and feel that there must be some sort of explanation on how we have to pay 21% tax on every pound of the pension that we paid during our working time in uk. Your advice or clarification of the rules to settle our very great concerns would be most welcome.

    We have savings of only £4500 so do not have any IHT issues, and am feeling the strain financially on survival here living in Spain.

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