Disability-Pension from UK Taxed Once Resident in Spain?

Question on our facebook group.

Member: I get a benefit called Industrial injuries because I had a bad accident at work. It is for life. In uk it’s not taxable. If I was to have it transferred from uk to international department and paid into a Spanish bank account would the Spanish be able to tax me on it? I would think not since it is tax free in uk. Is this correct?

Philip Carroll It doesn’t matter whether you have it paid into a Spanish bank account or in the UK, if you are resident in Spain then it’s subject to declaration and taxation in Spain.

Please note that this is applicable to all benefits related to disability, paid from abroad to a resident in Spain.

I’m afraid it would be taxable in Spain, and the fact that it’s not taxable in the UK is not relevant I’m afraid. That’s because Spain has a different system for tax allowances. They have a disability rating system where you are assessed and your level of disability rated as a percentage. This system is managed by the INSS (Social Security). You can and should apply for this in order to receive the additional tax allowances and other benefits which arise when you have been resident for the required time period.

If you are assessed at between 33% – 65% you receive an additional €3,000 tax allowance and over 65% it’s €9,000 plus a further €3,000 if you require third party care.

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.