From our tax advisor Philip Carroll 04.02.2017 in answer to this question:
¨After many years living and working in Spain, I am now based back in the UK where I am in receipt of a Spanish State Pension. However, 8% IRPF is deducted by the Spanish Authorities at source – is this correct, as I will also have to pay UK tax on it too making this, in effect, double taxation.¨
If you are in receipt of a Spanish pension, but are a resident in the UK, you will notice that a percentage IRPF will be withheld at source. The Seguridad Social deduct 8% from the amount of your pension because income paid in Spain to a non-resident is subject to Spanish tax legislation. Having said that, it is also subject to the Double Tax Agreement (DTA) between Spain and the UK.
Under the DTA if you receive a Spanish State Pension it is taxable only in the State where you are resident, so in this case the U.K.
It is not the correct procedure to claim relief on your UK self-assessment, and in fact it is unlikely that HMRC will allow such a claim. You should declare the full amount, and claim relief from Spain in respect of the tax paid in Spain. You can do this by submitting a Modelo 210, but you will be required to prove fiscal residence in the U.K. by providing a Certificate of Fiscal Residence. You can apply for this online.
You can claim back the tax paid in Spain up to 4 years after payment. I have to admit that it is not very clear if you can obtain payment of the pension without deduction of tax, unlike the U.K. where there is a form you can complete and submit. I cannot find any similar form in Spain.
You have to de-register from the Spanish Tax system as normally they will ask you to provide the Certificate of Fiscal Residence to support this, in which case they may authorises the INSS to pay without deduction of tax. If they don’t, then I would ask them and see what they say.
You deregister by submitting a Modelo 030, which you can submit online if you have a digital ID. You should also deregister from the Registro de Cuidadanos de la Unión if you have not done so already.
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