Joining the protest

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July 21, 2016

Dear Editor

Re the above subject about double taxation, which my wife and I read in last week’s CB News, we thought we should join in the ‘protest’, so here is our story.

Although we have lived here on and off on the Costa Blanca for 10 years, we finally became residents last year, which means we now have to pay our taxes here.

We are aged 64 and 65 (me). My wife receives a company pension from Imperial Tobacco, UK, and last year started receiving her state pension.

Through our abogado, Vives, in Calpe, we had no qualms about transferring her company pensions tax to Spain last year when we did our tax return. That was OK. There is a tax code on her P60 to ‘calculate the tax’ to be paid.

However, there is no way to calculate the tax code on her state pension. It is/is it? a state handout and I still do not know if anyone’s state pension is taxed. What you get is what you get, you have no choice, despite the fact that it has been taken from you since you started work all those years ago. IS IT TAXED? Still don’t know (a friend has said that it was taken from you and is now being handed back tax-free, so you were not taxed on your contributions so shut up and pay tax on it now).

This year my wife’s two pensions added together exceeded the lower income threshold, so there was effectively a tax to pay on her state pension, with which we totally disagree, as you can imagine.

So she now has to pay Spanish tax on a pension she has worked all her life for which would have been ‘tax free’ if we had stayed in the UK. UK state pensions should not be subject to tax here in Spain.

So now to me. I have a local authority pension (ex Fire Service) which I had to prove was not subject to tax here, by finding the relevant documentation online (took ages) and printing it off for them, that the tax has to be paid in the UK (article so and so, etc).

I have read that the tax authorities here, once they have accepted you are in receipt of it (local authority pension), will leave it alone as they know they cannot get the tax from it and will therefore regard it as ‘non-existent’.

So no problems so far, the tax for my works pension remains in the UK. However, this year, in June, I have received my first month’s state pension and am not looking forward to next year’s tax declaration. I think I know what will happen. They will add my two incomes together and, just like my wife, I will be over the lower limit (by adding the two amounts together) and then I will have to pay tax here in Spain, so effectively they will also be taxing my state pension, which would not have happened if we had not been living here in Spain.

I think this all revolves around the question of tax relating to the state pension. If there was clarification that tax has been paid on the state pension (which I cannot find out) or is not subject to tax and is free of tax, then Spain would not be able to include it as untaxed income, and should they then tax it would be guilty of the double taxation offence.

Do hope this helps the cause. Keep up the good work as this should not be happening.

Dave and Liz Clark