NARPO – The voice of retired police officers
NARPO – The voice of retired police officers

Double taxation

The UK and Spain have had a Double Taxation Convention for some time. Rules covering income tax and other taxes came into effect on January 1 and April 6, 2015.

Government service pensions paid to retired members of the fire service, police, civil servants, armed forces and local authorities are exempt from Spanish tax. Under the new treaty the amount of the pension is still exempt but must be included when calculating how much tax is due in Spain. This could have the effect of pushing any other income – perhaps from investments and rent – into a higher tax bracket meaning you’d have to pay more tax in Spain.

Disclosure rules

The Spanish ‘disclosure’ rules mean that Spanish residents and expats living in Spain will have to declare all relevant overseas assets worth more than €50,000. This includes bank accounts, property and life assurance policies.

The website includes the following:


The tax system in Spain operates on the same basis as the tax system in the UK. In the UK, those who are resident for tax purposes are taxed on their worldwide income, regardless of the country in which it arises. Those who are not resident for tax purposes are taxed only on the income arising in the UK. A Double Taxation Convention between Spain and the UK operates to prevent income being taxed in both countries when a resident of one country has income arising from a source in the other country. The full text of the convention can be found on the HMRC website.

In the case of pensions for past Government service, double taxation is avoided by allocating an exclusive right to tax to the paying state. This means that in all cases where a UK Government Service pension is paid to a Spanish resident it will be taxable only in the UK, apart from where, exceptionally, it is paid to a Spanish national. HMRC maintain a list of the UK pensions that are classified as government pensions for the purposes of the Double Taxation Convention.

Spain applies a system known as ‘exemption with progression’. This means all income a Spanish resident receives is considered when calculating the applicable rate of income tax in Spain – regardless of whether the income itself is taxed in Spain. So a UK Government pension, exempt under the terms of the DTC, will still be taken into account for the purposes of determining the tax rate which applies to income taxable in Spain

This is common practice in other states around the world.

If, as a resident of Spain, you have concerns over whether a UK Government service pension is going to be taxed in Spain in a manner not in accordance with the Double Taxation Convention, you should address these to the Spanish tax authorities.

In accordance with Spanish and international law, all residents in Spain (nationals and non-nationals alike) are required to declare assets or groups of assets held outside Spain. Assets may include bank accounts, securities, rights, insurance, annuities, property, etc. and the declaration is a separate exercise to the annual tax return.

To reinforce this obligation, and as part of the Spanish Government’s anti-fraud law, the Government requires all residents in Spain to file an annual informative declaration of assets held overseas by 31 March each year. Severe penalties for incorrect, incomplete or late reporting can be incurred and the legislation also means that criminal charges can be brought in the case of non-compliance.

Please see the links below:

HMRC Letter re Double Taxation