If you’re a Spanish tax resident and collect a pension, it’s important to know what your tax obligations are and how much the authorities retain at the source.
In this article, we look at the different aspects of tax on pensions in Spain.
Did you know? We offer comprehensive tax representation services for residents and non-residents to help you save time and money, and avoid costly and stressful mistakes.
The tax perspective on pensions
First of all, let’s take a look at how the Spanish tax authorities class pensions. For tax purposes, tax is considered to be income. As a result, pensions are subject to annual income tax regulations and rates.
Who has to declare tax on pensions in Spain?
Whether you need to file an income tax declaration depends both on how much income you have a year and its source.
If your annual income comes from a single source (i.e., just your pension) and it’s less than €22,000 a year, you do not have to file an annual income tax declaration. As a result, around 65% of pensioners in Spain are exempt.
More than one source
If your income comes from more than one source, for example, your pension and rental income, you must file an income tax declaration every year when:
- Your total income is higher than €12,000 a year;
- AND, the income from the smaller source is more than €1,500 a year.
What are tax rates on pensions?
Since pensions are classed as income, they have the same rates as income tax. These currently range from 19% to 47%.
What about tax retained at source?
On average, Spanish pensioners are taxed at source at a rate of 7.7%, although the percentage varies depending on your pension. The highest state pensions are taxed at least 19% at source.
What about personal allowances?
Pensioners have slightly higher personal allowances. For example, those aged between 65 and 74 have an allowance of €6,700 a year and the over 75s benefit from an allowance of €8,100.
What about pensions collected from outside Spain?
If you collect a pension from outside Spain and are a tax resident in Spain, you must usually declare the income from this pension.
The only exception is when there’s a specific tax treaty to avoid double taxation. In general terms, however, foreign pensions are taxed in the same way as Spanish pensions.
If you need advice on the tax obligations on your pension, get in touch with our team.
They will be happy to provide assistance to ensure you comply with tax regulations and, importantly, do not pay more tax than you need to.