Double Tax Agreements: only once , not twice
Sometimes make it dificult to be understood in both “Contracting States”.
Focusing only on the matter of pensions taxable in one state or the other will make us start with interpretation of single words.
Definition: Basic State Pension, was before called the Old Age Pension or Retirement Pension and means the basic flat rate state pension and the state earnings related pension scheme (SERPS).
Definition: Public Pension, means the occupational pensions for some of the workers in the public sector, civil servants, local authority workers, teachers, the NHS, the armed forces, the police and the fire brigades, etc…
From the Government website:
17/9/2014 State Pension if you retire abroad – GOV.UK
- Tax on your State Pension
You may have to pay UK tax on your State Pension if you live abroad. This will depend on:
- your taxable income
- whether you’re classed as a ‘UK resident’ or ‘non-UK resident’ for tax purposes
The rules are the same as for people living in the UK – you’ll only pay tax if your taxable income is over a certain amount.
don’t pay UK tax on their State Pension but may pay tax in the country they live in.
But if you live in a country without a double taxation agreement’ you’ll have to pay UK tax and may be taxed in the country you live in as well.
There is a double taxation agreement between UK and Spain which says clearly that you the pensionists are taxed only in one country.
- Public (sector) pension from the UK in the UK – from Spain in Spain.
- State pension and all the other private pension in Spain if you are resident here.
There is indeed a new version of the Double Tax Agreements between Spain and UK: “Signed on 14th March 2013. This Convention will enter into force on 12 June 2014.
Nevertheless the text of articles 17 and 18 in reference to pensions does not change anything:
Subject to the provisions of paragraph 2 of Article 18, pensions and other similar
remuneration paid to an individual who is a resident of a Contracting State, shall be
taxable only in that State.
- a) Salaries, wages and other similar remuneration paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.
b) However, such salaries, wages and other similar remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:
(i) is a national of that State; or
(ii) did not become a resident of that State solely for the purpose of rendering the services.
2. a) Notwithstanding the provisions of paragraph 1, pensions and other similar remuneration paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.
b) However, such pensions and other similar remuneration shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State.
3. The provisions of Articles 14, 15, 16 and 17 shall apply to salaries, wages, pensions, and other similar remuneration in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.
The article 18 is only for public sector pension and means that these pension of british public workers are taxable in UK and of spanish public workers are taxable in Spain only.