Q. I READ your column two weeks ago about the new law requiring all residents to declare their assets outside of Spain. You say that if you own a property in the UK which you rent out and you pay income tax on the rentals in the UK, that you will also have to pay tax on the same income in Spain if you are a Spanish tax resident. I was led to believe that you could not be double taxed and that you pay only once. I am in fact confused about this new law as I get different answers. No one seems to know how or even whether I have to declare my house in the UK.
BB (Costa Blanca)
A. YOU have two questions. I shall take the second one first. Yes, you have to declare your house in the UK if it is worth more than €50,000. You will do this on Tax Agency Form 720 which is only available electronically. There is no paper form. I urge you and anyone else in your position to seek professional help in Spain. The draft form is 22 pages long. To declare a house requires only a few of these pages but you must know which ones.
The Tax Agency has extended the deadline to declare from March 31 to April 30. They insist that the declaration is simply “informative.” Keep in mind that the new law is aimed at Spaniards themselves, not foreigners in particular. It gives the Tax Agency a new weapon against Spaniards with large undeclared assets abroad. This is why the penalties are so stiff.
As to your first question, yes, you are liable for tax in both countries. In the UK because the income arises there, and in Spain because you are required to declare your worldwide income as a tax resident here. You obtain forms from HRMC and from the Spanish Tax Agency to avoid being taxed twice. Spain will deduct your UK payments from the Spanish tax bill. Note that I did not say “you will pay”. I said you “are liable”.