QUESTION: We own a property in Spain and for 30 years we registered at the local Hacienda as “Resident Non-Taxpayers”. Every year we produced a tax certificate from our country of legal domicile, South Africa, and only paid tax on our property in Spain. In 2013 we were told by Hacienda that, if we were Resident in Spain, we had to pay Spanish taxes and claim back our tax from our country of origin.
My question is: In order to avoid double taxation, do we have to declare ourselves non-resident tax-payers in South Africa and only pay taxes in Spain, on the pension and annuity income we bring into Spain?
N.H. (Costa Blanca)
ANSWER: Yes. Almost all countries base their income tax on residence and not nationality. By terms of the tax treaty between Spain and South Africa, updated in 2007, you must arrange to go off the books in South Africa and pay tax in your country of official residence, Spain. Further, you must declare your worldwide income, not just the amount you bring into Spain.