In his book, ‘You and the Law in Spain’ for 2011 David Searl notes that both lifetime and fixed-term annuities have tax reductions. They must be declared in the investment part of the tax form. I have a Swedish annuity with a fixed time of 20 years. I am 80 years old and I have been declaring the annuity as a lifetime at eight per cent. But I think this is wrong. What percentage of the yearly amount should be declared?
H.G. (by email)
A fixed-term annuity of 20 years pays tax on 25 per cent of the yearly income. If you receive €20,000 each year from your fixed-term annuity, you will be taxed on €5,000. You declare this income in the investment part of the tax return. For investment income up to €6,000, the tax rate is 19 per cent, so this would draw tax of €950. However, you can deduct your personal minimo vital from your total income. If you are 80 years old, this reduction is €8,100. You can also apply this reduction to your Swedish pension income. You need a 2018 law book and a Spanish tax advisor.
Send your questions for David Searl through lawyers Ubeda-Retana and Associates in Fuengirola at Ask@lawtaxspain.com, or call 952 667 090.