Is Civil Service Pension Taxed?

I read your earlier articles about changes in the 2013 double taxation agreement between Spain and the UK which affect the treatment of government pensions in the two countries.

Under the previous Double Taxation Treaty Spain did not require declaration of the UK government pension. Now the Spanish tax agency has grabbed €2,190 from my bank account for unpaid tax from 2014.

I M (Costa del Sol)

Here is how it works. Under the previous treaty, for the Spanish Tax Agency, the UK government pension simply did not exist.

Now, the total amount of the UK government pension is added to your other income in order to determine the tax rate.

If your OAP is less than about €12,000 it would be taxed at 20 per cent.  If your government pension is €35,000, this bumps you into the 31 per cent bracket when added to the OAP.

Then the amount of the government pension is removed and the new and higher tax rate is applied, but only to the OAP. See Article 18 of the 2013 tax treaty.

Send your questions for David Searl through lawyers Ubeda-Retana and Associates in Fuengirola at Ask@lawtaxspain.com, or call 952 667 090.