Income Tax On Pensions In Spain?

Income Tax On Pensions In Spain
What about tax retained at source?  – On average, Spanish pensioners are taxed at source at a rate of 7. 7%, although the percentage varies depending on your pension. The highest state pensions are taxed at least 19% at source.

Do I have to pay tax on my pension in Spain?

Double taxation – The UK and Spain have had a Double Taxation Convention for some time. Rules covering income tax and other taxes came into effect on January 1 and April 6, 2015. Government service pensions paid to retired members of the fire service, police, civil servants, armed forces and local authorities are exempt from Spanish tax.

Do pensioners pay capital gains tax in Spain?

Absolute relief – As we explained earlier, all tax residents in Spain who are over the age of 65 years are exempt from paying the capital gains tax. Especially if the property they are selling is their main home.

Which countries do not tax pensions?

Rovinj, Istria Peninsula, Croatia Cultura Creative (RF)/Alamy Stock Photo With 700,000 U. Social Security checks a month now going to folks living abroad , foreign retirement is no longer an odd or terribly unusual proposition. But as with many major life decisions, deciding to pick up and leave these shores requires considerable thought and planning.

This much is certain: In many places it’s possible to maintain a higher standard of living at a lower cost than in the U. And for your money, you can also get such benefits as breathtaking scenery, beaches, terrific weather, great food and riveting culture.

But there are also potential drawbacks, including taxes (sometimes high, always complicated); healthcare (Medicare can’t be used abroad); getting back to see relatives (not all attractive locales have a quick or even direct flight back to the states); and social isolation (particularly if you chose a place where English isn’t widely spoken and you’re not fluent in the dominant language).

  1. There’s also the matter of getting permission to stay permanently in that foreign haven of your dreams;
  2. It’s a lot to sort out;
  3. To give you a big head start on your research, Forbes presents its new list: The Best Places to Retire Abroad in 2020;

The list, which is in alphabetical order based on country name, is here. In putting it together, we considered all the issues described above, and more. Richard Detrich, and his wife, Nikki Steele, wrestled with these issues more than a decade ago as they contemplated a foreign retirement.

  • They lived in Ventura, California, a distant coastal suburb of Los Angeles that was pretty enough but expensive as hell and full of traffic;
  • Detrich, then in his early 60s, grew up in the Midwest and on the East Coast and had had a varied career: pastor, travel agency operator, fitness chain Web guru and real estate agent, augmented by an M;

from California State University Northridge. Steele, for her part, had run for years a government program dealing with teenage moms and dads. “My wife and I reached the point one day when we decided you have to cash in your chips,” Detrich recalls. The couple quickly decided to move abroad.

  • But where? Methodical by nature, they separately drew up lists of the most important factors in making that decision;
  • They then compared notes;
  • It turned out their lists were pretty similar;
  • A warm climate, a lower cost of living (not hard to find when compared to California), convenient to visits by grown children still in the States, a stable government and economy, and a culture accepting of folks from other cultures;

That narrowed their list down a lot. They focused on Costa Rica, the U. Virgin Islands and Panama. They chose Panama for several reasons: It was outside normal hurricane zones, and Detrich and his wife had been there before. Plane trips from the U. were short and affordable.

  • The weather was warm but not especially tropical;
  • They didn’t speak much Spanish but found they could get around;
  • So they took the plunge in 2004, moving to Boquete, a small lush, scenic mountain town in the western part of the country near the Costa Rican border that’s now popular with American retirees;

Ignoring the usual advice given to expats in most places to rent rather than buy, they bought a house. “I don’t recommend doing that,” Detrich says now, “but it’s worked out. ” In 2010, he started blogging about living in Panama at richarddetrich. com. That same year he published a retirement guide, Escape to Paradise: Living & Retiring in Panama.

In 2017 he brought out a second edition, The New Escape to Paradise: Panama Q & A. These efforts (the blog carries ads for Panama real estate) bring in a little revenue, which Detrich, now 77, supplements by operating a small coffee farm and working several months a year as a lecturer on local topics aboard cruise ships around the world.

But despite the Panama Canal, “I have to fly to other countries” to catch the boats, he says. Panama is one of 25 countries we recommend on five continents and some islands. For each of the 25, we list several inviting locales (including Detrich’s home of Boquete)—a total of 65 recommended places in all.

While U. expats tend to congregate in specific areas, there are usually many more possibilities that can be discovered with a little due diligence on the Internet. One plus of most of the countries on our list: Good medical care and health insurance is available at a cost so far below U.

price levels that private insurance or even out-of-pocket payments can replace Medicare without bankrupting you. Several countries, including Uruguay and Italy, even allow expats to join their national health care systems under certain circumstances. As noted, Medicare can’t be used in foreign countries.

  • But it actually is available in one venue that made our list: the U;
  • Virgin Islands, which is an American territory;
  • Medicare is also an option for retirees close enough to drive or fly back from countries like Canada, Mexico, Aruba, Costa Rica, Dominican Republic, Belize and Panama;

In assembling the list, we looked at a number of factors in addition to healthcare. These include overall cost of living, ease of gaining the right to stay, climate, culture, things to do, political stability, crime, ease of traveling back to the U. and whether you can get by speaking only English.

Another issue we looked at is taxes. Frankly, the tax situation for Americans living abroad is not great. Unlike most other countries, the U. taxes its citizens on their income no matter where they live, so there’s no break there.

The country of foreign residence, of course, has its own taxes, often at higher rates. tax law allows U. filers to take a foreign tax credit against U. taxes for certain tax payments made to other countries, but this is somewhat limited. The U. has tax treaties with most of the countries on the list and these treaties provide some protection against double taxation, or taxation of the same income by both the U.

and the country of residence. The Internal Revenue Service website, irs. gov , provides guidance as well as a list of tax treaties  in effect. A handful of countries on our list, including Australia, Costa Rica, Malaysia, Panama, the Philippines and Uruguay, don’t tax any foreign income of expat retirees, while several others, including Colombia, Dominican Republic, France and Thailand, don’t tax pension and Social Security payments.

See also:  Tax On Income In Spain?

Regardless, expect to pay more for tax preparation assistance and advice on such issues as reporting foreign accounts to the Treasury. Overall political stability is another important issue, and it can change from year to year. Chile, Ecuador, Nicaragua and Peru made some previous Forbes lists of places to retire abroad, but aren’t not on the list now due to unrest in key places, such as the capitals.

  • On the other hand, we now include Colombia and Croatia, which not so long ago had big problems;
  • Similar to the U;
  • , many countries on this list have safer places and those to avoid;
  • In Mexico, some of the border cities are questionable, while the Philippines has unrest in a remote province;

A key issue, of course, is what it takes as an American retiree to gain the right to live in a foreign country. Most of the countries on this list allow foreign retirees to settle there upon a showing of adequate income resources, such as pensions, Social Security and retirement accounts, or overall net worth.

That adequate income can range from a minimal amount—$15,600 a year for two in Cyprus—to more than $100,000 in places like Ireland. Australia looks for a net worth topping $600,000. In some countries, family connections to the country, such as a grandparent born there, are a big help.

That works in Ireland. Canada currently makes it very hard for an American retiree without close family living in Canada to move there. But our northern neighbor allows American tourists to stay for six months a year with few questions asked, raising the possibility of simply splitting retirement between the U.

and Canada. But personal resources are hardly the only issue. Every country has procedures that have to be followed. Paperwork frequently has to be translated into the main language of the country. Some countries specify that an application first be filed with the country’s U.

embassy, while others require the paperwork to be filed once the retiree arrives in the country on a tourist visa. The website of the country’s U. embassy often has helpful information. Some expats retain a lawyer to handle the process. The initial permission to stay beyond a tourist visa is generally granted for a limited period of, say, a year or two, with the possibility of renewals and, eventually, something similar to permanent residence.

Using a tourist visa to stay as long as possible—most countries allow at least three months—on a first look to get the lay of the land is an excellent way of scoping out what might become a future home.

It is often possible to rent an apartment on a short-term lease. That could lead to a longer-term rental, since most Americans end up renting, not buying a home. Buying property in a foreign country can entail all kinds of issues, and in some places is hard to do.

There are other issues too; for example, Belize has had problems with fraudulent land sales to Americans. Expats retiring to a foreign country generally have to show proof of medical insurance, which is a smart thing to have, even without a mandate.

Coverage can be identified from such sources as  the Association of Americans Resident Overseas and Medibroker. Reflecting the lower cost of healthcare abroad, rates are generally reasonable, but finding coverage for some pre-existing conditions can be tricky.

A crucial warning: Even if you’re retiring abroad, make sure you enroll in Medicare Part A when you turn 65. It covers hospital care in the U. and it’s free. But also pay premiums for Medicare Part B, which covers doctors and other outpatient services.

(Part B premiums for 2020 start at $144. 30 but can be a lot higher based on income ). Why pay for something you’re not using? You might come back some day. If you decline Medicare Part B now and later return, you can be hit with a late enrollment penalty equal to 10% for each year you would have been paying premiums.

Due diligence, of course, is the key to any move. The internet and social media have made this a lot easier. Facebook, for example, hosts scores of groups for expats in specific countries. If a group for a location you’re interested in is closed, ask to join and then fire away with questions about the nitty gritty—cost of living, crime, banking issues, ease of bringing personal property such as a car, and so on.

Expats tend to be a helpful bunch, particularly when it comes to sharing information. Not on Facebook? Turn to Google. For example, a search earlier this month on “expat blogs in Portugal” produced more than 500,000 hits. One blog, Portugalist , run by an expat couple, had recent and useful posts on getting the best rate sending money to Portugal and traveling around the country on bus.

Is it better to retire in Portugal or Spain?

Some of the links below are affiliate links, so we may receive a commission, at no cost to you, if you make a purchase through a link. Check our  disclaimer for more info. (* = affiliate link) The Iberian Peninsula is a dream destination for people from all around the world.

  1. For retirees looking to enjoy a laid-back pace of life in beautiful, affordable, historic countries, Spain and Portugal are great options;
  2. When choosing to retire in Spain or Portugal, Portugal is the clear winner;

Portugal offers safety, ease of residency requirements, accessibility for foreigners, and affordability. In addition, Portugal is listed as one of the top countries when it comes to friendliness. In the rest of this article, we will look at different aspects of retiring in these two countries.

Is retiring to Spain a good idea?

Common FAQ’s About Retiring in Spain – How much money do you need to retire in Spain? Cost of living in Spain is one of the lowest in Western Europe. A couple can live very well in a beautiful coastal city such as Alicante for between $2,200 to $2,400 per month.

It is possible to live for even less in smaller regional towns. Can a US citizen retire in Spain? Yes a US citizen can retire in Spain. There are many different residency visa options for you in Spain. If you are planning on retiring there then the best visa option would be Residence Visa without the right to work.

Once you can support yourself this is the easiet visa to obtain. What is the best place to retire in Spain? Spain has many great potential retirement locations for potential expats. There are the cosmopolitan city options such as Madrid and Barcelona but there many other great retirement locations in Spain such as Alicante , Bilbao , Seville and Valencia to name but a few.

Is retiring to Spain a good idea? Retiring in Spain is a very good idea. Spain has many great benefits for expats retiring there such as a low cost of living, a great climate and excellent affordable healthcare.

All of these benefits give expats retiring in Spain a very high quality of life.

What is the tax rate for pensioners?

How much of my pension is tax free? – The good news is that some of your pension is tax free. If you have a defined contribution pension (the most common kind), you can take 25 per cent of your pension free of income tax. Usually this is done by taking a quarter of the pot in a single lump sum, but it is also possible to take a series of smaller lump sums with 25 per cent of each one being tax-free.

See also:  Driving In Spain On Uk Licence?

How is Spanish pension calculated?

Modalities of partial and flexible retirement are also available in Spain, with certain conditions. Knowing this, pensions are calculated through rating taking into account taxes, money earned during the contributing years and also the time period fulfilled by pension applier.

Why am I taxed twice on my pension?

When I paid into my company pension scheme prior to retirement my pension contributions were not subject to income tax. I can therefore fully understand and accept that I should pay income tax on my company pension. However I struggle to understand why the same logic does not apply to my state pension.

  • National Insurance contributions paid over the years were tax, so why should I then also pay income tax again on my state pension? Is it reasonable to expect me (and many millions of people out there) to be taxed twice on this? I would welcome your opinion on this;

SCROLL DOWN TO FIND OUT HOW TO ASK STEVE WEBB YOUR PENSION QUESTION     Paying twice: National Insurance contributions are taxed, so why must people pay income tax again on their state pension? Steve Webb replies: The question as to how much tax and National Insurance retired people should have to pay is indeed a contentious one.

Although there is a certain logic to the current system, there is also an issue of looking at how workers and pensioners are taxed and trying to make it fair for both groups. As you rightly say, when you put money into a company pension during your working life you are in effect “deferring” your pay.

So rather than pay tax at the time, you put money in to your pension before the deduction of tax. When you retire and start drawing the money out, you pay tax at that point. Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below Most people would feel that such a system is broadly fair.

Indeed, if you take advantage of the option of a 25 per cent tax free lump sum, then this represents a very favourable tax treatment overall. With regard to National Insurance contributions and the state pension, the system is rather different.

National Insurance contributions are levied on your gross pay, so this is in effect money on which you have already paid tax. When you draw a state pension, this is subject to income tax, so you could describe it as a form of double taxation. The reason the system works like this is that the National Insurance system was created as a system of “earnings-replacement”.

The idea is that you pay contributions when you are earning and then when you can’t earn because of sickness, unemployment or old age, you get a National Insurance payment to replace (part of) your earnings.

Since your earnings would have been taxed, so – the argument runs – should your earnings-replacement benefit be taxed. The main reason why this is not as unfair as it might at first sight seem is the existence of the tax-free personal allowance.

Which countries do not tax pensions?

Rovinj, Istria Peninsula, Croatia Cultura Creative (RF)/Alamy Stock Photo With 700,000 U. Social Security checks a month now going to folks living abroad , foreign retirement is no longer an odd or terribly unusual proposition. But as with many major life decisions, deciding to pick up and leave these shores requires considerable thought and planning.

This much is certain: In many places it’s possible to maintain a higher standard of living at a lower cost than in the U. And for your money, you can also get such benefits as breathtaking scenery, beaches, terrific weather, great food and riveting culture.

But there are also potential drawbacks, including taxes (sometimes high, always complicated); healthcare (Medicare can’t be used abroad); getting back to see relatives (not all attractive locales have a quick or even direct flight back to the states); and social isolation (particularly if you chose a place where English isn’t widely spoken and you’re not fluent in the dominant language).

There’s also the matter of getting permission to stay permanently in that foreign haven of your dreams. It’s a lot to sort out. To give you a big head start on your research, Forbes presents its new list: The Best Places to Retire Abroad in 2020.

The list, which is in alphabetical order based on country name, is here. In putting it together, we considered all the issues described above, and more. Richard Detrich, and his wife, Nikki Steele, wrestled with these issues more than a decade ago as they contemplated a foreign retirement.

  • They lived in Ventura, California, a distant coastal suburb of Los Angeles that was pretty enough but expensive as hell and full of traffic;
  • Detrich, then in his early 60s, grew up in the Midwest and on the East Coast and had had a varied career: pastor, travel agency operator, fitness chain Web guru and real estate agent, augmented by an M;

from California State University Northridge. Steele, for her part, had run for years a government program dealing with teenage moms and dads. “My wife and I reached the point one day when we decided you have to cash in your chips,” Detrich recalls. The couple quickly decided to move abroad.

But where? Methodical by nature, they separately drew up lists of the most important factors in making that decision. They then compared notes. It turned out their lists were pretty similar. A warm climate, a lower cost of living (not hard to find when compared to California), convenient to visits by grown children still in the States, a stable government and economy, and a culture accepting of folks from other cultures.

That narrowed their list down a lot. They focused on Costa Rica, the U. Virgin Islands and Panama. They chose Panama for several reasons: It was outside normal hurricane zones, and Detrich and his wife had been there before. Plane trips from the U. were short and affordable.

The weather was warm but not especially tropical. They didn’t speak much Spanish but found they could get around. So they took the plunge in 2004, moving to Boquete, a small lush, scenic mountain town in the western part of the country near the Costa Rican border that’s now popular with American retirees.

Ignoring the usual advice given to expats in most places to rent rather than buy, they bought a house. “I don’t recommend doing that,” Detrich says now, “but it’s worked out. ” In 2010, he started blogging about living in Panama at richarddetrich. com. That same year he published a retirement guide, Escape to Paradise: Living & Retiring in Panama.

  1. In 2017 he brought out a second edition, The New Escape to Paradise: Panama Q & A;
  2. These efforts (the blog carries ads for Panama real estate) bring in a little revenue, which Detrich, now 77, supplements by operating a small coffee farm and working several months a year as a lecturer on local topics aboard cruise ships around the world;

But despite the Panama Canal, “I have to fly to other countries” to catch the boats, he says. Panama is one of 25 countries we recommend on five continents and some islands. For each of the 25, we list several inviting locales (including Detrich’s home of Boquete)—a total of 65 recommended places in all.

See also:  Is Spain In Danger Of Going On The Red List?

While U. expats tend to congregate in specific areas, there are usually many more possibilities that can be discovered with a little due diligence on the Internet. One plus of most of the countries on our list: Good medical care and health insurance is available at a cost so far below U.

price levels that private insurance or even out-of-pocket payments can replace Medicare without bankrupting you. Several countries, including Uruguay and Italy, even allow expats to join their national health care systems under certain circumstances. As noted, Medicare can’t be used in foreign countries.

But it actually is available in one venue that made our list: the U. Virgin Islands, which is an American territory. Medicare is also an option for retirees close enough to drive or fly back from countries like Canada, Mexico, Aruba, Costa Rica, Dominican Republic, Belize and Panama.

In assembling the list, we looked at a number of factors in addition to healthcare. These include overall cost of living, ease of gaining the right to stay, climate, culture, things to do, political stability, crime, ease of traveling back to the U. and whether you can get by speaking only English.

  • Another issue we looked at is taxes;
  • Frankly, the tax situation for Americans living abroad is not great;
  • Unlike most other countries, the U;
  • taxes its citizens on their income no matter where they live, so there’s no break there;

The country of foreign residence, of course, has its own taxes, often at higher rates. tax law allows U. filers to take a foreign tax credit against U. taxes for certain tax payments made to other countries, but this is somewhat limited. The U. has tax treaties with most of the countries on the list and these treaties provide some protection against double taxation, or taxation of the same income by both the U.

and the country of residence. The Internal Revenue Service website, irs. gov , provides guidance as well as a list of tax treaties  in effect. A handful of countries on our list, including Australia, Costa Rica, Malaysia, Panama, the Philippines and Uruguay, don’t tax any foreign income of expat retirees, while several others, including Colombia, Dominican Republic, France and Thailand, don’t tax pension and Social Security payments.

Regardless, expect to pay more for tax preparation assistance and advice on such issues as reporting foreign accounts to the Treasury. Overall political stability is another important issue, and it can change from year to year. Chile, Ecuador, Nicaragua and Peru made some previous Forbes lists of places to retire abroad, but aren’t not on the list now due to unrest in key places, such as the capitals.

On the other hand, we now include Colombia and Croatia, which not so long ago had big problems. Similar to the U. , many countries on this list have safer places and those to avoid. In Mexico, some of the border cities are questionable, while the Philippines has unrest in a remote province.

A key issue, of course, is what it takes as an American retiree to gain the right to live in a foreign country. Most of the countries on this list allow foreign retirees to settle there upon a showing of adequate income resources, such as pensions, Social Security and retirement accounts, or overall net worth.

  • That adequate income can range from a minimal amount—$15,600 a year for two in Cyprus—to more than $100,000 in places like Ireland;
  • Australia looks for a net worth topping $600,000;
  • In some countries, family connections to the country, such as a grandparent born there, are a big help;

That works in Ireland. Canada currently makes it very hard for an American retiree without close family living in Canada to move there. But our northern neighbor allows American tourists to stay for six months a year with few questions asked, raising the possibility of simply splitting retirement between the U.

  • and Canada;
  • But personal resources are hardly the only issue;
  • Every country has procedures that have to be followed;
  • Paperwork frequently has to be translated into the main language of the country;
  • Some countries specify that an application first be filed with the country’s U;

embassy, while others require the paperwork to be filed once the retiree arrives in the country on a tourist visa. The website of the country’s U. embassy often has helpful information. Some expats retain a lawyer to handle the process. The initial permission to stay beyond a tourist visa is generally granted for a limited period of, say, a year or two, with the possibility of renewals and, eventually, something similar to permanent residence.

Using a tourist visa to stay as long as possible—most countries allow at least three months—on a first look to get the lay of the land is an excellent way of scoping out what might become a future home.

It is often possible to rent an apartment on a short-term lease. That could lead to a longer-term rental, since most Americans end up renting, not buying a home. Buying property in a foreign country can entail all kinds of issues, and in some places is hard to do.

There are other issues too; for example, Belize has had problems with fraudulent land sales to Americans. Expats retiring to a foreign country generally have to show proof of medical insurance, which is a smart thing to have, even without a mandate.

Coverage can be identified from such sources as  the Association of Americans Resident Overseas and Medibroker. Reflecting the lower cost of healthcare abroad, rates are generally reasonable, but finding coverage for some pre-existing conditions can be tricky.

A crucial warning: Even if you’re retiring abroad, make sure you enroll in Medicare Part A when you turn 65. It covers hospital care in the U. and it’s free. But also pay premiums for Medicare Part B, which covers doctors and other outpatient services.

(Part B premiums for 2020 start at $144. 30 but can be a lot higher based on income ). Why pay for something you’re not using? You might come back some day. If you decline Medicare Part B now and later return, you can be hit with a late enrollment penalty equal to 10% for each year you would have been paying premiums.

  • Due diligence, of course, is the key to any move;
  • The internet and social media have made this a lot easier;
  • Facebook, for example, hosts scores of groups for expats in specific countries;
  • If a group for a location you’re interested in is closed, ask to join and then fire away with questions about the nitty gritty—cost of living, crime, banking issues, ease of bringing personal property such as a car, and so on;

Expats tend to be a helpful bunch, particularly when it comes to sharing information. Not on Facebook? Turn to Google. For example, a search earlier this month on “expat blogs in Portugal” produced more than 500,000 hits. One blog, Portugalist , run by an expat couple, had recent and useful posts on getting the best rate sending money to Portugal and traveling around the country on bus.