taxation for pensioners tenerife
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Well. You'd think taxation for pensioners would be a straightforward matter, wouldn't you?
Then again, on reflection, everything concerned with taxation is always fiendishly difficult to understand!
I've trawled through various websites, trying to pick out the salient points that people approaching, or having reached, retirement age will probably be interested to know.
Remember, this is just advice and information. You should always use the services of a qualified tax advisor, before you do anything.
Retiring To Tenerife
Now, I'm going to use the UK as the example for this information, but it applies to any EU member state.
If you have reached retirement age and ceased work, you may wish to enjoy this future period of rest and relaxation by upping sticks and relocating to the sunshine island.
It is possible to receive your UK pension whilst living in Tenerife, but there are some things to be aware of.
Her Majesty's Revenue and Customs will pay the pension directly into your UK bank, or your Spanish one (if applicable), or will post it to you as a money order - it's for you to decide. You'll receive payments every four or 13 weeks.
However, this puts your pension pot at the mercy of exchange rates. Admittedly, the various fluctuations in these rates could increase the value of your pension when converted to euros, but, just as easily, its value could go down. Also, if your pension is paid into a UK bank, it will charge up to £30 to transfer the money.
The best solution is to use the services of a currency exchange specialist, who will be able to fix a year-long exchange rate for you, thus avoiding any fluctuations.
If your pension is UK based, then the Inland Revenue may require some tax payment from you. Beyond the age of 65, your personal allowance of income before being taxed is £10,500. You have to add up all income (pension, salary if continuing to work beyond 65 years, interest from bank and building society accounts etc) and, if this exceeds your allowance, you are liable to tax.
If the pension payments are made directly into your Spanish bank account, no UK tax deductions will be made, but you may be liable to Spanish tax on it.
Private Pension FundsIf you are UK nationals who are paying (or have paid) into one of these funds and move to, or are living in, Tenerife, it is possible to "transfer" the fund. This is when all the jargon gets a bit complicated. Basically, if you do this, the fund becomes free of UK tax (not a bad idea, as UK tax on these can be as much as 55%!). In 2006, HMRC launched the Qualifying Recognised Overseas Pension Scheme (QROPS). This lasted until 2017, when the requirements to be a Recognised Overseas Pension changed. You can check these new requirements here.
Note: a transfer such as this cannot be done with a state pension.
Already in Tenerife When You Retire?
This situation is strongly dependant on whether you worked in Tenerife prior to retiring. Or, more importantly, were in the system and paid National Insurance contributions to the Hacienda.
Normally, if you're in the UK, the Pension Service will write to you four months before your 65th birthday, regarding claiming your pension. If you're resident in Tenerife (and informed HMRC that you're no longer in the UK), the International Pensions Service will be the office that contacts you four months before you're 65.
This will be an explanatory letter and a claim form.
If you've ever paid Spanish Social Security, you should not use this form. You need to obtain the appropriate form from the National Institute of Social Security (INSS), with offices in Santa Cruz and Granadilla, fill it in and give it them back, with the UK letter attached.
This office will then process your application and pass details onto the UK Pension Service.
If you have ever paid UK social security, you'll also be eligable for UK state pension payments.
If you've made at least 30 years-worth of payments in the UK, you'll be entitled to the full amount.
Try as I might, I couldn't find anywhere on the Internet what the actual rate of taxation on pensions is in Spain or Tenerife.
Please note - I am by no means a tax expert. The above information is gleaned from several websites, where the terminology went a little complicated (you can imagine), but it is just that - information.
If you are considering taking any action regarding your existing or future pension, I strongly advise that you discuss it with a pension professional.
taxation for pensioners tenerife
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