The double taxation agreement between Spain and the UK

The text applied today is the treaty made in London on 14 March 2013, published in the BOE on 15 May 2014 and in force since 12 June 2014. It replaced the 1975 treaty, which still appears cited in old queries and on pages that nobody has updated. If something you are reading mentions the 1975 treaty, you are reading the wrong regulation.

It covers income and wealth taxes. On the Spanish side: personal income tax (IRPF), corporation tax, non-resident income tax (IRNR) and wealth tax. On the British side: income tax, corporation tax and capital gains tax.

What it does not cover is inheritance and gift tax. There is no bilateral inheritance treaty between Spain and the UK, so an inheritance with assets or heirs on both sides is resolved using the domestic regulations of each country and their internal mechanisms to relieve double taxation. This is the most expensive confusion we see in practice.

It is worth understanding that the treaty does not refund money on its own. It allocates the power to tax between the two States and sets limits. For that allocation to translate into less tax, you must prove it with specific paperwork before the corresponding administration, and do so within the deadline.

First, each country decides using its own law. Spain considers you a resident if you spend more than 183 days of the calendar year in Spanish territory (and sporadic absences count as time spent unless you prove tax residence in another country with an official certificate), if you have the main core of your economic interests here, or if your non-separated spouse and minor children reside here. The UK decides using the Statutory Residence Test, which combines days spent and personal ties.

It can happen, and often does, that both countries consider you a resident at the same time. That is what the tie-breaker rule in article 4.2 of the treaty is for, which applies in a cascade and stops at the first step that resolves the issue: a permanent home available to you; if you have one in both countries, your centre of vital interests (closest personal and economic relations); if this cannot be determined, where you habitually live; then, nationality; and if none of the above resolves it, mutual agreement between the two administrations.

Be careful with the first step. A permanent home available to you does not mean where you are registered on the padrón (the local town hall register) or where you receive your post: it is a home available on a continuous basis, whether owned or rented. Having a house on both sides is common, and it is exactly what pushes the analysis to the second step, that of vital interests, which is decided by facts: where your family, your accounts, your doctors, your car and your bills are.

The Directorate-General for Taxes has resolved cases exactly like this, for example that of a British pensioner with 2 homes in Spain and 1 in the UK who spent more than 183 days here. The outcome depends on evidence that must be gathered beforehand, not on what you declare after the fact.

Managora prepares this analysis and documents it in a legal opinion with the fieldwork done, in the Tax Residence and Double Taxation Conflicts Analysis service. You can see the updated price on the service page.

The British tax year runs from 6 April to the following 5 April. The Spanish one is the calendar year, from 1 January to 31 December. No British document fits exactly as it is into your Spanish tax return: not the P60, not the self assessment summary, nor your bank certificates.

For your form 100, you have to reconstruct by calendar year what your British paperwork presents by British tax year, income by income and with the exchange rate corresponding to each payment. Pro-rating by eye is the fast track to a parallel assessment from Hacienda (the Spanish tax authority).

The British split year treatment allows you to divide the tax year into a resident part and a non-resident part when someone arrives or leaves. Spain has no equivalent. Here, residence is determined by full calendar years: if you exceed 183 days in Spain, you are a resident for the whole year and pay tax on your worldwide income from 1 January, even if you moved in September.

That mismatch creates periods where both countries consider you a resident. It is not a system error: it is the scenario that article 4.2 and the tax residence certificate are designed to resolve. What you cannot do is ignore it and declare in only one of the two countries.

Interest and royalties are the easy case: the treaty attributes them exclusively to the State where the person receiving them resides, provided they are the beneficial owner. That means 0% withholding tax in the country of origin. If you are a resident in Spain and receive British interest, it is taxed only here; if you are a British resident and receive interest from a Spanish account, it is taxed only there.

Dividends are shared: they are taxed in the country of residence, and the country of origin can withhold tax with a general cap of 10%, or 15% when they come from real estate income distributed by investment vehicles. Dividends received by a company with at least 10% of the capital and those received by a pension plan are exempt at source.

That cap does not apply automatically. The payer withholds according to their domestic rule and then you have to request the exemption at source or the refund of the excess, presenting the tax residence certificate first. Whoever fails to do this pays too much and discovers it years later.

General pensions, which include the British State Pension and a private pension from previous private sector employment, are taxed only in the State where you reside. If you live in Spain, your State Pension is taxed here and nowhere else. The classic mistake is declaring it in both countries out of fear, or not declaring it in either believing it was already taxed in the UK.

Public service pensions follow a different route. Those paid by the British State or its local authorities for services rendered to that administration (typically civil servants and armed forces) are taxed only in the UK, unless the recipient is both a resident and a Spanish national, in which case they become taxable in Spain.

A nuance that surprises many people: a pension that is taxed only in the UK can still be counted in Spain to calculate the rate applied to the rest of your income. It is not double taxation nor is it a flaw in the tax software: it is the way the treaty eliminates double taxation without giving away progressivity.

If the property is in Spain and you reside in the UK, Spain always taxes it. With a rented flat, you declare the rental income; with an empty flat or one for personal use, you declare an imputed income of 1.1% of the cadastral value if that value was revised through a general collective valuation procedure that came into force in the tax period itself or in the previous 10 tax periods, and 2% in all other cases. It is not enough that the value was revised at some point: if the revision is older, the percentage reverts to 2%. In both cases the rate is 24%, because the UK no longer belongs to the European Union or the European Economic Area, and you cannot deduct expenses on rentals: the deduction of expenses is reserved for residents in the EU, Iceland, Norway and Liechtenstein.

When selling that flat, the gain is taxed in Spain at 19%. Furthermore, the buyer is obliged to withhold 3% of the agreed price and pay it using form 211 in the month following the signing of the deeds. That 3% is an advance payment on your behalf: if the final tax quota is lower, the difference is requested as a refund on the very same form 210 for the sale. Separate from this is the plusvalía municipal (local land value tax), which is assessed by the town hall and is not part of the IRNR.

The exemption for reinvestment in a main home only covers residents in the European Union and in European Economic Area States with an effective exchange of tax information, namely Iceland, Norway and Liechtenstein. A British resident cannot benefit from it. It is one of the practical consequences of Brexit that moves the most money.

If the property is in the UK and you reside in Spain, the situation is reversed: the UK can tax the income and the gain, and Spain can too, because you pay tax here on your worldwide income. Spain eliminates double taxation by deducting the British tax effectively paid, limited to the Spanish tax corresponding to that same income. If the British tax was higher, the excess is not refunded in Spain.

And there is an obligation that is frequently forgotten: if the total of your accounts, your securities or your properties located outside Spain, counting those in the UK together with those in any other country, exceeds €50,000 in any of those blocks, you have to submit form 720 between 1 January and 31 March of the following year. It is an informative return, it does not pay tax, but it must be submitted.

The central document is the tax residence certificate for the purposes of the treaty, issued by the tax administration of the country where you reside. The generic residence certificate is not valid, nor is the padrón, nor the health card: it must expressly state that it is issued for the purposes of the treaty with the other country. Its validity is 1 year.

To stop suffering British withholding tax on pensions, purchased annuities, interest and royalties of British origin, HMRC has its own form: the Spain-Individual, which serves both to request relief at source and to claim a refund of what has already been withheld. It is accompanied by the Spanish tax residence certificate.

Conversely, a British resident receiving Spanish income proves their residence with the certificate issued by HMRC and hands it to the Spanish payer or attaches it to their form 210.

Without a certificate, the payer applies their full domestic rate and you advance a tax that you will later have to claim back. Managora requests the certificate, completes the British form, submits it and follows up until the withholding is corrected.

The treaty did not change. It is a bilateral agreement between two States, outside the framework of the European Union, and it is still the 2013 one with the same allocation of powers. Whoever tells you that Brexit annulled the treaty is wrong.

What did change is the UK's fit within Spanish domestic regulations, which on many points distinguish between residents in the EU or the European Economic Area and the rest of the world. Since Brexit, the UK is in the rest of the world: the IRNR rate on rentals and imputations goes from 19% to 24%, the deduction of expenses on rentals disappears and the exemption for reinvestment in a main home disappears.

What has touched the treaty is the Multilateral Convention (MLI), which modified its preamble and incorporated a principal purpose anti-abuse clause: a treaty benefit is not granted if obtaining it was one of the principal purposes of the transaction. Its effects are calculated from 2023. It does not change the rates for dividends, interest or royalties, but it does require that there be a real economic motive behind a structure and not just a tax one. If your case depends on a specific article, it is advisable to check in the synthesised text published by each administration whether the MLI has altered it.

Inheritances remain outside the treaty. In inheritance and gift tax there is no single figure for the whole of Spain: each autonomous community approves its tariff, its reductions and its allowances, and the Basque Country and Navarre fall outside the state law due to their chartered regimes of Economic Agreement and Accord. The Canary Islands, on the other hand, are in the common regime and apply the state law with the regulatory powers ceded to them like any other community. Case law and administrative doctrine have been allowing residents in third countries, the UK among them, to also apply the corresponding regional regulations. Do not take for granted any general figure you may have read for your specific case.

If your situation touches two countries, the sensible thing is to sort it out once and leave it sorted. Managora analyses where you are a resident, applies the treaty income by income and submits whatever is needed on each side: form 100 if you reside in Spain, form 210 if you do not, the residence certificate and the British form. We prepare it and submit it for you.