If the UK leaves the European Union what impact does this have
on taxation for international people living in Spain?
The framework for taxation in all countries is based upon the
Are you tax resident according to the laws of that country?
Which tax authority is the controlling tax authority for your
Worldwide income and gains?
If you have income or gains outside of the country where you are
tax resident, is there a double taxation agreement between the
country where you are resident and the country where the income or
gain is made?
For those of us living in Spain, the simple test is are we in
the country for more than 183 days in any calendar year? If yes,
then we will be Spanish Tax resident. For more detail see
Spanish Tax Residency (I will ask Chris Clifford for the link as
the page is not visible on the site as the article is too old.)
If we meet the residency requirement Spain is our controlling
tax authority. This means we have to report our Worldwide
income and gains to Spain and our main payment of tax is in
Double Tax Treaties
The OECD, UN and USA have set up model frameworks for Double
Taxation Treaties. Most countries use these frameworks.
However, the Treaties are between individual countries. Even
if the country is in the EU there is NO EU wide double taxation
agreements. Therefore, if the UK leaves the EU it will not
affect the double taxation agreement between the UK and
Spain. As an example, Spain has 88 tax treaties, 66 of
them with countries outside the EU and even if the UK leaves the
double tax treaty should stay. The tax treaty between Spain
and the UK covers both income and gains.
It is not expected that there will be any changes to the Beckham rule (Impatriate Tax Regime). It is
available to people from around the World. Therefore people moving
from the UK to Spain should still be able to benefit from the lower
rate of taxation for five full tax years.
Where we do expect changes
There is a potential economic impact in both Inheritance Tax and
Exit Taxes if the UK leaves the EU.
In September 2014, the European Court of Justice instructed
Spain to change its rules regarding Inheritance Tax where the
deceased person or the person receiving the inheritance was in
another country in the European Economic Area (EEA). The effect was
to allow these people to claim the allowances that are available to
inhabitants of Spain (in our case Catalunya), rather than them being taxed on a
special "National" rate. This was because the
National Rate resulted in higher taxes.
If Britain is now longer a member of the EEA, it is quite
possible that we will have to return to paying the national rate of
inheritance tax. Please note, it is possible for the UK to
leave the EU but not the EEA and therefore will still
qualify. Whilst the loss of the local allowances will only
put us back to the situation two years ago it will still be a
There are several pieces of Inheritance Tax planning that you
can do to reduce the burden of Inheritance Tax.
HOWEVER, we have not left the EU, there is some
debate about whether we will ever leave the EU and we may yet
become part of the EEA. We strongly recommend,
therefore, that you discuss the possible planning methods now but
do NOT implement any planning on the basis of the UK leaving the
EU. This is because once taken, many of the planning
steps cannot be undone.
Exit tax is chargeable to all taxpayers that have been in Spain
in at least 5 years of the last 10 years whilst Spanish Tax
The market value of the shares and collective investments held
exceeds a joint value of Euro 4 Million
Only Euro 1 Million if the person holds 25% or more of the shares
in a company.
However, currently, if the person moves to another country in
the European Economic Area with whom an effective exchange of
information exists, the gain will only need to be declared and
Spanish Exit Tax paid if during the next 10 years the
shares are sold or the person loses his residency in the EU or in
It the UK leaves the EU and does not get EEA membership,
Spanish Exit Tax would become payable on departure.
CRS – Automatic exchange of information between
The OECD has also introduced a common framework for the
automatic reporting of information from one country to another of
the financial affairs of people who live in the second country, for
example UK to Spain where a British person lives in Spain.
This framework has been updated and common formatting of reporting
leads to common software and much easier analysis of the
Please be aware that these reports will still take place even if
the UK leaves the EU. Currently there are 101 countries using
this common software and standards.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The signing of a double taxation agreement between the UK and the UAE in April 2016 was undoubtedly much anticipated and marks a new milestone in the successful expansion of the UAE's international tax treaty network.
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