Pensions and retirement accounts

Some choices here are hard to undo, especially taking a lump sum or transferring a plan. Read this topic before you become resident, so you know who taxes your pension, how withdrawals are treated and what to decide first.

Start with "What happens to a foreign retirement account once you're resident". It gives the general pattern that the other pages build on. From there, go to the page that matches your situation, such as UK transfers, US 401(k) and IRA rules, or state pensions.

Key rules

• Plan contribution limit: Your own contributions to a Spanish pension plan reduce your taxable income by up to 1,500 euros a year, or 30% of net work income if lower.
• Private pension taxing right: Under most of Spain's treaties, including those with the UK, the US, Germany and the Netherlands, private and workplace pensions are taxed by the country where you live, so Spain once you are resident.
• Lump sums: A pension lump sum is taxed in full in the year you receive it, and the UK 25% tax-free lump sum is not exempt in Spain.
• US Social Security: US Social Security is taxable only by the US, so Spain does not tax it for a resident.
• Asset declaration: The foreign asset declaration (Modelo 720) applies above €50,000 in a category and is filed between 1 January and 31 March.
• Income type: Pensions, public and private, are work income taxed at progressive rates in the general base, not at savings rates.

Pensions and retirement accounts: the whole process, step by step

• Work out when you become a Spanish tax resident, using the residency tests in "How foreign private and workplace pensions are taxed in Spain": before you move

• If you plan a pension lump sum, take it while you are still non-resident, then read "Lump sum or regular income: how Spain taxes pension withdrawals": before your residency date, and not in the year you become resident

• Decide what to do with any foreign pension transfer, using "Transferring a UK pension to Spain (SIPP and QROPS)" or "US 401(k) and IRA rules after moving to Spain": before you move money, because cash paid out to you is taxed as income

• Become resident: more than 183 days in Spain in a calendar year, or your main base of activities or interests is in Spain: during your first calendar year in Spain

• Declare pension income in your Spanish tax return, using "What a retiree's total Spanish tax picture looks like": each year, for the previous year

• File the foreign asset declaration (Modelo 720) if a category of foreign assets, such as bank accounts, securities or real estate, is above €50,000, as explained in "Reporting a foreign retirement account: asset declaration versus income tax": between 1 January and 31 March each year, for the previous year

• File Modelo 720 again only if the value of a category rises by more than €20,000: in later years, in the same 1 January to 31 March window

Pensions and retirement accounts: questions that cross several articles

When am I treated as a Spanish tax resident for my pension?

You are a Spanish tax resident if you spend more than 183 days in Spain in a calendar year, or if your main base of activities or economic interests is in Spain. Your spouse and dependent minor children living in Spain can also lead to a presumption of residence. Read "How foreign private and workplace pensions are taxed in Spain" next.

Which country taxes my UK or US private pension once I live in Spain?

Spain taxes your UK or US private pension once you are resident, because the treaties give that right to the country where you live. US citizens and green-card holders can still be taxed by the US too, with double tax relieved by foreign tax credits. Read "How foreign private and workplace pensions are taxed in Spain" and "US 401(k) and IRA rules after moving to Spain".

Does taking a lump sum before I move avoid Spanish tax?

Yes, a lump sum received while you are still non-resident and before your residency date is outside Spanish income tax, but your source country may still tax it. Taking it in the year you become resident risks Spanish tax. Read "Lump sum or regular income: how Spain taxes pension withdrawals".

Is moving a foreign pension to another scheme taxed in Spain?

A transfer straight between foreign pension schemes is generally not taxed in Spain if the money never reaches you. Cash paid out to you is taxed as income. Read "Transferring a UK pension to Spain (SIPP and QROPS)" and "Spanish pension plans (planes de pensiones): contributions and withdrawals".

Do I report a foreign pension account twice, as assets and as income?

Yes, they are separate duties: the asset declaration (Modelo 720) is for balances above €50,000 in a category, and your tax return is for the income it pays. Read "Reporting a foreign retirement account: asset declaration versus income tax" next.