How foreign private and workplace pensions are taxed in Spain

Key rules

• Income type: Pensions, public and private, are work income taxed at progressive rates in the general base, not at savings rates.
• Treaty default: 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.
• Government pensions: Government service pensions are generally taxed by the paying country, not Spain.
• US citizens: The US can still tax its citizens and green-card holders, so you may need foreign tax credits to avoid double tax.

The short answer

Foreign private and workplace pensions count as earned income in Spain. The tax treaty between Spain and the paying country decides who may tax them. For the main treaty partners, the country where you live taxes them, so once you are resident, that is Spain.

How Spain taxes the income

Spain treats pensions, public and private, as work income. They go in the general base and are taxed at progressive rates, not at the lower savings rates. The more you receive, the higher the rate on the top slice.

There are exceptions:

• Income from a private annuity you bought with your own money (a "rentas vitalicias") counts as capital income. It goes in the savings base, and only a reduced portion is taxed.
• Lump sums from some schemes can be treated differently. Check the scheme's rules before you take one.

When Spain gets to tax you

Spain taxes you on worldwide income once you are a tax resident. You are resident if you spend more than 183 days in Spain in a calendar year. Short trips abroad still count as days in Spain unless you can certify tax residence elsewhere. You are also resident if your main base of work or economic interests is in Spain.

Spain presumes you are resident if your spouse (not legally separated) and your dependent minor children usually live in Spain. You can try to prove otherwise.

Who may tax your pension

The usual treaty rule is that private pensions are taxable only in the country where the recipient lives. Some treaties let the paying country tax as well, and government pensions generally stay with the paying country. Check your own treaty.

• UK: Spain taxes your private and workplace pensions once you are resident. UK government service pensions, such as civil service, are taxed by the UK. The exception is if you are a Spanish national and resident.
• US: Spain taxes 401(k) and IRA withdrawals once you are resident. The US can still tax its own citizens and green-card holders, so you may be taxed by both countries. Foreign tax credits relieve the double tax.
• Germany: Private pensions are taxed only by the country where you live, so Spain.
• Netherlands: Private pensions are also taxed only by the country where you live. Government and some social-security-type pensions follow other rules, and the Netherlands may tax some of them.

What to do

1. Work out what kind of pension you have: private, workplace, annuity, government or social security.
2. Check your treaty's pension rule for that type.
3. Declare the income in your Spanish tax return. If the paying country also taxes it, claim credit for the tax paid there.
4. If you are a US citizen, or have a government or annuity pension, get a tax adviser to check the split before your first return.

The decision and FAQ below cover common cases.

Choosing between options

Which country taxes your foreign pension?

• Spain taxes it: Your pension is private or workplace and you are a Spanish tax resident: you spend more than 183 days in Spain in a calendar year, your main base of activities or interests is in Spain, or your spouse and dependent minor children usually live in Spain.

• Spain and the US may both tax it: You are a US citizen or green-card holder living in Spain.

• The paying country taxes it: The pension comes from government service, such as a civil service or military pension. The paying state generally taxes it, and the UK does so unless you are a Spanish national and resident.

• Taxed as savings income: You bought a lifetime annuity (renta vitalicia) with your own money.

For private and workplace pensions, the country where you live decides, so Spain once you are a resident. Government pensions and annuities you bought yourself follow the separate rules above.

Frequently asked questions

Can the UK still tax my workplace pension if I live in Spain?

No, under the 2013 Spain–UK treaty only the country where you live may tax a UK private or workplace pension, so Spain taxes it.

Do I pay tax twice on a 401(k) or IRA if I live in Spain?

Spain taxes your 401(k) and IRA withdrawals if you are a Spanish resident, because the Spain–US treaty gives pensions to the country where you live.

Does Spain tax my German or Dutch private pension?

Yes, Spain taxes a German private pension if you live in Spain, because the Spain–Germany treaty leaves it to the country of residence. The Spain–Netherlands treaty works the same way for Dutch private pensions, but Dutch government and some social-security-type pensions follow other rules, and the Netherlands may tax some of them.