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UK resident: rental income from Spain

gwenbgwenb MAAT, AAT Licensed Accountant Posts: 42
Hello,
Hoping for some help on the above: client is Spanish and has income from property in Spain. That money goes into a Spanish bank account which is used here in the UK. As there's a double taxation agreement between the two countries, I am not sure whether that income should be included in a SAR. Client is adamant that tax is paid in Spain.
Any piece of advice will be greatly appreciated.
Thank you.

Comments

  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,431
    edited December 2017
    Hi @gwenb

    Is the client a UK resident? And if he is not domiciled is he claiming the remittance basis or is the income under £2,000?

    As a UK resident and domiciled he would have to declare his worldwide income. I would check the Double Taxation Treaty between Spain and UK - Double tax relief might be available if he has already paid tax in Spain.
  • gwenbgwenb MAAT, AAT Licensed Accountant Posts: 42
    edited December 2017
    Hi @MarieNoelle,
    The client is a UK resident (living here for about two years now, working and self-employed now as well). Income from Spain is above £2k but Client insists (without being able to prove it yet) that tax on rental income is being paid in Spain. As this stage, I am not sure where the domicile is, sorry.
    Feeling like I should decline the Client :(
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,431
    Hi yes there would be tax to pay in Spain - but the tax can be a credit on his UK tax (again look at the double taxation treaty).
    You would need to obtain detail of receipts and expenses (at the appropriate exchange rate) and calculate the rental income using UK legislation (the UK income might be different to the Spanish one) - ask for proof of tax paid in Spain as a credit will be allowable against UK tax.

    Double tax treaty
    Article 6 states that income derived by a UK resident from immovable property situated in Spain may be taxed in Spain (so client is right that he has probably to pay tax in Spain)
    Article 22 - Elimination of double taxation
    Spanish tax payable under the laws of Spain and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within Spain [...] shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which Spain’s tax is computed
  • gwenbgwenb MAAT, AAT Licensed Accountant Posts: 42
    Thanks very much @MarieNoelle I am having a read at the double tax treaty now between the UK and Spain. I will talk to the Client again and see if I can get some receipts for expenses.
    Feeling better now about taking on this client :)
    MarieNoelle
  • mskaatmskaat Regular Greater LondonMAAT, AAT Licensed Accountant Posts: 53
    @gwenb Hope that the client is not reading this. Since this trend appears in searches of the subject matter world wide. Good luck.
    MAAT
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,431
    edited December 2017
    mskaat said:

    @gwenb Hope that the client is not reading this. Since this trend appears in searches of the subject matter world wide. Good luck.

    I wouldn't worry too much - try googling "tax paid on rental property in Spain" and I doubt this thread will come up first.
    Besides there is nothing in this thread that would identify the client or the accountant.
    mskaat
  • mskaatmskaat Regular Greater LondonMAAT, AAT Licensed Accountant Posts: 53
    > @MarieNoelle said:
    > @gwenb Hope that the client is not reading this. Since this trend appears in searches of the subject matter world wide. Good luck.
    >
    > I wouldn't worry to much - try googling "tax paid on rental property in Spain" and I doubt this thread will come up first.
    > Besides there is nothing in this thread that would identify the client or the accountant.

    Thanks for letting us know this.
    MAAT
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