Where taxpayers get caught out
Some pension providers keep withholding tax in the home country after you move. Unless you send them a certificate of Spanish residence, you may pay twice and then have to claim a refund abroad.
Types of pensions
| Pension | Usual treatment for a Spanish resident |
|---|---|
| State retirement pension | Taxed in Spain (some treaties allow limited source taxation) |
| Private and occupational pensions | Taxed in Spain |
| Government service pensions | Taxed in the paying country, counted for the Spanish rate |
| Lump sums | Taxed in Spain as general income, with specific rules |
| Disability pensions | Possible exemption if equivalent to Spanish exempt pensions |
Lump sums
Taking a lump sum from a foreign pension after becoming resident is generally taxable in Spain at the general scale, without the tax-free portion some countries allow. In many cases it is better to take it before moving. Planning the timing matters.
Stopping tax at source
Request a certificate of tax residence from the Spanish tax agency and send it to the pension payer, together with the forms required by your home country, so that tax stops being withheld abroad.
Country specifics
British and German pensioners have specific rules under their treaties. See the UK–Spain treaty and the Germany–Spain treaty.
Declaring pensions
Pensions are declared in the annual return with the general income. Couples should compare joint and individual returns. See income tax rates and our income tax return service.
An illustrative example
Based on situations we commonly see; not a specific client. A Dutch pensioner moved to Ibiza and her Dutch pension fund kept withholding Dutch tax. We obtained her Spanish residence certificate, sent it with the Dutch forms, recovered the tax withheld abroad and declared the pension in Spain.
How Castell.tax can help
We prepare the annual income tax return of foreign residents in the Balearic Islands, including foreign pensions, investments, rental income and the foreign tax credit, and we compare joint and individual filing every year. We explain the result in English or German before filing. See our income tax return service or contact us to review your situation before the next campaign.
This page is published by Castell.tax, the tax practice of Castell.law in Palma de Mallorca. It is general information; tax rules and rates change, so check your case with us before filing.
Not sure what you owe? Ask before the deadline
Send us your situation or the letter you received. A tax adviser will tell you what applies, what it could cost and what to file.
Frequently asked questions
Is my foreign pension taxed in Spain?
Generally yes, if you are resident, depending on the treaty.
Are government pensions taxed in Spain?
Usually not, but they count to set the rate on other income.
Is a lump sum tax-free in Spain?
No, it is generally taxable for residents.
How do I stop tax being withheld abroad?
By sending a Spanish tax residence certificate to the payer.