Advice on living in Spain, moneywise

Paul Uden wrote:So there's a chance some of the 'no obligado' people will fall into the tax bracket at some point. I wonder how they are alerted to their crossing the threshold if they don't normally declare. They could be illegally evading tax without knowing it.

True however if your income stream is uncomplicated, and if you know how to fill out the Modelo 100, you can run your figures through the online simulator which will then tell you if you need to do a return or not. As said the threshold is around €15,000 and I think most responsible people who have no malfeasance in mind will know roughly what their income was for the year and if or when they might need submit one.


Ultimately though it's a system based on trust and good faith, in many ways not unlike taking out an insurance policy where if in doubt about anything your duty is to disclose. Play fast and loose it can come back and bite you, possibly severely!

Useful info from all thanks. The simulator looks like it could be useful for some although I doubt many even knew it existed (including me!). In practice I tend to leave it all to our accountant rather than risk making declaration errors myself!

I will attempt a worked example and people can tell me if it is right or wrong.
A single person aged 65 from the UK receiving a weekly State Retirement Pension of £221.20.
Exchange rate €1.18 x 221.20 = €261.
TFA 6700/52 =€128.85 p.wk

12450÷52=€239.42x19% =€45.49
Balance 21.58 x24%= 5.18
Total tax €50.67
Tax free allowance €128.85
So no tax due. You are a long way from using up your weekly TFA

Bee

Bee wrote:I will attempt a worked example and people can tell me if it is right or wrong.
A single person aged 65 from the UK receiving a weekly State Retirement Pension of £221.20.
Exchange rate €1.18 x 221.20 = €261.
TFA 6700/52 =€128.85 p.wk

12450÷52=€239.42x19% =€45.49
Balance 21.58 x24%= 5.18
Total tax €50.67
Tax free allowance €128.85
So no tax due. You are a long way from using up your weekly TFA

Bee

Sorry Bee, it is not calculated like that

261€ *52 = 13,572€ PA
Less general allowance 2,000€ = 11,572€ taxed at 19% = 2,198.68€
Personal Allowance 6,700€ @ 19% = 1,273€
2,198.68€ - 1,273€ = 925.68€ to pay

I find the way the numbers have been presented as most confusing.

Here is a clearer view of the position.

Total Income 13572 261 x 52
General Allowance (-2000)
Personal Allowance (-6700)

Balance 4872

Tax Payable (@19%) 925.68

RJC wrote:I find the way the numbers have been presented as most confusing.

Here is a clearer view of the position.

Total Income 13572 261 x 52
General Allowance (-2000)
Personal Allowance (-6700)

Balance 4872

Tax Payable (@19%) 925.68

That is fine, as the income in this example is within the 19% tax bracket. If in higher brackets, the allowances are only given at 19%

So what is the position of a 65 year old with Income of 25,000?

Total Income 25000
General allowance 2000

Personal Allowance (aged 65) 6700

Balance 16300

Tax Payable @ 19% (12450) (2365.5)

Income over 12450 3850

Tax Payable @ 24 % (12450+) (924)

Total Tax Payable (3289.5)


Is this calculation CORRECT?
Not sure if Allowances have been properly deducted.

RJC wrote:So what is the position of a 65 year old with Income of 25,000?

Total Income 25000
General allowance 2000

Personal Allowance (aged 65) 6700

Balance 16300

Tax Payable @ 19% (12450) (2365.5)

Income over 12450 3850

Tax Payable @ 24 % (12450+) (924)

Total Tax Payable (3289.5)


Is this calculation CORRECT?
Not sure if Allowances have been properly deducted.

Income less 2,000 general allowance =23,000
12,450 taxed at 19% =2,365.50
7,750 taxed at 24% =1,860.00
2,800 taxed at 30% =840.00
Total tax 5,065.50

Personal allowance 6,700 @19% =1,273

Tax to pay 5,065.50-1,273=3,792.50

Thank you Espanabums for your accountancy expertise. It is invaluable. I could see the final tax free figures were exceptionally generous if they were true calculations. Hopefully your post will now enable people to get an idea of how income tax on earned income is calculated in Spain. I do think €925 tax on such a small amount of income is very high.

Bee

Thanks for the clarification.
Just interested to know does everyone qualify for the General Allowance?