Pensions

Internal regulations

Regulations: Article 13.1.d) Law IRNR

According to internal regulations, pensions and other similar benefits are deemed to have been obtained in Spanish territory in the following cases:

• When they are derived from employment provided on Spanish territory.

• When they are paid by a person or entity resident in Spanish territory or by a permanent establishment located therein.

In addition, the internal regulation contemplates some of exempt :

(Normative: Article 14.1.a) IRNR Law)

• Old-age assistance pensions granted under Royal Decree 728/1993, of 14 May, establishing old-age assistance pensions for Spanish emigrants.⁽¹⁾

• Pensions that are exempt for residents under the Personal Income Tax Law, such as, for example: Pensions recognized by Social Security as a result of permanent absolute disability or severe disability or by passive classes as a result of disability or permanent incapacity.

⁽¹⁾ The current regulation of old-age assistance pensions is currently contained in Royal Decree 8/2008, of January 11, which regulates the benefit for reasons of need in favor of Spanish residents abroad and returnees, which repeals Royal Decree 728/1993, of May 14, which establishes old-age assistance pensions for Spanish emigrants.^(Back)

Agreement

If any Convention to avoid double taxation is applicable, it must be taken into account that pensions, understood as remuneration that is the result of a previously held employment, are treated differently if they are received as a result of a previous public employment; That is, that which is received for services rendered to a State, one of its political subdivisions or a local entity, or if it is received for prior private employment, as opposed to what has been identified as public employment.

• In the case of pensions received as a result of previous private employment, most Conventions provide for the exclusive right of taxation in favour of the State of residence of the taxpayer. Some Conventions (for example, those with Germany and Finland) provide for shared taxation between the State of origin of the pension and the State of residence of the taxpayer and establish tax limits in the State of origin (for example, the one signed with Germany).

• In general, the right to pensions received as a result of previous public employment is held by the State from which they originate, except in the case of residents and nationals of the other State, in which case the right to taxation will correspond to the latter.

However, due to the existing particularities, each specific Convention must be consulted.

Taxation

Regulations: Articles 24, 25 and 26 of the IRNR Law

When, in accordance with internal regulations and, where applicable, the applicable Convention, the pension is subject to Spanish tax, it will be taxed according to the following tax scale :

Deductions: Only the following may be deducted from the tax rate:

• Deductions for donations, under the terms provided for in the Personal Income Tax Law and in the Law on the tax regime of non-profit entities and tax incentives for patronage.

• The withholdings that have been made on income.