B Law & Tax
13 June 2023

Tax advisor: It is obligatory to declare when only a foreign pension is received

When the total income derived from work comes from a single payer, the limit for determining the obligation to file a tax return is set at 22,000 euros per year (according to article 96.2.a) and 3) of the IRPF Law). However, this limit does not apply in principle to taxpayers who receive earned income from multiple payers, since in these cases there is usually no match between the tax already paid through withholdings or payments on account and the tax due. However, this limit will apply in the following cases, in which there is an easy match between the tax paid and the tax due:

– The limit applies when the sum of payments received from the second and subsequent payers, in order of amount, does not exceed €1,500 per year.

– In addition, this limit applies when it is income from employment in the form of pensions and passive benefits, as established in article 17.2.a) of the Personal Income Tax Law, and the applicable withholding rate has been determined in accordance with the special procedure described in article 89.A of the Personal Income Tax Regulations.

According to the above, when an individual resident in Spain receives a pension from a foreign source from a single payer, the limit for determining the obligation to file a tax return is €22,000, unless the payer is not obliged to withhold, in which case the limit would be €11,200 (current limit of €15,000). This is because in the latter case the equality mentioned above is not met.

On the other hand, it is important to bear in mind that non-resident entities in Spanish territory are only obliged to withhold taxes on earned income when they operate in such territory, whether through a permanent establishment or not (according to article 76 of the Personal Income Tax Regulations). They are not obliged to withhold taxes if they do not operate in such territory.

Consequently, if the payer of the pension is a foreign public body similar to the Social Security in Spain, or a non-resident entity that pays the pension due to labor services rendered abroad by a resident in Spain, but does not operate in Spanish territory, there will be no obligation to withhold taxes according to article 76.1.c) and 76.1.d) of the Personal Income Tax Regulations. In this case, the determining limit for the obligation to file a tax return will be €11,200 (current limit of €15,000).

B Law & Tax International Tax & Legal Advisors.

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