Picture two retired Spaniards living in the same village in France. They draw roughly the same amount each month, and yet they end up filing different returns: one pays his tax in Spain, the other in France. Neither of them has made a mistake. Their pensions come from different sources, and double tax treaties deal with each source in a different article. Knowing which article your pension falls under is the very first thing to settle, because everything else hangs from it: the withholding, the return, the certificate you need and even the country you will have to claim from if something goes wrong.
Two articles, not one
Almost every treaty Spain has signed follows the OECD model tax convention, and that model splits pensions between two articles that sit right next to each other and say opposite things.
Article 18 deals with pensions and similar payments made in consideration of past employment. The general rule is that they may be taxed only in the state where the person receiving them lives. Article 19 covers pay and pensions for government service, and its second paragraph turns the rule around: a pension paid by a state, or by one of its political subdivisions or local authorities, for services rendered to that state is taxed in the state that pays it.
| Where your pension comes from | Article of the model | Usual rule |
|---|---|---|
| A working life in the private sector, paid as a Spanish social security pension | 18 | Only the country where you live |
| A pension plan, a life annuity or an occupational (company) pension | 18 | Only the country where you live |
| Services rendered to the Spanish state, to a Spanish region (comunidad autónoma) or to a town hall | 19.2 | Only Spain, because Spain is the payer |
| Services rendered to the state in connection with a business carried on by it | 19.3, which sends you back to 18 | Only the country where you live |
What decides it is not whose name is on the payment
This is where half of all cases go wrong. Many people assume that what matters is the name of the body that appears on the bank statement. It does not. What the treaty looks at is why the pension is being paid: whether it rewards services rendered to a public administration in the exercise of governmental functions, or whether it rewards a job like any other job.
That is why a retired career civil servant and a former employee of a state-owned company can fall under different articles even though both spent their working lives in the public sector. And it is why the question we ask when we open a file is not how much you receive, but which scheme your pension comes from, which corps or grade you belonged to, and what the decision that granted your pension actually says.
Someone who worked for a town hall or a public hospital as contract staff (personal laboral), paying into the general social security scheme, usually ends up with a social security pension, not with a civil service pension of the kind Spain calls haberes pasivos. That nuance can change the applicable article and, with it, the country that collects the tax. It is not an academic detail: it is the difference between filing a return here or there for the next twenty years. We read it in the decision that granted the pension before we decide anything.
The exception for the resident national
Article 19 of the model closes its second paragraph with a proviso that settles quite a few cases: the government pension is taxable only in the other state when the person receiving it is, at the same time, both a resident and a national of that other state. In plain terms: a retired Spanish civil servant who takes up the nationality of the country where he lives may stop paying Spanish tax on that pension. Living there is not enough; nationality is needed too, and both conditions have to be met at the same time.
The three families of clauses you may come across
Treaties follow the model, but they do not copy it. When you open the actual text of a given treaty, you will find one of these three structures, and each leads to a different procedure:
- Exclusive taxation where you live. The private pension is taxed only in your country of residence. Spain should not withhold anything, and if it does, you claim it back.
- Shared taxation. Both states may tax, and the state of residence removes the double taxation by giving credit for what was paid in the other. You declare the income twice, and the order matters: first it is settled where it arises, then it is credited where you live.
- A special rule for social security. Some treaties take payments made under social security legislation out of the general article and hand them to the state that pays them. Where that clause exists, a pension from the INSS, the Spanish social security institute, can be taxable in Spain even though its holder has lived abroad for decades.
The article number changes from one treaty to another, and the social security clause appears in some texts and not in others. We do not tell you from memory what your treaty says: we open the version published in the BOE, the Spanish Official State Gazette, together with its protocols and any later amendments, and we read it. A website that gives you the answer without having looked at your particular country is not advising you, it is guessing.
How to read a treaty in ten minutes
- Find the treaty in force between Spain and your country of residence, and check whether it has a protocol or a later amending instrument. What is in force is not always what was originally signed.
- Look for the pensions article. It usually carries that heading, but its number moves around from one treaty to the next.
- Check whether that article has a separate paragraph for social security payments.
- Read the government service article, even if you think it does not concern you: that is where the rule on civil service pensions and the resident-national exception live.
- Finish with the article on the elimination of double taxation, which is the one that says what your country of residence does with whatever you have already paid in Spain.
When you receive two pensions
This is the most common situation among people who moved between the public and the private sector, and the one that fits the forms least well. The same person can have one pension taxed only in Spain and another taxed only where he or she lives, in the same year and under the same Spanish tax number (NIF). There is no choice to make: the two have to be kept apart.
The difficulty is a practical one. If the payer is the same and the withholding is worked out on the total, the split does not show on any document, and the tax authority in the other country receives a global figure that does not match what is being declared to it. Each pension needs its own paper trail: its own award decision, its own withholding certificate and its own box on the return.
If the treaty gives the taxing right to Spain
Then there is nothing to recover, and the job is to check that the withholding has been done properly. Pensions paid to non-resident individuals are taxed under the IRNR, the Spanish non-resident income tax, using a progressive scale of their own, which is different from the flat rate that applies to other income of non-residents:
| Annual amount of the pension | Rate applied to that band |
|---|---|
| Up to €12,000 | 8 % |
| From €12,000 to €18,700 | 30 % |
| Above €18,700 | 40 % |
The scale climbs very steeply over a very short stretch, and that jump explains why a modest increase in the pension can lose a disproportionate bite. When the withholding matches what the scale produces, the pensioner does not have to file a return in Spain for that income: the tax is fully settled through the withholding. When it does not match, you have to act, and we explain how in how to recover tax withheld in excess.
What the treaty split does not decide
The fact that your pension is taxed in one country does not drag everything else along with it. The treaty allocates the right to tax that specific income and says nothing about the rest of your obligations. Keeping a home in Spain keeps you inside the Spanish non-resident income tax for that property, whether it is let or empty, and that is a separate matter: we explain it in if you live abroad and keep a home in Spain.
And there is one effect that catches people out every year: many countries require you to report the foreign pension even when the treaty stops them from taxing it, because they use it to work out the rate they apply to the rest of your income. Leaving it off the return over there, trusting that the treaty keeps it out, is one of the quickest ways to receive a letter in a language that is not your own.
How we work on it
We are international tax lawyers, and a typical engagement in this line starts the same way: the pension award decision, the withholding certificate for the last tax year, the applicable treaty and a certificate of tax residence. With those four documents we identify the article, check whether the withholding adds up, and decide whether there is anything to claim and within what time limit. If your case also needs an adviser in your country of residence, you choose that adviser and we coordinate with them; we do not sell a network we do not have.
What we do not do is guarantee an outcome. The classification of a pension can be disputed, and the tax authority of one country or the other may hold a reading different from ours. What we can do is tell you, in writing and before anything is filed, what basis supports each position and what risk you take on in each scenario. Tell us about your case in the pensioners form and we will tell you what applies to you.