Double Tax Agreement Between UK and Spain: What You Need to Know
The Double Tax Agreement (DTA) between the United Kingdom and Spain is an important agreement that helps to avoid double taxation of individuals and companies that operate in both countries. As a result, if you are a UK resident with income or assets in Spain, or a Spanish resident with income or assets in the UK, it is vital to understand the basic provisions of this agreement.
Here is what you need to know about the Double Tax Agreement between the UK and Spain:
1. What is the Double Tax Agreement?
The DTA is a treaty between two countries that aims to avoid double taxation on the same income or assets. This means that if you are a resident in either country, you will only be taxed on your income or assets by one country. The agreement also helps to prevent tax evasion by ensuring that individuals and companies pay their fair share of taxes.
2. Who is covered by the Double Tax Agreement?
The DTA covers individuals who are tax residents in either the UK or Spain, as well as companies that are registered in either country. It applies to various types of income, including employment income, dividends, interest, royalties, and pensions.
3. How does it work?
The DTA works by assigning taxing rights to each country. For example, if you are a Spanish resident who receives rental income from a property in the UK, the DTA will assign the taxing rights to the UK. This means that you will only pay tax on your rental income in the UK, and not in Spain.
However, there are exceptions to this rule. For instance, if you are a UK resident with employment income in Spain, you may still have to pay tax in Spain. This is because the DTA only applies to certain types of income, and the tax rules of each country still apply.
4. How to claim relief under the Double Tax Agreement?
To claim relief under the DTA, you need to follow specific procedures in each country. For instance, if you are a UK resident with income or assets in Spain, you should contact the Spanish tax authorities to claim relief. Similarly, if you are a Spanish resident with income or assets in the UK, you should contact HM Revenue & Customs.
5. How long is the Double Tax Agreement in force?
The DTA between the UK and Spain came into force in 2014 and started to apply from 1st January 2015. The agreement is in force indefinitely, subject to review and renegotiation if necessary.
In conclusion, the Double Tax Agreement between the UK and Spain is an essential agreement that helps to avoid double taxation on income and assets. It is crucial to know its provisions to ensure that you only pay tax once and avoid any potential tax disputes between the two countries. Make sure you seek professional advice to understand the specifics of the agreement and how it applies to your circumstances.