How to collect your pension in Spain

All those years of hard work are over, and you can finally fulfil your life-long dream: tell everybody “hasta la vista” and retire to Spain. And why wouldn’t you? Spain has everything a person could need for their happiness: sun, great food, sangria, endless fiestas, long walks on the beach… but before you pack all your stuff and book a flight, you need to understand the process of collecting your pension abroad.

There are two main scenarios of how you will obtain your pension in Spain and how and where it will be taxed:

If you previously lived in the UK and you’re entitled to a state pension, you need to contact the UK IPC (International Pension Center) to have your pension paid directly to your Spanish bank account. You must let the IPC office know about your decision to move to Spain before you go ahead and do it, to avoid any problems or delays with receiving the payments.

If you have worked any amount of time in Spain and paid taxes there before your retirement, the method changes a bit. In this case you will need to apply for your British pension through the National Institute for Social Security (Instituto Nacional de la Seguridad Social or INSS) in Spain. The INSS office will handle the processing of your claim and bring together records of your tax contributions to any other countries where you have worked.

Pay attention to taxes

All foreigners who are currently receiving a pension and living in Spain must declare their income in their tax declaration form in the monetary compensation section under income from work, if they are obliged to file an income tax return form. It is considered an income from work and therefore should be included in your annual declaration.

Spain has signed an agreement with other countries to prevent double taxation and it establishes the following rules:

• You don’t need to pay taxes for the public pension you receive. These should be taxed in the country in which they are paid and they are exempt from tax in Spain. However, there are some exceptions with, for example, Germany and the UK, which have established that these public pensions should be taken into account in the Spanish Income Tax Declaration (Impuesto sobre la renta de las personas físicas or IRPF).
• Private pensions from private employment must be declared in Spain, even if they are paid by the social security department or department for work and pensions of another country. Most agreements specify that they should only be taxed in the country of residence.