Pension Income: Many tax treaties allow government pensions to remain taxable only in the country of origin
Part-Year Residency Strategy: Some retirees carefully manage their time in Spain to remain below the 183-day threshold, maintaining non-resident status while enjoying extended stays
Spanish Compliant Bonds for Retirees:
Spanish-compliant bonds are tailored investment products designed to comply with local tax regulations. These bonds are attractive for tax residents in Spain, as they offer tax-efficient growth and income options.
Spanish compliant bonds are particularly valuable for retirees:
- Income Generation: Can provide tax-efficient regular income through partial surrenders
- Tax-Deferred Growth: Particularly beneficial for retirees looking to preserve and grow their retirement savings.
- Flexibility in Withdrawals. Partial withdrawals are taxed only on the growth portion of the bond, not the entire amount. For example, if you invest EUR100.000 and withdraw EUR 10.000 in profit, you will pay taxes only for 10% from the profit, which means that taxable income is only EUR 1000. So, at a tax rate of 25%, the net tax for EUR10.000 is EUR250 (2.5%).
- Estate Planning: No taxes apply to the inheritance process for designated beneficiaries
- Currency Options: Available in multiple currencies to match pension or income sources
Additional Investment Considerations
- Bank Deposits: Interest is taxed at progressive savings rates (19-26%)
- Property Income: Rental income is taxed at progressive rates with deductible expenses
- Investment Funds: Transfers between funds can be made without triggering tax events if specific requirements are met
Healthcare and Taxes for Retirees
Retirees should be aware that:
- Some healthcare costs may be tax-deductible under specific circumstances
- EU retirees may use the S1 form to access Spanish public healthcare. S1 form is obtained from the country of origin and then registered to Instituto Nacional de la Seguridad Social (INSS) in Spain, with the supporting documents such as:
- Passport
- Residency certificate (NIE or TIE)
- Certificate of empadronamiento (local town hall registration)
Reporting Requirements
Retirees must comply with:
- Annual tax returns (typically due between April-June)
- Modelo 720 foreign asset reporting (assets exceeding €50,000)
- Tax representation if maintaining non-resident status while owning Spanish property
Conclusion
Many retirees find the combination of Spain's quality of life with strategic tax planning makes it an attractive retirement destination,
Consulting with tax advisors who specialize in expatriate retirement planning is strongly recommended to optimize your specific situation and ensure compliance with all obligations. Your Directimo consultant will recommend vetted tax advisors in Spain and assist you in selecting the most suitable one for your specific needs.
Chat with AI assistant to find out more
© Directimo