According to Spanish law, pensions and other similar benefits are understood to be obtained in Spanish territory in the following cases:
1. When these derive from employment in Spain.2. When they are paid by a resident person or organization or by a permanent establishment situated in Spanish territory.
Also, Spanish law includes some cases of exempt pensions:
1. Old age pensions recognised by Royal Decree 728/1993, of 14 May, establishing old age pensions in favour of Spanish emigrants.2. Pensions which are exempted for residents by the Personal Income Tax Act, such as: Pensions recognised by Social Security as a consequence of absolute permanent disability or severe disability or for retired public servants as a consequence of being unfit for work or permanent disability.
AGREEMENT If an agreement to avoid duplicate taxation is applicable, it must be taken into account that pensions, understood as payments due to formerly performed employment, are treated differently if they are public or private. A public pension is understood to be that received for being a former public employee; i.e. that which is received for services provided to a State, to one of its political subsections or a local organization. A private pension is understood to be any other type of pension received by being a former private employee, as distinct from that defined as a public employee. – For private pensions, most of the Agreements establish the right to impose taxation exclusively in favour of the State of residence of the taxpayer. – In general for public pensions, the State where the pension comes from has the right to tax it, except in the case of residents and nationals of the other State, in which case the right to tax will correspond to that State.However, the particular characteristics of each agreement should be consulted.
When, according to Spanish law and, where applicable, the agreement, the pension is subject to Spanish tax, tax will be paid according to the tax rate scale
Only the following deductions are allowed from the taxable income: · Deductions for donations, under the conditions described in the Income Tax Act and in the Act on the tax regime of non-profit organizations and of tax incentives for patronage. · Tax withholdings that have been applied on the taxpayer’s income.