There is a very common misconception amongst Spaniards living in Switzerland: the idea that if you have income in Spain and pay tax in Switzerland, you’re already covered. Or, conversely, that if you pay tax in Spain as a non-resident, Spain has already done its bit. The reality is that there is a Double Taxation Agreement (DTA) between Spain and Switzerland, in force since 1967 and revised on several occasions, which sets out exactly which country taxes what. And in many cases, people end up paying too much without realising it, or too little, which also has consequences.
The agreement covers the main areas: state pensions from the INSS are still taxed in Spain even if you live in Switzerland (the tax authorities won’t let you off the hook for that), private pensions are taxed in your country of residence, dividends are subject to a shared withholding tax, and property income is taxed where the property is located. If you have a flat let out in Spain and live in Switzerland, that rental income must be declared in Spain using Form 210, with a 19 per cent withholding tax for residents of EU or EEA countries. Many people believe that simply declaring it in Switzerland is enough to sort everything out. And then the letter from the Spanish Tax Agency arrives.
It is precisely in these two situations – INSS pensions and rental income in Spain – that the most mistakes are made. These are the two cases in which Spain retains the right to tax you even if you have transferred your tax residence to Switzerland. If you have established tax residence here – holding a B or C permit – and meet the criteria for Swiss tax residence, your main tax return is filed in Switzerland. However, this does not cancel your obligations to the Spanish tax authorities regarding income from Spanish sources.
If you have income in both countries, consulting a tax adviser who is familiar with both tax systems is not a luxury – it’s what will save you years of complications. In Switzerland, there are tax advisers who specialise in these situations and regularly deal with Spanish clients. The tax treaty prevents you from paying tax twice on the same income, but only if you correctly determine which country taxes each type of income.