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Dual citizenship dilemma!

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Ozcelt
7/18/2022 11:44 EST

So, this is going to seem initially like one of those "good problems" to have!
We're both Australian citizens AND Irish (EU) citizens. We're keen to retire permanently in either Spain or Portugal (still deciding).
We both qualify for an Australian aged pension (at 67...so not quite yet) and have also a chunk of money in self-funded Australian superannuation (pension). So, crudely, we have a more than adequate recurring income. There is also a social security/services agreement between Australia and both Portugal and Spain (we think), which probably means we can avail ourselves of healthcare etc to some degree.
But, even so, if we come in ONLY on an Aussie passport, we have still to go through the whole non-EU citizen visa process - which seems to require a lot of up-front cash (which we really don't have).
We want to do the right thing wherever we choose to go: so, is it OK for us to claim permanent residency in either Spain or Portugal USING OUR EU citizenship - and possibly have to use healthcare etc in the (distant) future, but then still use our Australian citizenship to "prove" our income qualification etc? Anyone out there who has some knowledge or advice or expertise in this sort of juggling act?

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DoubleTax
7/20/2022 07:34 EST

Hey.

Sorry if my answer was geared towards the other person writing from NZ on this post.

In order to give you an answer, you would have to literally do accounting numbers to know which solution would be the best to apply to your case.

You will not need your Australian nationality to prove your income, the problem will be that if you live in Spain but get income from Australia, first of all you have to determine the country from which you are going to be considered a tax resident, which will not only depend where you reside

Secondly, that will determine in which country you must file taxes, since on many occasions you will have to file taxes in both countries, and later the problem will lie in going to the double taxation treaty to know in which of the two countries you must request the deduction of what has already been paid in the other to avoid double taxation.

In any case, if you want a more specific analysis of your case, write me a private message and we'll take a look at it without obligation.

I hope I have been helpful.

Thank you very much

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PoppyGalore
7/20/2022 05:52 EST

Language problems going on. Most of what the lawyer stated is as I said except the last part. It was sobering for us as well, but if laws are about to change, a fresh look would be a good idea. I suggest you make contact with a tax accountant/lawyer who has a good command of English. I don't think 8t makes much difference between Aussie and NZ. You can Google reciprocity Spain Australia and trawl through the jargon. I sincerely wish you well and hope I have in some way helped.

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Ozcelt
7/20/2022 05:23 EST

Hey Santiago, I think your advice is more directed to our colleague in New Zealand, but it is helpful in any case. Thanks very much. I didn't realise the wealth tax is annual! So that is sobering. But, on the other hand if the permanent home is excluded and a large chunk of annual income, then that is better! Again, thanks.

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DoubleTax
7/19/2022 07:34 EST

Good afternoon.

My name is Santiago and I'm a spanish lawyer and tax advisor in Madrid.

With your permission I would like to make some clarification.
Your questions unfortunately require a deep analysis that can hardly be done in this forum. More specific information would be needed and to know exactly several aspects of your situation.
In any case, I will try to answer briefly to give you an idea of each of your questions:
1. The classification as residents in one or another country will determine the fiscal and legal treatment of the rest of the aspects, mainly the different sources of income.
The 183-day rule is the first requirement to determine residency, but not the only one or always the most important. It is very likely that if you reside for more than 183 days in Spain you will be considered a tax resident in Spain, but if you have your “center of interests” still in NZ both countries could consider you a tax resident and therefore it would be necessary to resort to the Double Tax Agreement between the two countries in order to determine all the rules which will be applied to your case.
2. If you are considered tax resident in Spain by the Spanish Tax Agency, regardless of your nationality, you will be subject to taxation in Spain for your worldwide income, including that which they may obtain in NZ like a retirement pension or the income from renting your NZ house, unless an article of the Agreement establishes exclusive taxation in NZ as the country of origin of a certain income, which should be analyzed with more information in order to give you the correct answer.
3. “That means that on top of the taxes we pay on rental income here, we have to pay the Spanish government a further 10% of that income. “
That’s not exactly true. If you are considered a tax resident in Spain (for example, because you reside in Spain for more than 183 days), you must pay taxes on the total of your income regardless of the country of origin and the IRPF (Income Tax on individuals) would be applied to you. as if you were a Spaniard so you should not pay any taxes in NZ but the total in Spain (at the tax rate between 19% and 47% of your income.

4. “Plus the annual wealth tax on property owned in Spain which is around 2% plus of everything over 300,000€ “
Regarding the Wealth tax in Spain, as you say, the rules vary depending on the region in which you are going to establish yourself. In Madrid, for example, the wealth tax has been abolished, but it is very likely that after the elections in Andalusia last month, the wealth tax will also be eliminated in Andalusia sooner than later.
Although the calculation you mention is not correct. To determine the wealth tax that you must pay, you must add all the items that make up your wealth (homes, bank deposits, etc.) and before applying the tax, you must deduct the "minimum exempt" that the legislation establishes in general of 700,000 €. In addition, the habitual residence is excluded from the calculation of the tax – up to a maximum of €300,000. In other words, you do not pay taxes above €300,000, but you would pay wealth tax only above €1,000,000.

I hope I have shed some more light on this issue. If you need any further clarification or have any questions, don't hesitate to ask.
Feel free to ask anything you need in Spain

Kind regards

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PoppyGalore
7/19/2022 05:58 EST

Hi, we did a lot of online research both for real estate and financial implications. We are tossing up whether to continue with our dream due to the wealth tax. There is none in Madrid but property is considerably more expensive and we do favour Andalucia. We intend buying a property in Spain, and leave our home here rented. That means that on top of the taxes we pay on rental income here, we have to pay the Spanish government a further 10% of that income. Plus the annual wealth tax on property owned in Spain which is around 2% plus of everything over 300,000€. As I am 60 and already retired, we would be relying on our rental income from NZ to keep us. It seems a big word of our income would be going to both governments. I need to do more number crunching. Meantime, as the world is in crisis, we are staying put in our safe little corner of the world.

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Ozcelt
7/18/2022 22:27 EST

Thanks so much. Good to know we're not alone! All the available advice seems to revolve around discussions for Poms moving from the UK (and Brexit fallout) or Americans. There's little or no expert advice available for our circumstance. Mind you, at least no-one is peddling false qualifications either!
You seem quite clear and confident in what you intend to do - and how you intend to do it. Can I ask: did you get help/advice from any third party? Or, did you just plough through all the inline stuff to unearth gems?! I'd be grateful for any pointers to sources you found useful and trustworthy (and, maybe, not too expensive!!). Thanks

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PoppyGalore
7/18/2022 15:09 EST

In short, yes! Aussie and Irish citizen here as well, but living in NZ. I will use my Irish citizenship to enter Spain and buy a home, but still keep assets in NZ. Take a careful look at the Spanish taxation system though, before you make a final decision. The wealth tax in particular, which varies from region to region, can be a killer. You may be paying tax in both countries plus a sizeable penalty if for example in Andalucia, your property is worth more than €300,000. Best wishes.

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