European Parliament
2014-2019
Committee on Petitions
31.1.2017
NOTICE TO MEMBERS
Subject:
1.
Petition No 2334/2014 by Alexandre Lago Portela (Spanish), on behalf of the
Plataforma de Emigrantes Retornados de la Comarca de Vigo (Platform of
Returned Emigrants of the Region of Vigo) on the payment of tax on foreign
retirement pensions
Summary of petition
The group of returned Galician emigrants is complaining about the fact that they have to pay
tax on their foreign pensions when they are resident in Spain. They also complain about poor
administration by the tax authorities because they are failing to apply the 1966 agreement
between Spain and Germany and emigrants are being taxed twice.
2.
Admissibility
Declared admissible on 13 July 2015. Information requested from Commission under Rule
216(6).
3.
Commission reply, received on 25 November 2015
On behalf of the association Plataforma de emigrantes retornados de la comarca de Vigo1 the
petitioner expresses dissatisfaction regarding the tax regime applicable to the foreign
retirement social security pensions to which Spanish nationals having emigrated abroad (e.g.
to France, Germany, Switzerland) and returned to Spain are eventually subject in Spain.
Several aspects are mentioned:
a. Returning Spanish pensioners would be discriminated against in comparison to Spanish
residents receiving only Spanish pensions. The former must declare their foreign
1
The association represents former Spanish emigrants returning and currently residing in Spain.
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pensions1, while the latter must not. According to the petitioner, they should neither
declare, nor be subject to tax in Spain on such foreign pensions.
b. Contrary to previous statements of the Spanish tax administration2, the taxpayers were
recently liable to incur penalties for having failed to declare the foreign pension.
Consequently, the Spanish State should be found responsible for wrong administration.
c. The petitioner challenges the distinction and the interpretation given by Spain to
provisions of the agreement concluded between Spain and Germany to avoid double
taxation3 4 (the Spain-Germany Agreement) allocating the taxing rights on the pension
income, according to the nature, public or private, of the pension.
The Commission's observations
General remarks
Under the current state of EU law, direct taxation falls essentially within the competence of
Member States. EU secondary legislation in the area of direct taxation is limited and has no
bearing on the matter referred to in this petition. In areas where no EU secondary legislation
is applicable, Member States have broad freedom to design their own tax systems, and to
decide what to tax, when to tax it and at what rate. They are also free to agree how to exercise
their taxing rights in bilateral Agreements aimed at limiting or avoiding double taxation. The
interpretation and application of the latter is not governed by EU law5. The only limitation lies
in the fact that Member States have to respect their obligations under the Treaty on the
Functioning of the EU (TFEU). Thus they are not allowed to discriminate in their tax laws on
the basis of nationality or residence against the nationals of any Member State, including their
own, or against anyone who exercises the freedoms granted under the TFEU. Nor can they
apply unjustified restrictions on these freedoms.
Thus, according to the provisions allocating taxing rights in a bilateral Agreement, Spain is in
principle free to tax German source pensions (or other foreign source pensions) received by
persons residing on its territory.
Specific remarks to the petitioner’s claims
A. The Spanish tax provisions raised by the petitioner6 merely provide for the standard
obligation imposed on individuals resident in Spain to declare their income. Such an
obligation in particular arises7 when income is received from more than one payer of
1
That is because they are presumed to receive income from two payers of income.
As claimed by the petitioner: “foreign pensions are not subject to tax in Spain”.
3
Referring to Article 19 of the Agreement to avoid double taxation concluded between Spain and Germany in
1966.
4
Agreement to avoid double taxation signed in Madrid on 3 February 2011 - Instrumento de Ratificación del
Convenio entre el Reino de España y la República Federal de Alemania para evitar la doble imposición y
prevenir la evasión fiscal en materia de impuestos sobre la renta y sobre el patrimonio y su protocolo, hecho en
Madrid el 3 de febrero de 2011
5
The same remains true as regards the right of Member States to re-negotiate the provisions of such agreements.
Such provisions may thus evolve, eventually affecting the type of income subject to tax in a particular State.
6
Article 96 Ley 35/2006
7
Article 96 paragraph 3 letter a) or c).
2
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income if a certain threshold is exceeded, or if the payer of the income is not obliged to
retain the tax by way of withholding.
The Commission stresses thus the distinction between the obligation to declare the
(pension) income and the taxation of such income in Spain. If Spanish residents receiving
Spanish income are sometimes not obliged to submit a tax declaration, such nondeclaration does not necessarily entail exemption from taxation in Spain. Similarly, the
Spanish residents receiving foreign income that falls under the obligation to submit a
declaration are not necessarily subject to a higher taxation on that foreign income.
In particular, the Spanish payers of (pension) income are obliged – upon payment of the
income - to withhold the tax, transfer the amount to the State budget and communicate to
the Spanish tax authorities the relevant information1. Thus, in principle the Spanish
residents receiving pensions from Spain are subject to personal income tax on their
income by way of withholding tax, retained regularly upon payment by the Spanish payer
of pension. As a result, depending on the type or amount of the income obtained, such
taxpayers may not be obliged to submit an annual tax return, because they were already
taxed and the Spanish tax authorities receive directly from the Spanish payers of the
income the information relevant for personal income tax purposes.
On the other hand, similar withholding and information obligations towards the Spanish
tax authorities not being applicable in cross-border situations2, Spanish residents receiving
foreign pensions must in principle themselves declare their foreign income in their annual
tax return3. Subsequently, such income is subject to tax (or not), depending on its type or
amount.
B. With respect to a potential misinformation by the Spanish authorities, the public
authorities' responsibility for such misinformation is not within the remit of EU law but
may possibly be challenged in front of a national judge in accordance with Spanish
national law.
C. Regarding the taxing rights on the German pensions, articles 17 and 18 of the SpainGermany Agreement4 define the State competent to tax pensions. According to these
provisions, with the exception of the pensions paid in respect of a public function, Spain
has the taxing rights – either exclusive or shared – on pensions received from Germany by
Spanish residents.
If the petitioner opines that the provisions of the Spain-Germany Agreement have been
wrongly interpreted and applied by either of the Contracting States, he may, in addition to
1
Article 99 of Ley 35/2006.
Because the foreign payers of (pension) income are not always subject to the former, the information about the
foreign (pension) income obtained by Spanish resident must be made available to the Spanish tax authorities by
other means. Such information will ensure that the Spanish tax authorities are able to assess and eventually
exercise their taxing right on foreign (pension) income, the same way they do on income from a Spanish source.
3
In order for the Spanish tax authorities to have information about the income obtained and thus properly assess
the taxpayer's tax liability, similarly as they do in respect of a Spanish resident receiving only a Spanish pension.
4
Currently in force : Agreement to avoid double taxation signed in Madrid on 3 February 2011 - Instrumento de
Ratificación del Convenio entre el Reino de España y la República Federal de Alemania para evitar la doble
imposición y prevenir la evasión fiscal en materia de impuestos sobre la renta y sobre el patrimonio y su
protocolo, hecho en Madrid el 3 de febrero de 2011.
2
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any national remedies available to him, initiate the mutual agreement procedure under
article 24 of the Agreement. Such an exanimation falls outside Commission’s
competence.
Conclusion
Based on the information available, the petition discloses neither a discriminatory tax
treatment against EU law entailing a higher taxation of cross-border situation, nor a
misapplication of EU law in this individual case.
4.
Commission reply (REV.), received on 29 June 2016
The Commission's preliminary conclusions contained in the communication of 25/11/2015
have not changed. The additional documents subsequently received from the petitioner reflect
what the Commission has stated in its reply.
The three documents – national rulings dealing with the interpretation of the nature of the
pensions received in those precise cases – only reflect what the Commission already
suggested in its reply: if resident taxpayers consider that the double tax convention between
Spain and the relevant States are not correctly interpreted and applied by Spanish tax
authorities, the taxpayers can use the national means of redress or use the arbitration
procedure under the convention. It falls outside the Commission's competence to assess the
facts in every individual case. It appears to the Commission that this is what the national
judge did – checked the facts and circumstances of the concrete situations and finally ruled in
favour of the taxpayers. The same remains true as regards the recognition in Spain of a certain
invalidity status for the purpose of taxation of the corresponding (invalidity) pension income.
From these national rulings, it cannot be inferred that all residents in Galicia receiving foreign
pensions from Germany or Switzerland – represented by the petitioner – are all and each of
them in the same identical factual situation.
5.
Commission reply (REV II), received on 31 January 2017
On 1 December 2016, the petitioner submitted a new letter to the Committee on Petitions, in
which he expresses the following grievances:
 He reiterates that returning Spanish pensioners who receive a pension from Spain and
a different one from another Member State would be discriminated against in
comparison to Spanish residents receiving only Spanish pensions. The former must
declare their foreign pensions since it is considered that there are two different payers,
while the latter are considered to receive several pensions from one single payer and
do not have to submit a tax declaration.
 There is no recognition in Spain of disability of pensioners as declared by other
Member States and these have to submit an appeal to Courts to have them recognized
and enjoy tax exemptions.
 The petitioner challenges anew the interpretation given by Spain to provisions of
bilateral double taxation conventions concerning public pensions, which are appealed
successfully before the Spanish Courts.
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The Commission's observations
The Commission refers to its earlier replies as regards the first and the third grievances. As
regards the first one, the Commission would however like to add that the petitioner's
understanding of the Spanish legislation does not seem entirely correct. Firstly, the case
where pensions are paid by two payers cannot be assimilated to the case where a pension is
paid by the Spanish Social Security alone. Where two different and separate entities are
involved, neither of them is in a position to know what pensions are received by the pensioner
and to calculate a tax to be withheld based on the total income of its recipient. Accordingly,
under Spanish law, when taxpayers receive income from two different employers or pension
systems, whether Spanish or not, they have to submit a tax return. Thus, there is no
discrimination in the case raised by the petitioner.
As regards the second grievance, the Commission would like to underline that EU law does
not harmonize the tax law definitions of severe disability. Therefore, the criteria for
determining this question may differ between Member States. It follows that the Spanish
authorities are entitled to verify whether the criteria under their own legislation are fulfilled
before granting the tax exemption, also for pensioners receiving a disability pension
according to the legislation of another Member State. This is so because the criteria for
qualifying as disabled may be different under the latter legislation and not correspond to the
Spanish conditions.
However, taxpayers receiving a pension from another Member State are free to submit
evidence that they qualify as severely disabled under Spanish law. The Spanish rules do not
make any distinction according to whether the pension is received from Spain or from another
Member State. Thus, the Spanish legislation does not seem to run contrary to EU law in this
regard either.
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