Pension Taxation Spain

Who taxes German pension income in Spain?

If you've moved the centre of your life to Mallorca, Spain taxes your German pension — and Germany is still allowed to withhold a portion. The double taxation agreement between the two countries generally assigns the right of taxation to the country of residence, but grants the source country a capped claim on pensions from the statutory social security system: at most 5% of the gross amount if the first pension payment falls between 2015 and 2029, and at most 10% from 2030 onwards.

What surprises many people: this cap is, as a rule, the figure you actually pay. If you calculate the German tax according to the national rules, it almost always comes out higher than the cap — the calculator above shows you both amounts and tells you which one applies.

How it's calculated

The calculation runs in parallel in both countries and is then brought together at the end. The calculator lays out every step.

The German part

Your pension is not fully taxable in Germany. What matters is the taxable portion, which the Income Tax Act sets according to the year your pension began — the later the start of your pension, the higher the portion. The rest remains tax-free.

This is where the most common mistake happens: the tax-free portion is a fixed euro amount, not a percentage. It is determined once, in the year after your pension began, and then applies for the entire duration of your pension. Any later pension increase is therefore fully taxable. Anyone who instead applies the percentage to today's pension will systematically calculate too low a figure. That's why the calculator asks for the annual amount in the year after the pension began — it determines the tax-free allowance.

From the taxable portion, the tax office deducts the flat-rate income-related expenses allowance of €102 . What remains is your taxable income.

And now comes the point that no other resource discloses: as a person with limited tax liability — that is, without a residence in Germany — you do not receive the basic tax-free allowance. The law achieves this indirectly: the tax rate is not applied to your taxable income, but to this income plus the basic tax-free allowance. In practical terms, this means that even the very first euro of your taxable pension is hit by the entry tax rate. This is precisely why a German tax liability arises at all, and precisely why the treaty cap almost always applies.

In the end, the calculator compares the tax determined this way with the cap and applies whichever amount is lower.

The Spanish part

In Spain, the pension counts as rendimientos del trabajo — income from work and pensions. It is therefore included in the general tax base for income tax, not in the lower-taxed savings base.

First, a flat-rate allowance for income-related expenses of €2,000 and a graduated reduction for earned income, which is especially strong for small incomes. Next comes the mínimo personal — the personal tax-free allowance. It amounts to €5,550 and increases by €1,150 once you're over 65, and by a further €1,400 from 75. For pensioners this isn't a minor detail, but the difference between a tax liability and none at all.

There's a Balearic peculiarity on top: the autonomous portion of the tax works with a personal allowance increased by ten percent for those over 65. The calculator therefore shows the state and autonomous amounts separately.

The tax credit

So that the same pension isn't taxed twice, Spain credits the German tax paid. But this credit is capped: it can at most offset the portion of the Spanish tax that is calculated as attributable to the German pension. For this, an effective average rate is formed — which the law expressly requires to two decimal places — and applied to the corresponding portion of the tax base.

The calculator shows this maximum amount separately. It presents the credited tax as a forecast, because strictly speaking, what's credited is the foreign tax actually paid — and that's only certain once the German tax assessment arrives.

Special cases the calculator doesn't cover

The calculator answers the most common scenario: a statutory pension paid to a person without German residency. The following cases follow different rules and can't be answered with it.

• Civil servant pension. Pensions from public funds generally remain taxable solely in Germany; Spain exempts them but takes them into account for the tax rate applied to your other income. Two exceptions overturn this: if, alongside residency, you also hold Spanish nationality, and if the pension stems from an economic activity — the case of former postal, telecom and railway civil servants. We have a dedicated page on civil servant pensions in Spain.
• Company pension, Riester and Rürup. These benefits are a different type of income in Germany than the statutory pension and follow their own rules; the taxable portion based on the year the pension began doesn't apply to them. Whether Germany may also tax them depends on whether the contributions were subsidised and were paid over more than twelve years. More on this on our page about company pensions in Spain.
• Private annuities. A privately purchased annuity without state subsidy is not taxed by Spain as earned income, but only on a notional yield portion, which depends on your age when the pension began — and on the savings base. Whether this approach applies depends on the type of contract; deferred annuities again follow their own rules.
• Multiple pensions side by side. Your own pension plus a widow's/widower's pension, or a statutory pension alongside a civil servant pension: each payment stream has its own cohort and its own treaty provision, and only afterwards are they jointly assessed.
• German residence alongside.A tax residency under the treaty in Spain does not automatically end unlimited German tax liability. Anyone who still keeps a home available in Germany continues to be taxed there on an unlimited basis — in which case the whole calculation above no longer applies.
• Application for fictitious unlimited tax liability.Under certain conditions you can apply to be treated in Germany as if you were subject to unlimited tax liability — with the basic tax-free allowance. Whether this is worthwhile is a case-by-case calculation that this calculator does not carry out.

Deadlines, forms and responsible authorities

On the German side, the Finanzamt Neubrandenburg is responsible — it centrally processes the pensions of all recipients living abroad. It finds out about your pension anyway: the pension insurance providers automatically report pension payments, and Germany and Spain exchange data. There's no such thing as "nobody will notice" here.

On the Spanish side, you file the Renta — the annual income tax return with the Hacienda, the Spanish tax authority. It records your worldwide income, including the German pension, and it's there that you claim the credit for German tax paid. The filing deadline falls in early summer of the following year; the exact dates are announced afresh each year by the Agencia Tributaria.

Whether you're obliged to file a return in Spain at all depends first on your tax residency. How this is determined is explained in our guide on Taxation as a resident; those who don't yet have residency will find the rules on Non-resident tax elsewhere. Anyone moving to Spain first needs the Residencia and registration with the Empadronamiento. And anyone keeping assets in Germany should be aware of the reporting obligation under Modelo 720. We've collected all further tax topics for emigrants here.

A date on which the treaty is silent

Germany's right to tax at source applies if the event triggering the pension entitlement occurs on or after 31 December 2014 — and according to the protocol to the treaty, this event is defined as the first payment. However, the 5 percent cap in the treaty is formulated for the period from 1 January 2015 to 31 December 2029.

For 31 December 2014 itself, the treaty therefore names no cap. For this one day, the calculator does not output a figure but instead states that the case cannot be answered in this way. This is rare, but anyone who received their first pension payment on exactly this day should seek tax advice for their case rather than relying on an estimate.

The mistakes that cost the most

Out of the cases that reach us, five keep recurring.

1. Treating the pension allowance as a percentage. The most common and most costly mistake. The tax-free portion is a euro amount fixed in the year after the pension began; anyone who instead applies the percentage to the current pension every year sets too high an allowance and is later surprised by the back payment.
2. Confusing pension commencement with the first payment. For the taxable share, the year the pension began is what counts; for the German right of taxation at source, however, it is the day on which the first payment actually arrived. In the case of a pension awarded retroactively, these can fall in different years — which is why the calculator asks for both separately.
3. Assuming that registering in Spain ends German tax liability. It does not, as long as a home is still kept available in Germany. Anyone who overlooks this submits the wrong return in both countries.
4. Not claiming the German tax in Spain. The credit is not applied automatically; it must be requested in the Spanish tax return, and for that you need the German tax notice.
5. Not declaring the pension in Spain at all. Both tax administrations exchange pension data. An undeclared pension almost always comes to light, and then surcharges are added to a tax that, after crediting, would often have been manageable.

What to clarify, step by step

If you have just moved or are preparing your first Spanish tax return, this is the sensible order: first clarify your tax residency, as it determines everything else. Then check whether you still have a residence in Germany. Next, find your pension notice and read off from it the date of the first payment and the annual amount in the year after the pension began — you need both for the calculator above and for both tax returns. After that, determine the type of pension; only the statutory pension is covered by the calculation on this page. Finally, submit the Spanish tax return and claim the German tax there for crediting.

Legal basis and status

The allocation follows the agreement between Spain and Germany for the avoidance of double taxation of 3 February 2011: Article 17 for pensions, Article 18 for public service, and Article 22 for the avoidance of double taxation. The agreement entered into force on 18 October 2012 and applies to tax periods from 1 January 2013 onwards.

On the German side, the Einkommensteuergesetz (Income Tax Act) applies for the taxable share of the pension, the flat-rate deduction for income-related expenses, limited tax liability, and the treatment of the basic tax-free allowance. On the Spanish side, the Income Tax Act Ley 35/2006 applies for the classification of the pension, the deductions, the personal basic allowance, and the crediting of foreign taxes, together with the Balearic increase to the basic allowance.

One caveat applies: the protocol to the agreement ties the application of Germany's right of taxation at source to an exchange of information on pensions still to be agreed between the two states. The calculator reflects the wording of the agreement; it does not prove that this procedure already applies in any given case.

All the values the calculator works with come from a maintained register with source reference and date. You can see the legal status directly on the calculator.