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SPAIN AND THE US

Spain and the US sign new pensions and social security agreement

The Spanish government has made an agreement with the United States to improve pensions calculations and social security protections for workers who have worked and spent time between both countries.

Published: 9 April 2024 11:44 CEST
Spain and the US sign new pensions and social security agreement
U.S. Ambassador to Spain Julissa Reynoso and Spain's Minister of Inclusion, Social Security and Migration Elma Saiz. Photo: Ministry of Inclusion, Social Security and Migration

Spain and the United States have signed a new agreement that improves the way in which pensions are calculated and extends social security protections for people who have lived and worked in both countries.

Spain’s Minister of Inclusion, Social Security and Migration, Elma Saiz, presented the agreement with U.S. Ambassador to Spain, Julissa Reynoso, at the formal signing on Monday.

The new deal updates the first bilateral agreement between the two countries, signed back in 1986 and in force since 1988.

Americans are increasingly moving to Spain to live, and the relaxed pace of life and relative affordability compared to many parts of the U.S. attracts pensioners in particular. In late 2022 there were 41,953 US nationals officially residing in Spain, according to Spain’s national statistics agency (INE).

READ ALSO: Where in Spain do all the Americans live in 2023?

The new deal will also benefit many of the hundreds of thousands of Spaniards living in the US. The United States is the third country in the world with most Spaniards living there, behind Argentina and France. As of 2023 there were 192,766 Spaniards living in the U.S, according to INE figures. 

At the signing, Saiz said that “thirty-six years after the signing of the first agreement, we are taking another step forward in promoting international labour mobility, which will undoubtedly be a powerful lever to continue stimulating our bilateral economic activity.”

The Minister emphasised that the deal will have an “impact on the lives of hundreds of thousands of workers”. Among the changes, the new agreement allows for the easier application and implementation of social security benefits in the two countries, eliminates coverage duplication, provides relief from double taxation and avoids gaps in the social security system for many workers.

According to a government statement: “The main changes included in the new text effect, firstly, the calculation of Spanish social security pensions, which will be more beneficial. From now on, there will be two pension calculations. The first will be based solely on contributions in Spain, and the second will add the time contributed in the United States.”

After comparing the two calculations, the more favourable one will be paid. This benefits pensioners, the government says, because “until now, if you were entitled to a pension only with contributions in Spain, the benefit was paid without the second calculation being made by adding the contributions in the United States, even though it could have been higher.”

EXCLUSIVE: What the new Spain-US social security deal means for Americans

“In addition, the calculation of the regulatory base for benefits has been improved when contributions from Spain and the United States are added together, based on the actual contribution bases prior to the last working day in Spain.”

This will especially impact those who spent the latter part of their working lives in the United States.

The agreement also makes improvements for self-employed workers abroad, and extends the period for self-employed and employed workers posted abroad to 5 years, extendable by a further 2 years in exceptional circumstances and subject to authorisation by the relevant social security system.

It also includes civil service and military pension schemes in the scope of the agreement.

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For members

TAXES

What are the fines if you make mistakes on your Spanish tax return?

Filling out your Spanish income tax return can be daunting and mistakes can be made, so what happens if you submit your form with an error? Will you always have to pay a fine and how much will it be? Is there are a way of correcting the mistake in time?

Published: 20 May 2024 14:09 CEST
What are the fines if you make mistakes on your Spanish tax return?

It’s easy to make a small mistake on your yearly income tax return in Spain, known as la declaración de renta. This is because there a so many questions and boxes to fill. The most important thing is to look over everything as carefully as you can.

If you have any doubts about anything, it’s best to contact the Agencia Tributaria directly by phone, in person or on the web or to contact a tax professional and ask them to help you.

READ ALSO: How to complete Spain’s Declaración de la Renta tax return in 2024

Even with double-checking though and being thorough, small mistakes may slip through. So what can you do?

Q: I realised after I submitted my tax return that it contained an error, what can I do?

A: It’s important to note that there are usually fines for any errors made on your return. These amounts can vary depending on the size of the mistake. Whether you omitted information on purpose or it was accidental, they could still possibly fine you.

If you have already submitted your return and realise later that you made a mistake, it’s important to rectify it as soon as possible and submit a second declaration voluntarily within the allotted time frame to do this, before the Treasury finds out.

Tax experts claim that the authorities will then take into account your income, circumstances and deductions on your last declaration to see if and how much you will be fined.

READ ALSO: 11 mistakes to avoid when filing your Spanish tax return

Q: Is there a way to modify a declaration that has already been submitted?

A: Yes, the Treasury explains two ways to do this on their website

If the error affects the taxpayer – either because they have to pay the Treasury more or less than what they should, they can request the modification of the error on the declaration that’s already submitted . This can be done online on the Agencia Tributaria website, as long as Hacienda hasn’t carried out the fiscal settlement yet.

If the error affects Spain’s Hacienda treasure , the taxpayer can submit a complementary declaration , something that can also be done online under ‘Modificar declaración presentada‘.

You will need to either have a digital certificate or Cl@ve details to do all this online.

READ ALSO: 

Hacienda has announced that in this campaign it will promote communication with taxpayers who may have had errors so that they can solve them.

Q: What are the fines if I don’t correct the mistakes on my Spanish tax declaration?

A: How much you get fine for making a mistake on la declaración de la renta can depend on numerous factors, including the severity of the error, whether it’s your or them who notify the mistake and how long passes before you pay. Generally speaking, for every month that you don’t pay the money back, the amount you owe will go up.

If the mistake is linked to minor tax fraud, in the sense that you have changed something and you have not specified it, Hacienda can fine you €100. Incomplete data or other mistakes can also lead to penalties of €150.

Even if you realise that Spain’s tax agency owes you money but you inform them after the tax deadline, they will pay you what’s owed but fine you €100. If it is the Treasury that realizes the error before you, the penalty goes up to €200.

If you have any erroneous deductions that don’t correspond to you, the Treasury considers this to be a serious infraction and the fine will be 15 percent of the amount you receive.

If fake invoices or supporting documents are used so that the declaration works out favourable to you and it’s more than €3,000, the fine is between 50 and 100 percent of the amount.

With more serious cases of fraud on your declaration, the fine can be up to 150 percent of the amount. When fraud is in the millions, the fine can be €30,000 and in very serious cases the amount rises to more than €300,000.

READ ALSO: What are the penalties and prison sentences for tax evasion in Spain?

Q: Will I always get a fine if I make a mistake?

A recent ruling by the Superior Court of Justice of Galicia has found that people have the “right to make a mistake” when filing their income tax return. This could set a new precedent across the country, meaning that those who make small mistakes may no longer be fined.

During the case, the accused’s lawyer, Nadia Vasallo, assured the court that he “had no intention of deceiving the Treasury,” but rather that “a tax advisor simply advised him on a complex operation.”

Most appeals are won by taxpayers who’ve been fined are won by clients, but unfortunately the bureaucracy and cost involved mean it’s not necessarily worth fighting it. 

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