If you receive a Swedish pension in Spain and are tax resident in Spain, it is important to review its tax treatment correctly. Many Swedish citizens believe that public pensions from the Swedish Social Security system are only taxable in Sweden, but the reality may be more complex and may give rise to double taxation that must be properly managed.
What does the Spain–Sweden Tax Treaty say?
According to the Double Taxation Agreement between Spain and Sweden, public pensions (such as those from Social Security) are taxable in the country of origin, that is, Sweden.
However, they are also taxable in Spain if the beneficiary is fiscally resident here.
This double taxation is not automatically resolved in Spain. Instead, the Treaty explicitly states that Sweden, as the source country of the pension, is responsible for eliminating the double taxation. In other words, the tax paid in Spain must be claimed back in Sweden through a deduction or refund.
Important:
A Swedish pension in Spain may be taxable both in Sweden and in Spain if the beneficiary is Spanish tax resident. Double taxation is not automatically resolved in Spain and must be managed correctly under the Treaty between both countries.
What should a resident in Spain receiving a Swedish pension do?
- Include the Swedish pension in their Spanish income tax return (IRPF) as taxable income.
- Pay the corresponding tax in Spain.
- Request a refund in Sweden of the tax paid there, providing evidence of the double taxation suffered.
Regularising previous tax years.
If the Swedish pension has not been correctly declared in Spain in previous years, it is advisable to review the situation as soon as possible. In many cases, it may be possible to amend the last four non-prescribed tax returns, include the pension as taxable income in the Spanish income tax return and regularise the taxpayer’s position.
This review can help correct errors before they are detected by the Spanish Tax Agency, reduce the risk of penalties and prepare the documentation needed to request the corresponding refund or deduction in Sweden for the double taxation suffered.
Each case should be analysed individually, taking into account the tax years affected, the amounts received, the tax paid in Sweden and the beneficiary’s tax residence position in each year.
ÁLVARO MORALES SOUSA
PARTNER – LAWYER
CUSTOM REPRESENTATIVE
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