Tax Obligations for German Retirees in Spain

The tax situation for German retirees becoming Spanish Tax Residents is defined by the Spain-Germany Double Taxation Treaty (DTC), which came into effect in 2013, replacing the previous 1966 treaty. This modern agreement is closely aligned with the OECD Model Convention, providing specific rules, particularly concerning the taxation of pensions.

1. Taxation of German Pensions

The DTC establishes a clear division of taxing rights based on the nature of the pension—specifically, whether it is a state/public pension or a private/occupational pension.

Pension Type	Relevant DTC Article	Taxable Where?	Key Obligation in Spain
Private/Occupational Pensions	Article 17 (Pensions)	Only in Spain	Declared as General Income in the Spanish Personal Income Tax (IRPF) return. This includes most corporate and private retirement schemes.
German State Pensions (Statutory Pension Insurance – Deutsche Rentenversicherung)	Article 17 (Pensions)	Generally in Spain	These pensions are generally taxable only in Spain (the country of residence). Exception: If the pension income exceeds a certain threshold (€15,000 as of a previous interpretation, but this must be verified against current Spanish/German guidance), Germany retains the right to tax, and Spain must apply a tax credit to avoid double taxation.
German Government Service Pensions	Article 18 (Government Service)	Only in Germany	This covers pensions for former civil servants (Beamte), military, and other public service roles. HOWEVER, this income must still be declared in Spain for “Exemption with Progression” purposes.

Crucial Consideration: Exemption with Progression
If your German Government Service Pension is only taxable in Germany, you are required to declare the income in Spain’s IRPF return. While Spain will grant an exemption on this income (meaning you don’t pay Spanish tax on it), its value is added to your total income to calculate the tax rate that will be applied to your other Spanish-taxable income (e.g., private pensions, savings income). This can result in your Spanish-taxable income being subject to a higher marginal rate.

2. Taxation of Other German-Sourced Income

Income Type	Taxable Where?	Mechanism to Avoid Double Taxation
Interest & Dividends	Taxable in Spain (country of residence). Germany may also impose a limited withholding tax (usually 15% on dividends, as per DTC).	Spain must grant a tax credit in the IRPF return for the German tax paid (up to the Spanish tax liability on that income).
Rental Income (German Property)	Taxable in both countries, but Germany has the primary right to tax.	Spain must grant a tax credit in the IRPF return for the German tax paid on the rental income.
Capital Gains (Sale of German Assets)	General rule: Taxable only in Spain. Exception: Gains from the sale of German real estate or from shares in a property-rich company (where 50%+ of assets are real estate) are taxable in Germany.	Spain applies an exemption or grants a tax credit for the German tax paid, depending on the asset and the relevant DTC article.

3. Key Spanish Declarations for German Retirees

As a Spanish Tax Resident, you must comply with standard Spanish obligations, particularly concerning overseas assets:

Personal Income Tax (IRPF) – Modelo 100: Mandatory declaration of worldwide income (including all gross German pensions and other investment income). This is where the mechanisms of the DTC (tax credits/exemptions) are applied.
Declaration of Overseas Assets (Modelo 720): You must declare all German assets (bank accounts, investment funds, real estate, and life assurance policies/pension schemes that fall under the relevant categories) if the value in any category exceeds €50,000.
- Note: German life assurance policies and investments are generally subject to scrutiny and must be correctly declared.
Wealth Tax: Taxable on worldwide net assets above the regional exemption threshold. Assets held in Germany (e.g., real estate, liquid investments) must be included in the calculation of the worldwide tax base.

4. Continuous Information Exchange

The tax treaty includes provisions for the automatic exchange of information between the Spanish and German tax authorities, particularly concerning pension payments. This makes it highly likely that the Spanish authorities are aware of the German pension income received, necessitating accurate and timely declarations.

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