The perils of free movement
Nick Griffin MEP, received an email recently regarding taxes paid by British people living and working in Spain temporarily. As with many ‘harmonised’ systems in the European Union, there appear to be some cracks in this one.
The biggest issue here, is that information to tackle these problems is not easily located or accessible and people find themselves very frustrated trying to manoeuvre through multiple national systems which have various Member states with different rules and languages. When they do get through to the correct office, they are sometimes then given misleading information.
The author is this particular piece of mail worked in Spain teaching English for about six months, during which time, income tax and Social Security was paid into the Spanish system. Upon return to the UK, he tried to reclaim the income tax and Social Security, and was shocked to discover that the UK Government appeared to have no system in place to allow contributions to count towards his UK National Insurance payments.
When they wrote to HM Customs and Revenue to inquire into this, they were informed that they could pay voluntary contributions to the UK National insurance Scheme for the period of time they were living abroad. In other words: pay twice!
However, from the research below done by Nick's Constituency Outreach Officer, this office had given him misleading information and they, themselves appeared to be confused as to how their own system functions.
Regarding the attempt to reclaim the income tax, more run-around took place, as the author of the email started with the Spanish Embassy in London, was then directed to the British consulate in Madrid, the British Foreign and Commonwealth Office in London, and then referred to the Spanish Inland Revenue website which was meant to have information for non-residents.
Unfortunately, the Spanish Inland Revenue site is only partly in English and appears to have no simple, accessible form for UK citizens to fill in should they wish to reclaim income tax paid in Spain. So here he runs into a roadblock, as he does not speak or read Spanish.
Finally, out of frustration, this gentleman contacted his MEPs to seek assistance. This is coming from a previous firm supporter of, and believer in, the EEC, who is extremely dismayed at his own experience of living and working abroad in Spain.
Surely, in order to promote the free movement of people and goods around the EEC, reclaiming tax paid in one member state when returning to another member state should be a simple process? But like many harmonised processes throughout the EU, this one simply does not function easily across countries.
With a million ex pats from the UK living and working in Spain, it has been suggested that perhaps the Spanish websites could at least have an English translation to ensure it is easy to live and work between these two countries. After all, Britain has been kind enough to translate many areas into multiple languages for their immigrant populations and English is a fairly universal language spoken globally.
The main issue here lies in the fact that while free movement is an interesting concept, in reality it may not work across varied systems with differing national rules. There are no easy answers out there. Nick Griffin, MEP’s Outreach Officer researched the systems to try and shed some light on this complicated issue, below is her response:
"As a British National Party MEP, Mr Griffin believes that national governments should be free to govern, without interference from the European Union. If the Spanish Government decides that, in the interests of Spain’s fiscal health, a particular level of non-reclaimable income tax and social security should be paid by foreign workers, then it is their prerogative to collect this.
It can be argued that it is only just that, having enjoyed the same cover of Spanish social services and all the social benefits that indigenous Spanish workers/taxpayers receive, it is right and proper that sufficient payment should be made to cover this. As the British people know only too well, the presence of migrant workers can create far more problems than benefits for the host country.
Britain is the exception to the European rule in its excessive efforts to accommodate the needs of migrant workers, including translating all documentation into scores of different languages - whatever the cost.
In Mr Griffin’s view, it is perfectly understandable and acceptable that Spain should decline to do likewise. There are benefits and losses associated with working in a foreign country and language difference (and the difficulty that arises as a result of not being able to speak the language of the host country) is one of those negatives that must be weighed against the positives.
Notwithstanding the pro-national-sovereignty stance of Mr Griffin, we are members of the European Union at present, and there are mechanisms available to you, as a European citizen, to raise queries about perceived legislation anomalies and national discrimination within the European Union.
I raised, on your behalf, the questions you highlighted in your email with the Europe Direct Contact Centre, a service which offers information on a range of subjects. I copy the email below, for your reference:
“I would be very grateful if you could address the following two personal (1 & 2) and general (3 & 4) queries….
3) If it is correct that there is no system in place to allow Social Security contributions paid by a UK worker in Spain to be transferred to the UK on their return, in order to facilitate the free movement of workers within the EU, should a system not be introduced to allow this?
4) Again, in order to facilitate the free movement of workers within the EU, should there not be a simple, accessible system in place to enable workers such as myself - with language restrictions - to reclaim income tax paid whilst working in Spain, upon returning home to the UK?”
Below is the reply from Europe Direct:
Subject: Your Europe Advice enquiry
You indicate that you are a British citizen and that you have been working in Spain and have recently returned to the UK. You further indicate that you pay your taxes and your national insurance contributions in the UK.
Whilst working in Spain you paid Spanish social security and Spanish taxes. You would like to claim these back.
I will answer your preliminary point concerning language. In your dealings with the Spanish administration, you must use Spanish (given this is the official language in Spain).
The use of language and language rights have not been legislated at EU level to empower EU citizens when dealing with national administrations.
Your substantive questions relate to the following:
1. Are you liable to pay twice for your social security cover, in your case in Spain and in the UK?
I must correct the underlying notion behind your post, e.g that social security rules have not been coordinated. As a matter of fact they have, by virtue of Regulation 883/04.
Accordingly, a fundamental principle under Regulation 883/04 is that you can only be subject to one social security system at any given point in time.
Given that you were working in Spain, you were subject to Spanish social security (under Article 11 paragraph 3) and therefore had the obligation to make your social security contributions to Spanish social security.
You are now back in the UK where you are working, and thus, are once again subject to UK social security.
The information you have received (from HM Customs and Revenue) according to which the UK Government has no system in place to allow these Social Security contributions to count towards your UK National Insurance payments is misleading; It is true that you are not able to reclaim the amount paid to Spanish Social security from the UK authorities. However, it would be wrong to state that your period of cover under Spanish social security will not now impact on your ability to make claims on UK social security.
Under the principle of aggregation (Regulation 883/04), the social security contributions paid in Spain will have to be considered whenever UK benefits are to be claimed, especially where the grant of the benefits in question is subject to a period of cover.
Thus, there does not appear to be any point in paying twice for social security cover, or paying voluntary contributions in the UK, given that the period during which you were covered in Spain must be taken into account by the UK authorities. Paying for voluntary contributions in the UK would therefore appear to be redundant.
For further advice, contact the Overseas Healthcare Team:
International Pension Centre
Newcastle upon Tyne
Phone 0191 218 1999 (Monday to Friday 8am-5pm)
2. Are you able to reclaim the income tax paid in Spain, upon your return to the UK?
The short answer is that EU law does not directly regulate the matter. Member States retain sovereignty to legislate on matters of taxation, a realm into which European Union law may not in principle trespass.
Accordingly, given the absence of a specific Community competence, the tax arrangements to which you are subject to are entirely dependent on bilateral taxation agreements signed by European States with the aim of avoiding double taxation.
The UK and Spain have entered into a double taxation convention, which means that you cannot be taxed twice in respect of the same income.
Where you decide to seek advice from the UK, you are urged to contact the following, which may be of assistance to you
Your other questions (3 and 4), appear to be hypothetical questions about the desirability of rules which do not exist in the form that you put (at least not yet);
The reason for the lack of fiscal harmonisation is that rules pertaining to tax must be agreed on unanimously by all EU member states, thus effectively blocking any moves towards a greater fiscal unity.
One of the Member States that have resisted any move towards greater fiscal unity has traditionally been the UK. One such recent example is the attempt by the overwhelming majority of EU member states to enact a Treaty towards greater fiscal unity, only to be vetoed by the UK.
You may also find a suitable lawyer by consulting the following website.
Where you decide to seek advice from the UK, you are urged to contact the following, which may be of assistance to you.
Nick's Outreach Officer went further and attached more information on the EU Regulations, below are the links for your information, should you find yourselves in this position:
"For your convenience, I attach some information on EU Regulation (No. 883/2004) - cited in Europe Direct’s reply - which co-ordinates social security systems. (Available here)
I note that the HM Revenues and Customs (HMRC) website page cited by Europe Direct for further details of the UK-Spain Tax Convention is not available. I have searched the HMRC website and found a copy of the UK-Spain Double Taxation Convention. Please find this here for reference."