The Superior Court of Justice of Madrid has ruled in favor of two retirees from whom the Treasury claimed 53,280.02 euros for not having declared their pensions from the World Tourism Organization and the United Kingdom. The court considers that both benefits are exempt from personal income tax, since they come from international organizations and foreign public jobs covered by international agreements signed by Spain.
It all starts when two retirees residing in Spain began to collect their retirement pensions from the World Tourism Organization (UNWTO) and the United Kingdom. The Tax Agency, upon reviewing their 2017 income tax returns, proceeded to collect 53,280.02 euros from them, considering that both benefits should be taxed in personal income tax as income from work, as stated in article 17 of Law 35/2006 on Personal Income Tax or Personal Income Tax (IRPF) (can be consulted in this Official State Gazette).
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Several retirees over 65 years of age speak clearly: “I worked all my life to give them everything… and I regret having given them my properties; that was my mistake.”
Faced with this situation, the retirees decided to appeal to the Regional Economic-Administrative Court of Madrid (TEAR), which agreed with the Treasury when it understood that the pensions were not exempt from taxes.
Faced with this situation, the retirees decided to go to court to demand the annulment of the settlement, since they explained that their pensions were covered by international agreements signed by Spain, both by the UNWTO by the 2015 Headquarters Agreement between Spain and the World Tourism Organization, and that of the United Kingdom by the Convention to avoid double taxation of 2013. According to their interpretation, both treaties recognize the tax exemption of the benefits derived from international organizations or foreign public jobs.
They were exempt from personal income tax due to international agreements.
Upon reaching the courts, the Superior Court of Justice of Madrid ruled in favor of the retirees and annulled the liquidation of the Treasury. In his ruling, he explained that Article 16 of the UNWTO Headquarters Convention “establishes the exemption from all taxes on salaries, emoluments and benefits received from the Organization,” understanding that the term “benefits” It also includes retirement pensions.
Furthermore, article 20 of the same agreement reinforces this interpretation by stating that “the benefits provided by the pension fund will enjoy the same exemptions and immunities as those granted in this Headquarters Agreement.”
Regarding the British pension, the court confirmed that the plaintiff had worked as a civil servant in the United Kingdom Department of Trade and Industry, which entitled him to a public pension. According to Article 18 of the Double Taxation Convention between Spain and the United Kingdom, “pensions paid by a State or one of its entities may only be taxed in that State”, so Spain cannot tax them. In other words, they were also exempt.