If you are a foreigner living in Spain for more than 183 days in a calendar year, you are classed as a resident for tax purposes and will have to pay tax on your income. Even if you have yet to obtain a formal residency permit, you must still pay taxes.
Spain has signed double tax treaties with several countries, such as Argentina, the UK, Chile, China, Bolivia and Cyprus, meaning foreigners should only pay once on the same income. If you have decided to settle and work here, check whether there is an agreement between Spain and your home country. Ask the Spanish agency responsible for tax and customs systems (Agencia Tributaria).
Good to know:
The tax year in Spain is different from that in many other countries, running from January 1 to December 31. Given that the Spanish tax system is complicated, and rules and regulations are changing all the time, it is best to engage the services of an accountant to prepare and file your tax returns. Although you can file your own returns, there's more chance of you making mistakes or missing deadlines, resulting in fines.
If you are legally resident in Spain, you pay tax on your worldwide income, while non-residents only pay tax on income generated in the country.
Are you a tax resident in Spain?
Individuals are resident in Spain for tax purposes if they meet any of the following criteria:
- You spend more than 183 days per year in the country
- You have a regular residency permit
- You have core economic interests in Spain
- Your spouse lives in Spain
Income tax in Spain
Income tax in SpainÌý´Ç°ù IRPF (Impuesto Sobre la Renta de las Personas FÃsicas) is a direct tax paid to the government that generally varies between 19% and 47%. It is deducted at a progressive rate according to your salary.
In Spain, income consists of general income and savings income.ÌýÌý
General income includes:
- All earned income, such as salary, self-employment income and pension income
- Business income
- Rental income
- Royalties
Savings income includes:
- Interest income
- Dividends
- Capital gains on the sale or transfer of assets
- Purchased annuity incomeÂ
- Income from life assurance contracts.
As of July 2023, the income tax rates in Spain are as follows:
- 19% for the first 12,450 euros
- 24% for incomes ranging from €12,451 to €20,200
- 30% for incomes ranging from €20,201 to €35,200
- 37% for incomes ranging from €35,201 to €60,000
- 45% for incomes ranging from €60,001 to €300,000
- 47% for incomes over €300,000
The tax rates for savings income are:
- 19% for the first €6,000 of taxable income
- 21% for the following €6,000 to €50,000 of taxable income
- 23% for the following €50,000 to €200,000 of taxable income
- 27% for the following €200,000 to €300,000 of taxable income
- 28% for amounts over €300,000
You must file your tax declaration (declaración de la Renta) between the 1st of May and the 30th of June. This will be for the previous year. You can do this online or with an accountant. As a resident in Spain, you may be eligible for deductions and personal allowances.
Personal tax allowances in Spain
If you pay taxes in Spain, you can benefit from several personal allowances that will reduce your tax burden. As of July 2023, these include:
- For people under the age of 65, the personal tax allowance is €5,550
- For people over 65, it is €6,700
- For people over 75, it is €8,100
- Pension plans and contributions, up to €1,500 per year.
There are also deductions for charitable donations and the costs of buying and renovating your main home.
You can also claim the following additional allowances:
- For the first child - €2,400
- For the second child - €2,700
- For the third child - €4,000
- For the fourth child - €4,500
Tax returns in Spain
The cut-off day for filing your annual tax return is June 30 at the latest. This will cover your income for the previous year. Note that income tax is deducted at source by employers. When filling out tax returns, you will need your N.I.E. number - foreigner's identification number.
Warning:
Additional declarations may apply depending on your type of work, for example, if your clients are located outside of Spain, or you run your own company. You are advised to check with your gestor (tax adviser).
Other taxes in Spain
Apart from tax paid on income, Spain has a wealth of other taxes that expats should be aware of. For example:
Capital gains tax
Capital gains tax is the tax you pay on the profits from selling an asset such as a property. Capital gains tax is due whenever you sell an asset for a value greater than the initial purchase price paid. The rate at which you pay it is set out below:
- 19% for the first €6,000
- 21% for €6,000 to €50,000
- 23% for €50,000 to €200,000
- 26% for €200,000 plus
- 19% for non-residents
Wealth tax
Residents and non-residents in Spain are liable for a tax on their assets, known as the wealth tax. Spanish residents have to pay tax on their worldwide assets, while non-residents only pay it on their Spanish assets.
The tax rate you pay depends on the region of Spain where you reside, and it's only applicable to highly valued assets. In addition to the tax-free allowance of 700,000 euros per person, homeowners in Spain have an extra allowance of 300,000 euros. So, the bottom line is if you're a homeowner in Spain, you must pay wealth tax if you have assets worth over 1 million euros.
Assets that are taxed include real estate properties, cars, jewelry, savings, boats, investments, and art pieces.
VAT (Value Added Tax) in Spain
Value Added Tax (VAT) is a type of consumption tax that applies to the sale of goods and services. VAT is charged to consumers on the prices they pay and collected by businesses, which are responsible for reporting it to the government.
If you are VAT registered, you must declare your VAT through a form known as modelo 303. You can do this online. VAT in Spain is known as IVA, which stands for impuesto al valor agregado. You will also have to submit an annual VAT summary with modelo 390.Â
The general VAT rate in Spain is 21%, and it applies to most goods and services. There are also reduced rates:
- 10% applies to health products, sports and entertainment activities, newly built properties and basic necessities that aren´t included in the reduced rate of 4%.
- 4% applies to newspapers, magazines, books and some food items.
- Zero-rated VAT goods and services include some gold coins and intra-community and international transport.
Inheritance tax in Spain
If you are resident in Spain (Spanish national or expat), you have to pay inheritance tax on bequeathed assets, regardless of whether or not the deceased lived in Spain.
The inheritance tax rate applied depends on several factors, including the relationship between the donor and beneficiary, the value of the beneficiary's assets, the amount being inherited, where the deceased person was resident and the region and municipality where the beneficiary is based.
How to save on taxes in Spain
There is a special tax regime in Spain called the Beckham Law, where you can keep being taxed as a non-resident even though you live in the country. This could mean you pay less tax than a regular tax resident in Spain.
You are eligible to apply for the Beckham Law tax regime if:
- The reason you are moving to Spain is because of work, and you have an employment contract (excluding professional sportspeople)
- Acquiring a board of director position (with some restrictions on ownership).
However, you are not eligible for this tax regime if you've been a tax resident in the country for a period of ten years before the tax year you move to Spain.
Under this regime, only your Spanish income and gains are taxable in Spain, and only your Spanish assets would be liable for wealth tax.
To benefit from the Beckham Law, you must inform the tax agency by completing the 149 form. You must do this within six months of registering with the social security service authorities. If you fulfill all the requirements, you will pay income tax at a flat rate of 24% instead of the progressive tax rates for a period of six years.
Note that the Beckham Law tax regime is not available to pensioners or self-employed people.
Overseas assets of expats in Spain
In Spain, it is the law for foreign residents to notify the tax authorities of worldwide assets over €50,000 they own or control. This can include property, shares, assets held in bank accounts and life insurance policies. The purpose of the law, which came into effect in 2013, is to cut down on tax avoidance. Failure to declare foreign assets can result in several financial penalties and even criminal charges.
Independent workers in Spain
Independent workers in Spain, including freelancers (autónomos), are responsible for paying their income tax and making social contributions. It is, therefore, advisable to hire an accountant or tax adviser for assistance. Independent workers pay the same tax rates as everyone else.
How to register to pay tax if you're an independent worker
As an independent worker in Spain, you will have to register with the Agencia Tributaria, the country's tax authority (also called the Hacienda). You will also have to register with the Spanish social security system. To register for tax:
Visit the tax agency's website to book an appointment at the closest tax office to where you live.
At the tax agency, you must select a business activity category that corresponds to the work you will be doing as a freelancer.
Complete form 036 or 037 (Tax register of business persons, professionals and withholders - Tax register declaration of registration, modification and removal and simplified tax register declaration), whichever is the most appropriate for your case. You can also fill in the forms online.
You will need to bring several documents to the tax agency – your NIE, passport, photocopy of your passport and details of your Spanish bank account. You may also need to bring certificates validating your studies if you work in some business areas such as medicine and the law.
Good to know:
You can hire an accountant or gestor to help you register to pay taxes and to accompany you to the tax agency.
How to register for social security in Spain
After registering with the tax authorities, you have 30 days to register with the social security system. You must make the required monthly payments to access public health facilities and receive a Spanish state pension. To register, fill in a form acknowledging your autónomo status and bring your passport and a photocopy, NIE, the tax certificate you received from the tax office and the 036 or 037 form.
Whether you are a full-time or part-time freelance worker in Spain, you will have to pay tax on your income.
Make sure you set enough money aside to pay your tax bill when the time comes. Your previous year's tax bill plus knowledge of the income tax rates will give you a good idea of how much you should set aside.
Know which deductions you can take to offset your tax bill, and don't be shy about claiming anything that's owed to you. Your gestor will be able to advise you.
Keep your invoices and receipts organized and accessible. This is often easier said than done, but it's worth the effort to ensure you get all the deductions and that you pay the correct amount of tax. As paper can easily get lost, it might be a good idea to invest in a scanner and immediately scan paperwork into your computer.
Good to know:
Non-residents who rent out a property or have any other asset that generates an income pay tax. Non-residents who own a home in Spain but who do not rent it out and don't have another income source will pay income tax based on the value of their property.
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