Taxation in Spain
A guide to Spanish taxation in 2015 for expats, with up-to-date information on income tax, VAT, property tax and other taxes for residents and non-residents in Spain.
If you are living and working in Spain, you will be liable to pay Spanish taxes on your income and assets and will need to file a Spanish tax return.
If you are resident in Spain you will be subject to Spanish taxation on your worldwide income. If you are a non-resident in Spain you will pay Spanish tax on Spanish income only, including potential income on Spanish property even if you don’t rent out your property. Other taxes include those on property, goods and services (VAT) and investment interest.
Spain is divided into 12 autonomous regions, and taxes are split between state and regional governments, with each autonomous region deciding on its own tax rates and liabilities. The tax year runs from 1 January to 31 December.
The information given here provides a general overview only; you should always get professional advice from a Spanish financial professional concerning your specific circumstances.
Who has to pay taxes in Spain?
Residents of Spain
If you have been living in Spain for six months (183 days) or more of the calendar year (not necessarily consecutively) or you have your main ‘vital’ interests in Spain (for example, your family or business is in Spain), then you are classed as a Spanish resident for tax purposes.
As a Spanish resident, you will need to submit a Spanish tax return and pay Spanish income tax, at progressive scale rates, on your worldwide income if:
• your annual income from employment is over EUR 22,000;
• you are self-employed or run your own business;
• you receive rental income of over EUR 1,000 a year;
• you have capital gains and savings income of more than EUR 1,600 a year
• it is your first year declaring tax residency in Spain.
You will have to declare all overseas assets worth more than EUR 50,000 (using Modelo 720). Your taxable income is the income left after deductions for social security contributions, pension, personal allowance, professional costs, etc.
Non-residents of Spain
If you live in Spain for less than six months (183 days), you are classed as a non-resident and will only be taxed on the income earned in Spain. Your income is taxed at flat rates with no allowances or deductions. If you are a non-resident and own a property in Spain, whether or not you rent it out, you will need to submit a tax return and pay ‘imputed’ income tax on your property as well as local property taxes.
Spain has signed many treaties with other countries to avoid double taxation (ie. paying tax in your home country and in Spain). For an up-to-date list of treaties, see the Agencia Tributaria, the Spanish tax authority.
Registering for taxation in Spain: residents and non-residents
You will need to register for tax in Spain with the Agencia Tributaria, the Spanish tax authority, whether you are a resident or non-resident. You will need your Foreigner’s Identity Card (NIE) number, which you can get through the local Foreigner’s Office (Oficina de Extranjeros) or police station within 30 days of arrival in Spain. You use Modelo 30 to register your obligation to pay tax as a resident or non-resident for the first time, or to change your details.
Income tax in Spain for residents
Personal income tax is called Impuesto de Renta sobre las Personas Fisicas or IRPF. Taxes are split between state and region and while the state has reduced taxes and simplified the income bands, this has not happened right across Spain. Each region sets its own tax bands and rate of income tax, so how much income tax you pay depends on where you live. Madrid has the lowest tax rates in Spain starting at 19.5 percent and rising to 44.5 percent for the highest earners, while in Andalucia the top rate is 40 percent.
Guide to income tax bands 2015 and 2016
• Up to EUR 12,450: 20 percent (2015) | 19 percent (2016)
• EUR 12,450–20,200: 25 percent | 24 percent
• EUR 20,200–35,200: 31 percent | 30 percent
• EUR 35,200–60,000: 39 percent | 37 percent
• More than EUR 60,000: 47 percent | 45 percent
Filing your Spanish tax return
In the first year of your tax residency, everyone has to make a tax declaration. After the first year, you don’t have to file a return if your income from all sources is under EUR 8,000 and you have less than EUR 1,600 of bank interest or investment income. Furthermore, the same applies if your rental income is less than EUR 1,000 or you earn less than EUR 22,000 as an employee as your income tax will have been deducted at source.
To make your income tax declaration, see Modelo 100. You can find information on how to complete and submit your return, information of previous tax returns and payments made. You will need your digital identification certificate to access this service. You will need to submit your tax return for the 2015 calendar year during May and June 2016, with the deadline for submission and for payment of tax being 30 June 2016.
If you are married, either in a heterosexual or same-sex marriage, you can choose to be taxed separately or together. You need to compare the tax you would pay as individuals to the tax you would pay as a couple before you decide what to do. There is a married couples allowance (declaracion conjunta) of EUR 3,400.
Personal allowances in Spain
The basic personal allowance for everyone under the age of 65 is EUR 5,550. If you have children under 25 living with you, earning an income of less than EUR 8,000, you can claim an allowance of EUR 2,400 for the first child, EUR 2,700 for the second and EUR 4,000 for the fourth. If you have a parent or grandparent living with you, with an income of less than EUR 8,000, you can claim an allowance of EUR 1,150 if they are over 65 and EUR 2,550 if they are over 75.
Tax deductions in Spain
You can claim tax deductions in Spain for:
• payments into the Spanish social security system;
• pension contributions;
• the first EUR 1,500 of dividend interest,
• the costs of buying and renovating your main home;
• charitable donations.
Income tax for non-residents
As from 2015, the general flat tax rate for non-residents is 24 percent and 19 percent if you are a citizen of an EU/EEA state.
To apply to pay income tax as a non-resident of Spain, use Modelo 149. You can then make your income tax declaration on Modelo 150. If you a non-resident property owner, you should make your tax declaration on Modelo 210.
Special tax regime for people working on assignment in Spain
There is a special tax regime for foreigners coming to work in Spain on an employment contract with a Spanish company. This is sometimes known as ‘Beckham’s Law’ as it was allegedly set up so that footballer David Beckham did not have to pay tax on his worldwide image rights when he came to play for Real Madrid in 2003.
Under the regime, you are only taxed in Spain on Spanish income at a rate of 24 percent up to EUR 600,000 (2015 and 2016). Over EUR 600,000 the 2015 rate is 47 percent and will drop to 45 percent in 2016. There’s no capital gains tax payable on interest outside of Spain.
If you are a Spanish tax resident (spending more than 183 days a year in Spain) and have not been resident in Spain in the last 10 years, you can apply to be taxed under this regime within six months of arriving in Spain. You can get reduced taxation for up to five years.
VAT in Spain
There are three levels of VAT (value-added tax) or Impuesto sobre el Valor Añadido (IVA):
• IVA general – 21 percent on goods and services.
• IVA reducido – 10 percent on medical/pharmaceuticals.
• IVA superreducido – 4 percent on food essential foods and newspapers.
Taxes on property
If you own a property in Spain and are living in it on 1 January in any given year, you will be liable to pay a local property tax called Impuesto sobre Bienes Inmuebles (IBI). The amount is the rental value multiplied by a tax rate set by the local authorities. This applies to non-residents and residents. There is also basura, a rubbish collection tax. Non-resident property owners may also need to pay ‘imputed income tax’ at flat rates on potential rental income on Spanish property.
If you sell a property in Spain, you have to pay a property transfer tax, Impuesto Transmisiones Patrimoniales (ITP). When a property is sold, the local authority charges a tax on the increase in value of the land, the plus valia.
Capital gains, inheritance and gift tax and wealth tax
Capital gains tax (the tax paid on profits from selling property or other investments) has been cut from 21 percent to 20 percent in 2015 and will fall to 19 percent in 2016. If you bought the property before 1994 you may be liable to pay more tax than before as taper tax on capital gains tax has been abolished.
The rules regarding inheritance and gift tax (also called succession tax) have now changed so that non-residents from within the EU/EEA are treated the same as residents. Previously, non-residents were charged around 80 percent more than residents. Now the rate is around 1–7 percent for all (depending on region). If you have paid the higher rate in the past, you may be entitled to a refund.
If your wealth is over EUR 700,000 you will be liable for wealth tax of 0.2–2.5 percent on net assets: residents pay tax on world-wide assets, while non-residents pay Spanish assets only.
You should seek specialist advice on these taxes as the system is complex.
The general rate of company taxation in Spain has been reduced in 2015 to 28 percent and will fall to 25 percent in 2016. Newly formed companies pay 15 percent for the first two years of business. Company tax returns must be filed within six months and 25 days after the end of the accounting period. Payment is by instalments in April, October and December, each instalment usually being 18 percent of the tax liability. Read more about taxes for self-employed workers and freelancers in Spain.