If you live in Spain for more than 183 days per calendar year, then you’re considered resident – which means you’ll have to pay taxes in Spain.
Residency isn’t a matter of choice, as some threads on expat forums will have you think. Plus, the 183 days need not be sequential – so it’s not sufficient to claim that you left the country for a while and then returned. So, if you are a resident in Spain, what taxes should you be paying? First of all, everyone with a property in Spain must pay IBI – otherwise known as council tax. This tax goes towards local services and infrastructure. However, the good news is that the amount you’ll need to pay in Spain is often less than comparable taxes in your home country.
The other tax – as you might expect – is income tax. Often, income tax is what makes most people feel most anxious and confused – as when it comes to income tax Spain has one of the more complex systems. In this article, we set your mind at ease and explain taxes in Spain, including Spanish income tax rates and bands.
Income tax in Spain
The majority of residents in Spain are required to complete a resident tax declaration annually, before the end of June. Payment of taxes in Spain is retrospective, so when you make your declaration, it will cover the previous year’s bill. However, not everyone has to make a resident tax declaration:
- If you only have one pension worth less than €14,000, then you don’t need to make a declaration.
- That said, if you have any other income like interest from savings or rental income, you’ll need to file a declaration.
However, we still advise making a declaration even if you don’t have to, as it formally records you as a fiscal resident in Spain.
Your documentation will need to cover all your income worldwide, including any rental income, interest from savings, income from the sale of a house or any other assets. If you are working in Spain, then you must also declare your income from your job. However, if you are on a contract then you will have a ‘retention’ deducted monthly from your salary. The self-employed (or ‘autonomos’ as they’re referred to in Spain) pay their tax quarterly, but they must still make an annual tax declaration. At this point, it’s calculated whether you’ve paid too much or too little across the course of the year.
For many people who relocate to Spain in later life, taxation on pensions tend to be of most interest. If you have a civil service pension, the tax will have been deducted at the source and you won’t be taxed twice. You should be aware, however, that the income from this pension is taken into consideration when working out your tax band.
Taxes in Spain: Bands and allowances
In Spain the tax rate operates similarly to Britain, as you don’t pay tax on all your income. Instead, you’re allocated an ‘allowance’ on which you don’t pay tax. In Spain, everyone has a basic personal allowance of €5,550, which is increased in certain circumstances. For example, if you are over the age of 65 you have an additional allowance of €1,150; when you’re over 75, this increases to €1,400.
|Tax year 2018|
|Over the age of 65||+ €1,150|
|Over the age of 75||+ €1,400|
|Incapacity allowance||+ €3,000|
|Incapacity allowance > 65%||+ €9,000|
|Married persons allowance joint tax||€3,400|
|Deduction for other work-related expenses||€2,000|
Spanish income tax rates
|Tax year 2018|
|Up to €12,450||19%|
|From €12,450 to €20,200||24%|
|From €20,200 to €35,200||30%|
|From €35,200 to €60,000||37%|
Calculating your taxes in Spain can be quite complicated – so it’s advisable to hire an expert to work out exactly how much you have to pay.
Making your resident tax declaration
In Spain, you can hire a fiscal representative to help you handle your resident tax declaration. These representatives submit tax declarations annually on behalf of their clients. Before meeting your advisor, you’ll be advised as to the documents you need to bring to your appointment. Make sure you allocate around an hour for this, so your advisor can cover everything you need to know. At Ábaco, we can tell you immediately how much your taxes in Spain will be. In some cases, there is even a reimbursement which will be paid directly into your bank account. Whatever the end result of the calculation, with Ácabo, you can feel confident that you are compliant with the tax law in Spain.