Taxes in Spain depend on your residency status. Both resident and non-residents have to pay taxes in Spain and make Spanish tax declarations but they are at different times of the year.
We would like to remind you that taxes in Spain can be complicated and you could be subject to fines or penalties if you miss a deadline or don’t do your taxes properly. Advisably, you should seek fiscal advice from an expert to avoid possible complications.
If you live in Spain for more than 183 days per calendar year, then you’re considered resident. 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?
Resident Taxes in Spain
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.
If you would like more information about IBI you can consult our post: IBI in Spain: What is it and how to pay.
The other tax in Spain for residents – 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.
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.
Non-resident Taxes in Spain
In this article we’ve focused on resident taxes in Spain, but if you’d like more information regarding non-resident taxes, you can visit our article All you need to know about non-resident tax in Spain.
Other Taxes in Spain
Inheritance tax in Spain
In Spain, inheritance tax is applied very differently to other countries. To begin with, all beneficiaries must declare it, even the wife or husband of the deceased. What often comes as a surprise to inheritors is that this tax must be paid before a property can be sold. Moreover, it’s not only property that’s taxed, but money held in bank accounts, deposits, vehicles and other assets are all taxable too.
You can find more information regarding inheritance tax in Spain in this article.
Capital gains tax in Spain when selling your property
Capital gains tax is a levy imposed on the sale of a non-inventory asset, that is, a capital asset that’s not likely to be liquidated into cash within a year. The most common capital gains are bonds, profits earned from the sale of stocks, and property. Exactly when and what you will have to pay varies from country to country, depending on your residential status. However, capital gains tax in Spain is paid on the profit you make from all property sales, whether you are a resident or not.
If you’d like more information about capital gains tax in Spain, you can visit this article.
IVA or VAT in Spain
VAT is called IVA in Spain and there are three types of IVA in Spain:
- Super reduced rate IVA – 4%
- Reduced rate IVA – 10%
- General rate IVA – 21%
You can find more information regarding these 3 types of IVA and some recent changes in this article.
Wealth tax in Spain
The wealth tax in Spain has no equivalent in other countries. Although there was a 100% discount in 2009, now, if you have worldwide assets of over €700,000, you are liable for wealth tax of between 0.2%–2.5% on a sliding scale.
If you would like more information about the tax liability calculations and exemptions, you can visit this post.
Free consultation about your taxes in Spain
Taxation in Spain can be complex, especially if you are not familiar with the fiscal system. The rules can be difficult to understand and if you don’t follow them correctly you can be subject to fines and late payment interest.
You can fill out this form to arrange a free consultation with a tax expert from our team about the specific taxes you need to pay. You can rest assured that we will contact you as soon as possible to give you an effective response based on your needs.