Paying tax in Spain. 

single.php

Posted and filed under Businesses in Spain, Taxes in Spain.

Paying tax in Spain. 

 

The number of times Spanish Solutions are asked “how much tax do I pay in Spain” increases every week. Here, we’ll try to explain some of the basic details regarding the tax situation for expats in Spain. 

 

We’d like to thank our inhouse accountant, Mari Carmen Gomez Poveda of MC Consultants in Torrevieja who gave us the up to date information this week. It is valid as of July 2019. Please read the disclaimer at the bottom of this piece. 

People like you and me performing activities in Spain are subject to tax. It is based on worldwide income. If you have a rental property abroad, or a business, you must declare it here in Spain. 

Non-residents are taxed on Spanish income. Ana in Spanish Solutions is the contact person for those looking to pay their NRT effortlessly anywhere in Spain. 

Non residents are also taxed on capital gains earned only in Spain. As in most European countries, there are a bunch of tax exemptions which often apply to expats.

Tax rates in Spain 2018. 

Taxable Income Bands in Euro  Spanish Income Tax Rate
0 – 12,450 19%
12,451 – 20,200 24%
20,201 – 35,200 30%
35,201 – 60,000 37%
60,001 +45%

 

Income Tax in Spain. 

What is it and who pays? 

The most obvious type of income tax is employment income

Taxable income in Spain includes all payment received for personal services. That means salaries and wages, pensions, expenses for certain business related activity, payment in kind, (if you get a company car for example) and other allowances paid in cash.

Ex patriate Spanish residents who have with overseas duties have an income exemption of up to €60,100. Maria Carmen will tell you what conditions are needed to be met. 

Clients enjoy a limited 30% reduction to tax where their income is irregular employment income. (Consultants fall into this category) This  income exemption of up to €60,100 applies if it is earned over two years or more and as with most of this advice … certain terms and conditions must be achieved. 

Taxable self employment and business income: This includes all income from professional, artistic, industrial and commercial activity in Spain.  

Residents in Spain pay taxes on self-employment and business profits at the applicable Spanish rates.

Non residents currently are subject to a flat 24% rate. Residents pay 19%. This is applicable to residents of European Union [EU] member states. Don’t ask us about Brexit just now! 

The tax is on gross self-employment and business income. Mari Carmen will explain how to legally reduce the bills by deducting certain ligimite expenses related to the business. We deduct salaries, advertising, rent and rates, that sort of thing. How important it is to keep a very good record of all of these expenses! This is assuming you are earning a profit however and relief for business losses may be available, subject to terms, limits and conditions.

Directors’ fees are considered ordinary taxable income in Spain. 

Non-resident clients are subject to tax on directors fees at a flat rate of 24% and its 19% for residents of other European states.

Spanish Resident individuals are subject to tax on rental income too.  For tax residents here in sunny Spain, income from property rental may be reduced by 60% . should the property be destined for living as opposed to office use.

Non-residents are obliged to declare and pay tax on such income at the same flat rate of 24%. Again, the figure is currently 19% for EU residents and EEA member state residents.

For Spanish real estate used to live in and which is not rented, the Spanish law presumes an income of 2%, based on the cadastral value. We discuss this castrol value of property in many other posts. Needless to say, it is a matter of much discussion, especially after the value of Spanish property fell so dramatically after the world wide credit crunch. 

Movable property in Spain includes but is not limited to, interest, royalties, dividends, and industrial property. 

While determining net income from personal property in Spain, some limited administration expenses are legitimately deductible.

 

Both Spanish tax residents and their non-resident counterparts are subjected to tax on profit from dividends, interest and CGT.  (regardless of how long you own the property for) at the following rates:

  • 0- 5,999.99: 19%
  • 6,000 euro to €49,999.99. 21%
  • 50,000 plus: 23%

 

Not taxable in Spain (assuming there is a double tax agreement) is: 

 

  • Income from public debt.
  • Non-resident bank accounts.
  • Income derived from the sale of shares.
  • Interest income and CGT from bonds and securities issued by resident entities or individuals (assuming the client is a resident of an EU country).
  • Income from a reimbursement in investment fund from official Spanish markets

 

Sometimes members of a family decide to file separate tax returns. Here, the actual owner of the property is the one to whom the income is attributed. 

For husbands and wives, 50% of the income is attributed to each spouse, under the so called community property regime.

Spanish income derived from “employer provided stock options”  up to a yearly limit of 12,000 euro will be exempt from tax, assuming the terms and conditions are met. 

 

Double tax agreements. 

We mention this above and its important. 

A person living in Spain may use their foreign tax credits in order to avoid double taxation. Also referred to as the imputation method.

The favourable double tax treaty is signed by Spain with 90 other countries, including: 

Andorra; Argentina; Australia; Austria; Cyprus; Belgium; Bosnia; Brazil; Bulgaria; Canada; Chile; China; Columbia; Costa Rica; Croatia; Cuba; Cyprus; The Czech Republic; Germany; Denmark, Estonia; Finland; Romania; France; Greece; Hungary; Iceland; India; Ireland; Israel; Italy; Japan; Latvia; Lithuania; Luxembourg. 

Slightly different agreements exist with Spain and: 

New Zealand; Mexico; Netherlands; Norway; Poland; Portugal; Russia; Saudi Arabia; Serbia; Slovakia; Slovenia; South Africa; Sweden; Switzerland; United Arab Emirates; The United Kingdom; USA; Uruguay; and others. 

 

Our clients are considered residents in Spain for tax purposes if they spend more than 183 days in a calendar year here. Also they are resident if their primary interests are here- This can be down to the kids being in school in Spain, your business is in Spain and your home is here. The accountant explained it; If you live here, you live here. 

Residence in Spain is determined on a full-year basis.

This is interesting: 

Spanish nationals who give up Spanish tax residency are taxed the same as a resident for the next four years if the person is moving to a so called tax haven.

An employee relocated to Spain who meets the terms and conditions for being considered Spanish resident can decide to pay tax under the NRT (non-resident taxpayer) rules.

Of course this is subject to certain conditions, especially ; you cannot have been a Spanish tax resident in the last ten years; the move to Spain must be with a work contract;  (the exception being that for a professional athlete, but ask Messi or Ronaldo- this is hardly clear either!!). You can’t be employed by a Spanish company, they must be based abroad. 

In this special case, the tax rate of 24% applies up to 600,000 euro.Employment income over and above this figure will be taxed at the rate of 45%.

As we have heard in the news, it will depend on the autonomous community in which the taxpayer resides. Rafa Nadal was another who ran into trouble on this one.

In simple terms the person is subjected to tax on this employment income at a rate of 24%, effective for the first year of residence in that area and the following five consecutive years. (This is so delicate, please check it with your accountant in person!) 

 

CGT. 

Capital gains taxes in Spain are calculated on the difference between the selling price of an asset and its buying price. 

CGT is taxed at a rate of 19% for the first 5,999.99 euro; 21% on the amount from 6,000 to 49,999.99; 23% thereafter. 

For our Spanish tax residents, (exclusively) capital losses which are incurred on sales of Spanish assets may be offset against CGT. You can (subject to terms and conditions) carry forward loses in Spain for four years.

If as spoken about above, a husband and wife fall under the community property regime their CGT is divided 50/50. 

 

Gift tax in Spain.

We ́ve had thousands of enquiries about this in Spain and right now (July 2019) it’s the hottest topic in terms of how to save inheritance tax in Spain. 

This law is on the verge of changing.

Estate and gift tax rates in Spain in 2019 vary dramatically depending on the autonomous region you live in.

We have had clients reduce their heirs potential inheritance tax bill to pay as low as almost ZERO.

If you have a property in the Valencia/Murcia areas, you should speak directly to Amanda in Spanish Solutions today! 

 

Social security in Spain. 

Everyone must join the Spanish social insurance system. It cannot be avoided is you live and/or work here. It has changed twice in the past two years but currently stands at: 

The rate of this tax for employer is a hefty 30.15% of salary.

The rate is 6.35% of salary for employees. 

 

How to pay your tax in Spain. 

The easy answer is to hire a professional. 

Non-resident clients in Spain file tax returns within one month of the date when taxable income from Spanish sources is due. In certain cases, subject to conditions… etc etc, non-residents in Spain may file returns quarterly.

On a family tax return, Family members may file one tax return that includes the total family income. These family members are jointly and individually liable for the payment of tax in Spain. 

If one member of the husband and wife team has a tax liability, while the other has a refund, they can offset each other’s taxable amounts.

For residents ́ tax returns, tax is due with the return. Interest will accrue on any unpaid amount, even if it is a genuine mistake- it is so important to get it right! 

Normally, 60% of the tax bill may be paid in June; The rest paid by 5 November, without having to pay interest.

If any excess tax is withheld, the excess is refunded to the taxpayer. It happens and is a nice bonus when it does! 

Non-residents in Spain who have a taxable income, have to file a tax return unless the entire amount due is subject to withholding tax.

 

Declaration of assets located outside of the country. 

A relatively new Royal Decree (1558/2012 to be precise form 2012), established new requirements for tax residents of Spain. Now, we are obliged to declare our assets, properties and income located outside of Spain.

Resident taxpayers with similar assets located abroad, (again… while meeting certain terms and conditions) have got to file this information by 31 March. Very severe penalties for not doing so may be imposed.

Conclusion! 

We could have called this article, “Certain conditions apply”. 

Tax is difficult and especially so in Spain. 

We advise our client never to take short cuts. Those days are long gone where the Spanish government will not realise you have an income in the UK or wherever you are from originally. Rightly so, they are checking this information. 

We think if you play by the rules, take advantage of the laws and certain deductions and breaks (Donation tax right now in Spain, is a massive example) it is fair and it works! 

Lastly, please remember the figures here are accurate to the absolute best of our knowledge but subject to change. Please use the article for research only rather than as a substitute for professional financial advice.

 

If you have questions especially about:

  • Non resident tax in Spain.
  • Income tax
  • Donations in Spain, 
  • Rental taxation in Spain 

We really want to help you! 

Disclaimer

 

All this content is provided by Spanish Solutions. The firm accepts no responsibility for its accuracy.

Tax legislation and administrative practices in Spain may change. This reference document is a summary of potential issues to consider when paying tax in Spain. This summary should not be used as a substitute for professional tax advice. It is every individual’s responsibility to disclose your income to the Spanish tax authorities.

This information detailed here does not constitute advice. No liability is accepted by Spanish solutions and the views expressed are subject to change.

 

40 Comments

  • Margaret Armstrong

    If myself & my husband become permanent residents of Spain this year , as non-workers using my husbands private pension & rental income from a UK property we jointly own to live off until we can claim UK state pensions in 6 years , what amount of taxes might we have to pay in Spain please ?

    • Nicola Ryan

      Good Afternoon Margaret,

      We would recommend you have a consultation with a Fiscal Advisor (accountant), here in Spain, who will give you tax advice based on your current situation, we hope this helps.

      Kind regards
      Nicola

  • Mrs Kathryn Margaret Stych

    Have been residents in Spain for many years and paid taxes there. We returned to live in England in Dec 2019. Can our 2019 taxes in Spain be deducted from our English Bank Account ?

    • Nicola Ryan

      Good Morning Mrs Stych,

      Thank you for your enquiry.

      The taxes would have to come from a Spanish bank. If you need any assistance in paying the taxes, please so not hesitate to contact us we would be delighted to help.

      Kind regards
      Nicola

  • Mrs Kathryn Margaret Stych

    Thank you for this information. How can I pay Spanish tax if I do not have a Spanish Bank Account ?

    • Ian C.

      Hello Kathryn,

      I will send you an email with the options you have.

      kind regards

      Spanish Solutions

  • CHARLES Pay

    We have been tax payers in Spain for the last 5 years and returned to UK in
    November 2019 we need to pay our taxes for this year but no longer have a Spanish bank account what options do we have to make payment

    • Ian C.

      Hello Charles,

      We’ll be happy to pay this for you.
      Please get in touch via email and we’ll give you the details on what we need from you.
      Are you moving back to Spain or staying in the UK? We hope you come back!!

      Kind wishes,

      Ian

  • Sam

    Hi

    We have been running a bar in Spain for over 10 years, it’s in my wife’s name as an autónoma. We are now looking to move to Andorra and want to become residents there, however, we would like to keep the bar and employ someone to run it for us. Am I right in thinking that we’d be taxed at 24% of the profits?

    • Ian C.

      Hello Sam,

      Thanks for the enquiry.
      Do you mean will you qualify for reduced tax by moving to Andorra? The government in Spain is really clamping down on people claiming to live there but not actually doing so. Some very high profile sports stars had issues with this and millions of euro in fines too!
      Please email us more details- when do you intend to move, what is the estimated profit form the bar, where is the bar located, etc. Does the Covid 19 change your plans?
      Regards, ian

  • Mike Broome

    Hi we want to apply for residency in Spain as we intend to be here 8 months of the year. We will be keeping our uk home as daughter still lives there and will be getting pension paid into uk bank and tax on it in uk. My question is what tax would we need to pay in Spain. We have NIE, own Spanish home and pay non resident tax but are looking to buy bigger home in Spain. Tax seems to be hard to understand in Spain.

    • Amanda Thomas

      Dear Mike, I am sorry for the delay in responding. If you are going to spend more than 6 months in Spain you will need to become Resident and also tax resident (two stages) so then you would need to refer to an accountant for a simulated tax return to estimate the tax payable in Spain. But it is not a choice, if you spend more than 6 months you will be Resident and will need to pay tax on worldwide income according to Spanish rules. Kind regards

  • Gordon Milne

    GordonM, My wife and I are resident in Spain with pension income only and have completed our tax returns here for several years. We purchased a UK property last year and have rented for holiday rental only. Our UK accountant confirmed to us that the UK tax authorities have first bite on the full assessment of our income and expenditure before calculating profit and only then should this info be passed to Spain for any worldwide wealth tax but we do not file our UK return for 2019 until November, so Spain will not get info until after the end of this Tax Year. Can we legally declare any residual profit next year in Spain without penalty ?

    • Ian C.

      Hello Gordon,

      It is not the penalty we are worried about. You need to pay once but only once due to the double taxation agreement between Spain and the UK.
      We’ll reach out privately to help clarify,

      Kind wishes,

      Ian

  • Martin Dellar

    My mother returned from Spain Nov19 and needs to submit her Spanish tax return for 2019 but does not have a Spanish bank account to put on the form , how can we get around this please

    • Ian C.

      Hello Martin,
      Thanks for contacting Spanish solutions.
      You are lucky in that you have found a tax expert- Ana Barbadora will be in touch and she’ll help you get your non-resident tax paid.
      Kind wishes,

      Ian

  • Paul Anthony Lines

    We are a married couple and have retired living off my pension as my wife is only 60 years old . I am 67. We are residents but have not spent a full year here yet. How do start with tax here in Gran Canaria?

    • Ian C.

      Hello Paul,
      Thanks for getting in touch with Spanish Solutions.
      Regarding your tax payments, Ana our tax expert can do it. She is based in La Zenia but luckily we can do tax returns for our clients all over Spain.
      Once you live for more than 6 months, you need to make your tax return here in Spain. It is paid in arrears so we can take care of your tax affairs like that.
      We’ll be in touch,

      Regards,

      Ian

  • Karen Wiles

    In England you can earn £12500 before you start paying tax as a self employed or employed person.
    Is there a tax free allowance in Spain?
    We want to live in Spain and work for ourselves and understand that to be self employed you pay into the social system 63 euro a month for first two years then it increases.
    Tax of 19% is payable on first 5999.99 euros profit in Spain.
    In U.K. if net profit is £16,000 you would pay tax on £3500 (16000 – 12500)of that profit at 20%
    Would I be right in thinking if my profits in Spain where 16000 euro that I would be taxed on all that? Or would I have to pay myself a salary and take that off the profit?

    • Ian C.

      Hi Karen
      We can put you in touch with our tax advisors to answer this. Should you require help with property purchase please let us know and we can assist with estate agency and conveyancing.
      Kind Regards
      Jane

  • Trish T

    IfDoes the CGT tax band apply per person or to a married couple ie if as a couple you earn more than €49,999.99 but less than €99,999,98 are you taxed at 21% or23%

    • Jane

      Hi Trish

      It applies per couple not per person. They have to pay only one tax form with the two names on it. The rates are Profit until 6.000 euros – 19%
      Profit from 6.000 to 50.000 euros – 21% Profit over 50.000 euros – 23%

      Kind Regards

      Jane

  • Emilia Sanchez

    I’m Spanish citizen but reside in US… how can I make tax of an inheritance low as possible , and what forms of payment Do they take if I don’t have bank account in Spain ….?…. thank you …

    • Amanda Thomas

      Dear Emilia,
      I am not sure from your message if something has happened and there is inheritance tax to pay, or if this is future planning. If you can email us I can try to give some personalised advice. Payment can be made by a bank transfer from anywhere to your solicitor or credit card and then they pay the tax. Kind regards Amanda

  • B. Macdonald

    Hi there,
    If I am spending more than 183 days in Spain this year, how do I apply to become a tax resident? And if I continue to receive my UK income, are there any implications in the amount of tax payable vs if I was paying my normal tax in the UK?

    • Jane

      Hi Bella

      You will require to speak to a fiscal advisor to talk through your personal situation. If we can be of help finding one please give us a call.

      Kind Regards

      Jane

  • Mark Lang

    Not sure if this is the right forum for this qustion but my wife and I currently live in the UK but once Covid lockdown eases we would like to buy an up and running holiday let business in Spain and make the permanent move. Our problem is that pre existing medical conditions rule us out of private medical insurance to qualify for residency. The hope is that buying an established business we can start paying in to the Spanish Tax and Social Security systems to qualify to use the Spanish Health Service straight away. Is this feasible and what measures would be need to take now Brexit has happened?

    Regards

    Mark

    • Jane

      Hi Mark

      We have e mailed you direct with some ideas.

      Kind Regards

      Jane

  • Mark Lang

    Thank you Jane,

    Received, much appreciated

    Kind Regards

    Mark

    • Jane

      No problem, always here if we can assist further.

      Jane

  • Una Helen Fairley

    HI.
    I am in the process of moving to Spain. I will be receiving my salary from our UK Business. I understand that I will be paying Tax and social security in Spain. My question is? Does the company pay employers NI in the UK or Employers Social security in Spain.

    • Jane

      Hi Una

      This can be complicated process and dependant on various factors. If you wish us to put you in touch with our partners who specialise in tax please contact us.

      Kind Regards

      Jane

  • Dayne

    Hello,
    Where is the laws written about the usage of foreign tax credits? The Agencia Tributaria has denied the use of my foreign tax credits from Ireland, and as a result are charging me extra tax here in Spain, along with a fine for tax avoidance.

    • Nicola Ryan

      Good Morning Dayne,

      Thank you for your enquiry.

      We feel it would be best to have a consultation with a Fiscal Advisor, either by phone or skype/zoom call, where you will provide tax advice based on your current situation. Let us know if this is something you would be interested in.

      Kind regards
      Nicola

  • Nancy

    Hi ,we have a house in Spain that we are thinking if renting to our friends. We currently have been living in Andorra for over 6 years and pay all Our taxes there . Would we pay tax in Spain on the rental or in Andorra .
    Thank you

    • Nicola Ryan

      Good Morning Nancy,

      Thank you for your enquiry.

      If you rent your Spanish property out, you would be liable to pay taxes on the rental income in Spain, please see a link below discussing this in more detail. If you need any assistance with this, please do not hesitate to contact you.

      https://www.spanishsolutions.net/?s=rental+tax+

      We hope this helps.
      Kind regards
      Nicola

  • Jan Østergaard

    Hi
    I have an apartment in Spain, that I rent out some of the time. I have filed my Spanish tax-returns, but I dont know how to actually pay the taxes. I have a Spanish bankaccount, but I cant find out how to, and Agencia Tributaria sends me letters, that I have to pay, but not how. I hope you can give me guidlines so I can get this out of the way. Thanks.
    Regards
    Jan

    • Tracie Miles

      Good afternoon Jan
      Your enquiry went into our enquiries email. My colleague will be in touch with you direct to advise you regarding payment of taxes. Her name is Ana.
      Thank you
      Regards
      Tracie

  • Tim Verdon

    Greetings,

    I am a Spanish tax resident (UK expat) who is a Saudi gov employee with regular travel to Saudi. As a Saudi gov employee should I pay tax in Spain. Thanks.

    • Nicola Ryan

      Good Afternoon Tim,

      Thank you for your enquiry.

      Rafa, our tax advisor would be delighted to set up a consultation with you. We will contact you directly to discuss this matter further.

      Kind regards
      Nicola

Leave a Reply

Your email address will not be published. Required fields are marked *

*

*

*

Looking for a solution?

Feel free to get in touch with any enquiries and one of our friendly members of staff will get back to you as soon as possible.

Form loading.