The definitive guide for annual tax return 2023 for expats (Renta)

Are you ready for another tax year? It’s the time of year to collect all of your documents for your annual tax return. Our tax advisers in Spanish Solutions will help you to prepare everything on time but here there are a few key details you should know in advance:

When do I have to submit my tax return?

• 11^th April starts the tax campaign.
• 25^th June deadline to set a direct debit.
• 30^th June deadline to submit your tax return.

We recommend to our clients to bring everything between April & May so we can process your tax return carefully so that we have enough time to react if there are any documents missing.

Am I Spanish tax resident?

This is the general rule that pretty much everybody knows: You have to live more than 183 days in a calendar year in Spain. You might think that if you travel to the UK for two weeks it doesn’t count but this isn’t the case. Those two weeks would be like you are here in Spain.

Another rule that not everybody knows is that if your husband/wife and children live in Spain, you will be automatically be a Spanish tax resident even though you work outside of Spain.

Is it mandatory to submit my tax return?

It is likely you might have read that if you only have one payer and your earnings are less than 22.000 €, you don’t have to submit your tax return. This is correct but only the Spanish are entitled to this. The reason is the PAYE they pay monthly from their pension or salaries.

Tax Agency is clear. When you have pensions with no PAYE in Spain, you must submit your tax return, unless the amount is less than 1.000 € per year. 

When do I have to pay my tax return?

There are different payments method:

• 100% direct debit paid on 30^th June.
• 60% direct debit paid on 30^th June and 40% on 5^th November.
• Paid from your bank branch from 11^th April to 30^th June.
• If you are not able to pay the tax bill, you always can apply for a deferral with a 4,0625% late interest.

When do I receive the refund?

If the result of your tax return is negative, this means you will receive a refund.  The Tax Agency has until 31^st December to pay you back. There is no specific time because it depends on how complex your tax is and how busy the Tax Agency are. If you don’t receive the tax refund before the end of the year, the Tax Agency will pay you late interest.

If you already have debts with the Tax Agency, the refund will be deducted to cover the debt.

How my pension is taxable in Spain?

In general, all pensions are taxable in Spain. The double taxation treaty says that you will pay taxes only in the country where you are resident. So if you are paying PAYE on your pension, you are entitled to get a refund. You will need a Spanish tax residency certificate to be provided to the HMRC.

There are exceptions. When pensions come from the Civil Service or Military, they are exempt of taxes in Spain and only taxable in the UK.  However, when you have other regular pensions, we need to include the exempt ones to get the tax rate. This means that you will pay the same tax rates as if it was taxable in Spain but only for the tax base subject to taxes. A bit tricky, isn’t it? We can help to explain this.

How my rental income is taxable?

First, we need to know if the rental is short or long term. This can mean a 60% reduction on the tax base when you have a long term contract.

Second, the deductible expenses are the following:

• Mortgage interest
• Repairs
• Council tax and surcharges
• Personal services (an agent to take care of the rental)
• Lawyer if the tenant doesn’t pay.
• Insurances
• Bills and community fees
• Depreciation (3% of the purchase value divided by 50%)

Finally, we will get the taxable income here we will be added to same box we add pensions or salaries.

Do I have to pay taxes for property that is not rented in the UK?

The answer is yes – only for owning properties. The Tax Agency assumes you have earnings as long as the property isn’t rented out.  In Spain, we use the catastral value but we don’t have that for British properties so it will be the 50% of the purchase value x 1,1% = the tax base. We include that figure as income on the general tax base.

I sold my property in the UK. How much do I pay for Capital Gains?

This is the diagram we use to get the capital gain:

(+) The value when you bought the property

(+) Improvements and renovation on the property. Note: Repairs are not included here.

(+) Expenses and taxes when you bought the property (Notary, lawyer, transmission tax, etc.)

(-) Depreciations (only for property rented)

= Purchase value

(+) The price you are selling the property

(-) Expenses and taxes when you sell the property (Notary, lawyer, transmission tax, etc.)

= Price value

Price value – Purchase value = Capital Gain

Am I entitled to get an exemption on capital gains if I reinvest?

There are only two possible options:

• When you sell your main property where you live and buy another one which will be your new main residency.
• If you are older than 65 years old and sell the property to get annuity.
• If you are older than 65 years old and sell your main property. The capital gain will be exempt of taxes.

Which are the tax thresholds?

On the income tax we have two boxes: One for the general income where we include salaries, pensions, rental income, etc. and the other for capital gains (interest, bonds, capital gains from a property, etc).

50% of the tax base is for the state and the other for the community. This can vary depending on where you are. This is for Valencia where our company is based.

General box: The minimum is a 19,50% if you earn less than 12.450 € and the maximum is a 54% if you earn more than 300.000 €.

Capital gains box: The first 6.000 € is 19%, from 6K to 50K its 21%, from 50K to 200k its 23% and more than 200K is 26%.

As you can see the taxation is better for capital gains rather than the general one, which is more progressive.

Disclaimer: All of the information here is only to guide taxpayers. Each individual case can be completely different. Your circumstances can be an exception. We advise to get a tax consultation with our tax adviser if you are not sure. Better safe than sorry.