We solve the main questions related to taxes in Spain.
Who has to make a Spanish tax declaration?
With very few exceptions, anyone resident in Spain (more than 183 days) for tax purposes and with any income or capital gains anywhere in the world has to file a tax return. Non-resident property owners are also obliged to file tax returns.
The cut-off point is 12.000€ under these circumstances:
- The income has not been taxed at source (pensions from abroad).
- The income comes from more than one source (e.g. two jobs or two pensions or one of each).
This limit goes up to 22.000€ in any one year which applies to income from employment and pensions, including those from overseas as long as they are being monthly taxed in Spain; this limit only applies to people who receive pensions from the Spanish State and are being monthly taxed at source.
In any case, a return becomes obligatory in certain circumstances however low your earnings:
- if you have a claim for double taxation.
- if you are due a refund.
- if you have made pension contributions.
- if you are claiming deductions for the cost of buying your main residence.
- if you have capital gains or income above certain limits.
Remember that it may be in your interest to make a tax return when your earnings are low, for example, if you have worked for only part of the year and may, therefore, be due to a rebate because your personal allowances exceed your income.
What is the minimum income to be liable for the Spanish Income tax?
- Minimum exemption per taxpayer: 5.550€.
- Older than 65 years: 6.700€.
- Older than 75 years: 8.100€.
In addition, employment income and pensions have a minimum exemption of 2.000€.
There is a further reduction of 3.700€ when the income is below 11.250€ and it progressively disappears until the income is above 14.450€ euros.
What income is taxed?
If you are a resident in Spain, you will be taxed for your worldwide income and will be obliged to file income tax returns.
If you have one source of income, not taxed at source, and you earn over 12.000 euros in pensions, you are obliged to file a tax return.
Also, there are advantages of being fiscally resident in Spain especially when applying the Inheritance Taxes.
There are 5 kinds of income:
- Income from work (paid employment, pensions).
- Investment income (interest, dividends).
- Income from Real Estate (rentals, second homes).
- Income from economic activities.
- Capital gains (lottery, gambling winnings, sales of assets such as homes, stocks, etc.).
These revenues, in turn, are divided into two sections with two different tax rates:
1. INCOME FROM SAVINGS. Part of this income, the investment income and capital gains that are evident at the time of transfer of assets.
2. SAVINGS INCOME. From 19%:
|Taxable savings income Up to euros :||Tax||Rest of the taxable savings income||Applicable percentage|
3. GENERAL INCOME. The rest that is not part of savings income goes from 19,5%, as the tax scale shows below:
Are there any tax deductions for living in Spain?
Yes, some of the main deductions are:
- A personal tax-free allowance.
- Married couples allowance for joint declarations.
- Employment allowance.
- Child tax allowance.
- Deductions for private pension plans.
- Taxation regime for income from annuity pensions.
Most important deductions
- Deduction of 15% on the amounts for the purchase of the main residence, acquired before 01/01/2013.
- Deduction of 10.05% on the amount paid in rental housing (Contracts before 1 January 2015).
- In addition, the Comunidad Valenciana has a further deduction of 15% on the amount paid in rental housing with the limit of € 459 when the tenancy contract is registered with the Comunidad Valenciana.
- Double Taxation Deductions.
Non-residents income tax liability
Non-residents are liable for this taxon any income arising in Spain, such as income from property in Spain, or income derived from any business in Spain. Property owners are taxed on their property income or value of the property. The tax base is the property cadastral value (valor catastral), which can be found on any IBI (in Alicante province SUMA BILL). Should you fail to pay this tax, you will be charged and penalized by the Spanish Tax Agency.
When do I become a tax resident?
The short answer is that living longer than 183 days in Spain (including occasional trips out of the country) during any one calendar year makes you a tax resident. Do not get confused obtaining a Spanish residency certificate (RESIDENCIA issued by the Spanish Foreign Office) with a Spanish fiscal certificate (issued by the Spanish Tax Office); the first one shows you are on the register of foreigners kept by the Police and does not equate to tax residency, although the tax authorities may see it as evidence that you are tax resident if it is ever a matter of dispute. The second one is issued once you comply with the Tax Office requirements.
When is it due?
The declaration must be filed from the 1st of April up to the 30th of June during the year following the relevant tax year. So in 2018 everyone will be filing their 2017 tax returns in April/May/June.
The tax could be paid in two-stage payments by the end of June (60%) and the 1st of November (40%) of the same year if you do it by direct debit. Normally the taxpayer’s bank details are included in the declaration and the tax is automatically taken from their account.
What if I don’t pay?
Failure to pay tax can result in penalties of between 50% and 150% of the tax owed, plus interest. Late payment can result in penalties between 5% to 20% of the tax involved, plus interest.
Income that gets taxed in Spain
- Earnings from work (wages, salaries, pensions, etc.)
- Earnings from liquid capital (share dividends, account interests, etc.) and from real estate capital (from the leasing of real estate, etc.)
- Earnings from economic activities (employers, professionals, etc.)
- Net gains and capital gains loss (by transfer of goods, some prizes, etc.)
- Legally established allocations on income from the ownership of some properties, other than the home that is leased, etc.
- Certificate of Unemployment (if unemployed during the fiscal year).
- Government grants (if any).
What information should I provide to include in the deductions?
You will need to provide the following information:
- Last Suma bills for a personal residence or leased properties.
- Proof of mortgage or loans (if any).
- Date of purchase of the main home.
- Pension plan contributions and specification of the type.
- Charitable contributions.
Other information needed to work out your income tax return
- Copy of residence and passport.
- Name and date of birth of your husband, wife or dependents.
- Last year’s income tax return.
- Certificate of Disability ratified by Social Security in Spain (if disabled).
- Copy of Deeds/cadastral value (Escritura or IBI bill).
- Bank account number with your IBAN number.
If you want more information, we recommend that you contact expert Tax Advisors who can assist you.