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Spanish Tax System Guide

Spanish Tax System Guide

If you are living and working in Spain or are you thinking of coming to live in Spain, you are responsible for paying taxes on their income and assets and submit a statement of Spanish taxes. These Spanish taxes will depend substantially on your state of residence.

Understanding how taxes work in Spain

When it comes to taxation in Spain, a variety of factors that come into play in terms of what you pay for. Unfortunately, many foreigners do not fully understand these important complexities. This lack of knowledge can lead to problems at tax time.

What do you need to consider when it comes to laws and tax rates in Spain? First, the final amount should depend on:

  • Your current residence
  • Revenues in the last year
  • Tax rates and state government liabilities
  • Government tax rates regional and liabilities

Depending on personal information and where you live, you will have to pay a different amount when it comes to taxes on wealth, property, income, capital gains, and inheritance. Also, you have to pay the social security system in Spain if used.

Spanish tax residents

If you have been living in Spain for 183 days in a year or more days (not necessarily consecutive) or have their main vital interests in Spain (for example, your family or business is in Spain), then you are qualified as a Spanish resident for tax purposes.

As a Spanish resident, you must file a tax return and pay Spanish income tax on income if:

  • You run your own business
  • You are self-employed
  • Your annual employment income exceeds €22,000
  • You are declaring tax residency for the first time in Spain
  • Your capital gain and savings income exceeds €1,600 annually

Non-residents tax in Spain

If you live in Spain for less than six months (183 days) in a calendar year, you are classified as a non-resident and will be taxed on income earned in Spain. Your income is taxed at flat rates without deductions or allowances. If you are a non-resident owner of a property in Spain, if you rent or not, you will have a property tax return and you will have to pay for non-residents (or tax on the imputed income your property) and local taxes of Spanish property.

Double taxation agreements

Double Taxation Agreements allow the tax paid can be offset in either country against the tax payable in the other, thus avoiding double taxation. Spain has signed double taxation treaties with over 80 countries around the world. Some forms of income are tax-exempt or discounted rates.

Income tax in Spain

The majority of residents in Spain are required to complete a tax return each year, before the end of June. The payment of fees in Spain is retrospective, so when you made your statement, it will cover the bill for the previous year.

However, not everyone has to make a tax declaration. If you only have a pension worth less than € 14,000, then you do not need to make a statement. That said, if you have other income such as interest on savings or rental income, you will need to file a return. However, we always advise making a statement, even if you do not, because you officially recorded as tax resident in Spain.

Spanish wealth tax

Wealth tax is an annual tax payable on the total net value of your assets on December 31. If you are a resident of Spain, you are responsible for your assets worldwide. Non-residents pay only a wealth tax on assets located in Spain. For wealthier residents, it can have a significant impact.

Inheritance and gift tax in Spain

The rules on inheritance and gift in Spain (also called inheritance tax) changed so that non-residents within the EU / EEA are treated as residents. Previously, non-residents were charged 80% more than the residents. Now the rate is about 1-7% for all, depending on the region. If you paid the highest rate in the past (from 1 January 2011 to 2015), you may be entitled to a refund.

In 2017, some regions like Andalusia updated their estate and gift policies. This has led to many families do not have to pay inheritance tax. 

The Spanish tax system is complex. We can advise you on the taxes in Spain.

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