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Taxes in Spain: Tax Rates and Special Expat Taxes

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Taxes in Spain: Tax Rates and Special Expat Taxes

Income taxes in Spain should be paid between May 1 and June 30 for the previous year’s income.”

Posted by Dreamer

Tagged: nie, finance, dni, property, spain taxes, tax, tributaria, advisor, agencia, irs

Information on income taxes and income tax rates in Spain, paying tax in Spain, special taxes, VAT/IVA, double taxation, taxes on property and real estate, and US forms and publications for expatriates living in Spain.

Expat Taxes in Spain

When you move to Spain, you may or may not have to file or pay taxes in your home country. Here’s a rough guide by country:
 
UK: Apply for certificate E101 to declare your tax paying status in Spain, negating your tax obligations in the UK. For more information on double taxation issues between the UK and Spain, see http://www.hmrc.gov.uk/cnr/dtdigest.pdf.

USA: See IRS Forms and Publications. In particular, Publication 514: Foreign Tax Credit; Form 2555 and 2555-EZ: Foreign Earned Exclusion; Form 1116: Foreign Tax Credit. You’re exempt for up to $80,000 while you live overseas. Detailed information on double taxation between the USA and Spain can be read here: spain.pdf.

Canada: Spain and Canada have a double taxation treaty; read it carefully to find out your tax obligations while overseas. If you plan to be in Spain for longer than two years, look into declaring non-resident status in Canada in order to avoid paying tax there during your absence. See a copy of that treaty here in PDF format.

Non-Europeans: The 16% VAT/IVA tax can be rebated for many items over €90. Keep your receipts and upon leaving the European Union and Spain, you’re able to receive that tax money back from the government. This mostly applies to tourists, but other medium-term expats as well, and can be completed at the airport and some tourist information centres.

Spanish Income Taxes

Spain’s fiscal/tax year is the natural calendar year. Income taxes in Spain should be paid between May 1 and June 30 for the previous year’s income. With a DNI or NIE, you can apply for a Número de Identidad Fiscal (NIF) in order to pay your taxes in Spain.

Tax residents will need to pay income taxes in Spain and are generally defined as those who reside in Spain over 183 days in each calendar year and/or have their main financial interests in Spain. However, in many cases you only need to file a tax return in Spain when you make more than €22,000 per year, receive a rental income of more than €1,000 and/or receive a capital gains and savings income of more than €1,600.

Personal allowances for Spanish income tax purposes are €5,151, which increases to €6,069 for persons over age 65 and €6,273 for persons over age 75.

Child allowances for Spanish income tax purposes are: €1,836 for the first child, €2,040 for the second child, €3,672 for the third child and €4,182 for additional children. In addition, Spain has a maternity allowance of €2,244 for each child under three years old.

Earned income above these allowances is taxed at the following rates:

                                       
Income (above allowances)Spain’s national tax rateProvincial tax rateTotal tax rate
€0 - €17,70715.66%8.34% 24%
€17,707 - €33,00718.27%9.73% 28%
€33,007 - €53,40724.14%12.86%37%
€53,407 and above27.13%15.87%43%

The provincial tax rate is only a guide. Some autonomous communities have different rates.

Income in Spain is roughly defined as:

  • Wages and salaries, either as a salaried employee or as a businessperson
  • Pension benefits
  • Dividends, yields, interest and capital gains
  • An employer’s pension contributions
  • In-kind benefits
The tax rate for expats could be advantageous…”

Special Expat Income Tax Regime in Spain

As of 10 June 2005, the Spanish government approved a new tax regime for expatriates working in Spain. This was Royal Decree 687/2005.

This tax rate for expats could be advantageous to avoid paying the upper levels of the rate table outlined above. In order to qualify, the expatriate must meet following:

  • Expats must not have been a resident in Spain at any previous time during the 10 years before their current work or position in Spain.
  • Their position must be under a legal employment contract with a Spanish company or through secondment employment, or with a non-resident company holiding a permanent establishment (i.e. a branch) in Spain.
  • The work must be performed in Spain, although some flexibility is allowed. Work may be partially performed outside Spain if the salary for work abroad does not exceed 15% of the total salary for the year. If the working contract provides that the individual performs functions in another group company, this limit goes up to 30%.
  • The expat’s income must be subject to Spanish NRIT (Non-Resident Income Tax).

If you qualify, this means you’ll be subject to a special flat tax rate for expatriates at 25% for all Spanish income sources, and you will be taxed as a non-resident regarding all income, capital gains and wealth taxes.

Note: You’ll have to make the decision within six months from the start date of your social security registration. The period of time you can claim this expat tax rate starts from the first year when the expat has spent more than 183 days in Spain and continues for a total of five years or more.

Further note: Due to the special nature of this tax, you’ll very likely need a tax advisor to ensure proper adherence to the decree.

Property/Real Estate Taxes in Spain

The average cost of property in Spain is €186,000 for new property and €179,000 for resale property. To conduct real estate transactions in Spain, you must obtain a NIE number – a foreigner identification number.

When you buy property, you will pay a transfer tax of 7%, unless you’ve already paid VAT.

VAT/IVA is 4% for publicly subsidized homes, 7% for newly-built properties and 16% for plots of land and commercial premises.

The stamp duty tax is levied on the sale price declared on the public notarized deed; it varies by autonomous community between 0.1% and 1%.

The wealth tax rate ranges from 0.2% to 2.5% of the value of the property every year. For residents the first €108,182 is tax exempt. The tax exemption increases to the first €150,253 if it is a primary residence.

The local property tax/council tax is set by the municipal authorities, usually between 0.5% and 1%.

The land appreciation tax is levied each time a property changes hands and increases in value; this rate is set by the municipal authorities.

When you sell property, the capital gains tax rate is 18%. However, there are tax breaks available.

Inheritance tax is not a fixed rate. It depends on a number of factors, including the wealth of the beneficiary, not just the benefactor.

The income tax on rental income is 24% for non-residents and will still be taxed if you don’t rent out the home at the level set by the government. However, tax breaks are available. Rental income should be declared quarterly.

 

Last updated 28 07 2009

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Comments

If you'd like to ask a question for discussion, please mosey on over to the Spain Forum. See our posting rules and instructions here.

29/May/2010:
enghun said:

If I need to talk to someone about my taxes whom do I ask? I made 21523 Euro last year and they want me to pay 1400 Euros and I don't understand how is that possible. I would like to talk to someone but don't know who is the right person in Spain to talk to. My Spanish is okay, but not great.

Thanks for the help.

 
14/Aug/2010:
Spainbound said:

To Enghun,

You need to see a Gestor. Of course I don't know your circumstances, but I have to say that I think 1400 euros is pretty low!!!

 
28/Oct/2010:
Matt de Graaf said:

Hi,

I hope someone can help me with this.

I have lived in Spain for over 6 years now and have always been registered in the cities I have lived in "empadronamiento".

I have worked most of that time but lost my job last march. Then I received the Paro (welfare benefits) and then returned to work from October onwards. Now my new employer wants to set my tax rate to 24% for the rest of this year. They say that´s "the law", as I haven´t worked 180 days this year.

My question: is this correct? Or should it depend on the time I have been a resident here?

Regards,
Matt

 
09/Mar/2011:
KR said:

Like Stefano's case below, has anyone had any luck applying for the non-resident tax status (Beckham Law) after the 183 days?

 
13/May/2011:
ray-pc said:

Hello,

I am a pensioner from the UK living in Spain (with my wife) as a residents for the past 7 years. My 'tax to pay' calculation for the year 2010 has been set at 275euros. This is on a total income from state pension and small private one of 13,681euros. The previous 3 years I did not have any tax to pay. I am 73 years of age and my wife is 58. Can anyone please advise if the calculation is correct and if the tax rates altered so very much? Thanks in anticipation.

Regards,
ray-pc

 
16/Sep/2011:
Monica said:

Hi,

I am a Romanian IT developer, registered as self-employed here in Romania. I have been offered a full time job as a freelancer in Spain paid with 300 euro/day.

I would love to use my Romanian freelancer papers but I have read this is not possible.

Could you help me calculate my monthly net income (without considering the expenses deductions, in order to simplify the formula) ?

I estimate 6000 euro/month before the "autonomo" taxes.
The taxes would be of 43% * 6000 = 2580 euro. So the net at the end of the month would be of 3420 euro.

Is this correct or I have to pay also VAT, health insurance, etc?

Thank you!

 
02/Dec/2011:
wheeliebin said:

Hi,

Your site says that in many cases you only need to file a tax return in Spain when you make more than €22,000 per year. I have worked in three different countries. I now have a small state pension from the UK, as i just hit retirement age and i get a disability allowance from another European country where i worked for 30 years, because i am not retirement age there for another few years. I did work in another country for four years but they kept no record of my employment and i lost all my papers when my cellar flooded.

UK is great in the fact that they do supply such information and try to give advice on how to increase your pension. I bought back years. In total i get between 17,000 and 18,000 income. Do i need to file tax returns, and what is the personal allowance. I am disabled 75 percent, although still mobile. Are there any additional deductions?

Thanks

 
27/Jan/2012:
naomiP said:

Hi,

Saving money is one thing that all of us know we should do. There are some basic things that everyone can do that will help increase the amount of money you save. Article source: 4 easy ways to increase how much you save

Thank you!

 

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