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.
Income taxes in Spain should be paid between May 1 and June 30 for the previous year’s income.
The tax year in Spain runs from 1 January to 31 December. The filing period runs from early April to 30 June, although this can vary slightly from year to year.
If you spent more than six months (183 days) of the calendar year in 2020, your core economic interests or family are in Spain, then you are considered to be a Tax Resident of Spain.
As a Tax Resident, you will be liable to pay Spanish taxes on your worldwide income (and possibly your assets), and will need to file a Spanish Tax Return.
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 rate||Provincial tax rate||Total tax rate|
|€0 - €17,707||15.66%||8.34%||24%|
|€17,707 - €33,007||18.27%||9.73%||28%|
|€33,007 - €53,407||24.14%||12.86%||37%|
|€53,407 and above||27.13%||15.87%||43%|
The provincial tax rate is only a guide. Some autonomous communities have different rates. Income in Spain is roughly defined as:
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:
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.
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 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.
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.
The tax rate for expats could be advantageous
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:
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.
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.
A great article from Mark Wilkens of the Rights Group regarding the actual costs of buying property in Spain 2007.
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