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Taxation

Overview of national tax policies, including income tax, VAT, and corporate taxes.

Sections

Who Needs to Pay?

  • Residents: If you live in Spain for more than 183 days in a calendar year, you are considered a tax resident and must pay income tax on your worldwide income.
  • Non-residents: If you live in Spain for less than 183 days, you are only taxed on income earned in Spain.

Tax Rates for Residents (2023)

Income tax rates are progressive and vary by income brackets. The national rates are as follows:

  • Up to €12,450: 19%
  • €12,451 to €20,200: 24%
  • €20,201 to €35,200: 30%
  • €35,201 to €60,000: 37%
  • Over €60,000: 45%

Note: Regional governments can adjust these rates slightly, so the total tax rate may vary depending on where you live.

Tax Rates for Non-Residents

  • Employment income: Flat rate of 24% (or 19% for EU/EEA residents).
  • Rental income: 24% (or 19% for EU/EEA residents).
  • Capital gains: 19%.

Deductions and Allowances

Residents can benefit from various deductions, such as:

  • Personal allowance: €5,550 (higher for those over 65 or with dependents).
  • Contributions to pension plans.
  • Mortgage interest (for homes purchased before 2013).
  • Charitable donations.

3. Corporate Tax

Who Needs to Pay?

  • Companies registered in Spain are subject to corporate tax on their worldwide income.
  • Non-resident companies are taxed only on income earned in Spain.

Tax Rates

  • Standard rate: 25%.
  • Reduced rate for new companies: 15% for the first two years of profitability.

4. Value-Added Tax (IVA)

What is IVA?

IVA is Spain’s equivalent of VAT and applies to most goods and services.

Rates

  • Standard rate: 21%.
  • Reduced rate: 10% (e.g., food, transport, hotels).
  • Super-reduced rate: 4% (e.g., basic necessities like bread, milk, books).

5. Wealth Tax

Who Needs to Pay?

  • Residents: Taxed on worldwide assets.
  • Non-residents: Taxed only on assets located in Spain.

Exemptions

  • The first €700,000 of assets is exempt.
  • Primary residence is exempt up to €300,000.

Rates

  • Progressive rates range from 0.2% to 3.5%, depending on the value of your assets.

6. Inheritance and Gift Tax

Inheritance and gift tax rates vary significantly by region. Factors such as the relationship between the giver and receiver, the value of the inheritance/gift, and regional allowances affect the tax amount.


7. Property Tax (IBI)

If you own property in Spain, you must pay an annual property tax (IBI). The rate is set by local municipalities and typically ranges from 0.4% to 1.1% of the property’s cadastral value (a government-assessed value, usually lower than market value).


8. Filing Taxes in Spain

Tax Year

The tax year in Spain is the same as the calendar year: January 1 to December 31.

Filing Deadlines

  • Income Tax (IRPF): The filing period is typically from April to June for the previous tax year.
  • Corporate Tax: Must be filed within six months and 25 days after the end of the fiscal year.
  • Non-Resident Income Tax: Quarterly or annually, depending on the type of income.

How to File

  1. Online: Most residents file their taxes through the Spanish Tax Agency’s website (Agencia Tributaria) using the Renta Web system.
  2. In-person: You can also file at a local tax office.
  3. With a Tax Advisor: Many people hire a gestor (tax advisor) to handle their taxes, especially if they have complex financial situations.

Documents Needed

  • NIE (Foreigner Identification Number).
  • Proof of income (e.g., payslips, rental income statements).
  • Bank statements.
  • Details of deductions (e.g., mortgage payments, dependents).

9. Key Considerations for Visitors and Immigrants

NIE and Tax Residency

  • To engage in financial activities in Spain (e.g., opening a bank account, buying property), you need an NIE (NΓΊmero de IdentificaciΓ³n de Extranjero).
  • If you stay in Spain for more than 183 days in a year, you are considered a tax resident and must declare your worldwide income.

Double Taxation Agreements

Spain has agreements with many countries to avoid double taxation. If you are a resident of a country with such an agreement, you may be able to offset taxes paid in Spain against taxes owed in your home country.

Be Aware of Regional Variations

Some taxes, such as income tax, wealth tax, and inheritance tax, vary by region. For example, Madrid offers significant reductions in wealth tax, while other regions like Catalonia have higher rates.

Special Regime for Expats (Beckham Law)

  • Non-Spanish workers moving to Spain may qualify for the Beckham Law, which allows them to pay a flat income tax rate of 24% on Spanish-sourced income for up to six years.
  • To qualify, you must apply within six months of starting work in Spain.

10. Penalties for Non-Compliance

Failure to file taxes or pay the correct amount can result in penalties, which vary depending on the severity of the infraction. Late filing penalties range from 50% to 150% of the unpaid tax amount, plus interest.


11. Practical Tips

  • Hire a Tax Advisor: Spanish tax laws can be complex, especially for immigrants. A tax advisor can help ensure compliance and maximize deductions.
  • Keep Records: Maintain detailed records of income, expenses, and deductions for at least four years.
  • Use the Agencia Tributaria Website: The Spanish Tax Agency’s website (www.agenciatributaria.es) offers tools, guides, and online filing options.

By understanding these key aspects of the Spanish tax system, visitors and immigrants can better navigate their financial obligations and avoid potential pitfalls. If you have specific questions or need further assistance, consulting a tax professional is highly recommended.