Taxes and Finance in Spain

Learn more about finance and taxes in Spain. We offer overviews about income taxes, property taxes, capital gains, inheritance taxes, and more.

Tax Deductions in Spain For The Self Employed

Taxes

Tax deductions in Spain for the self-employed can provide a great opportunity to save money and create a more stable income. Freelance Tax deductions are available on the cost of materials, tools, and maintenance expenses for self-employed or independent workers. Tax deductions may also include other professional costs such as training, exhibitions, and conferences – all of which could provide an invaluable resource for self-employed individuals in Spain.

This is an absolute must-read if you want to become a freelancer in Spain. Without a doubt, the taxes that come with self-employment are one of the most crucial aspects to consider as part of your choice. Read on!

What are tax deductions for self-employed?

In Spain, two taxes offer deductions to self-employed workers: the Personal Income Tax (IRPF) and the Value Added Tax (IVA). Those who take advantage of these tax reductions can greatly reduce costs.

Personal income tax is a progressive tax levied on the income of individuals. Employed workers are taken off their payroll each month. In the case of the self-employed, they must withhold a small amount on each invoice they issue. Both employed and self-employed workers have to make the annual income statement to balance the amounts. IVA is a direct tax that taxes consumption and is added to the amount of each item or service for sale.

Income tax or IRPF (“Impuesto de la Renta de las Personas Físicas”)

Almost every quarter, self-employed people must pay the Spanish tax agency (Agencia Tributaria) for personal income taxes. This tax is known as IRPF or personal income tax by the Spanish tax authority. As a freelancer, you’ll be dealing with the IRPF on a regular basis:

when invoicing clients
setting aside for quarterly payments
calculating your annual tax report

Thus, if you file your quarterly tax return, 20% of it should be submitted as an advance payment. You must complete 130 (Modelo 100) and 131 (Modelo 130) forms, and this preliminary report will make preparing the annual tax return easier.

How to file IRPF quarterly

Every 3 months, self-employed individuals must submit their Personal Income Tax (IRPF). This declaration includes your income decreased by any relevant expenses. If you’re a freelancer living in Spain for more than 183 days each year, then you will become known as a tax resident. As such, all income generated from any self-employed activities must be declared and taxed accordingly.

Consequently, when filling out the quarterly IRPF documents you are essentially paying a 20% prepayment in anticipation of your income statement. To file your Personal Income Tax, you’ll have to turn in Tax Form 130 (Modelo 100) or Tax Form 131 (Modelo 131) every quarter. Later on, these quarterly reports will help you file your annual tax return (Declaración de Renta).

How to calculate IRPF in the Annual Tax Report

It depends on several factors, such as your economic situation and the type of activity that you pursue. In general, tax rates range from 19% to 47%.

From 0 to 12.450€: 19%
From 12.450€ to 20.200€: 24%
From 20.200€ to 35.200€: 30%
From 35.200 to 60.000€: 37%
From 60.000€ to 300.000€: 45%
Above 300.000€: 47%

Depending on the specifics of your circumstances, you may use additional allowances to reduce what you owe in terms of the base rate.

How to apply IRPF retention when invoicing a client

When voicing clients in Spain, the percentages of IRPF that the customer has to remit will also be included on your client’s invoices. IRPF’s annual costs vary, though the average is 15% deducted from all the fees paid by the client. Your customers withhold IRPF percentages and pay them back to the Tax Office in your name.

VAT for self-employed workers (“IVA”)

Once each quarter (between the first 20 days of each quarter, on January, April, July, and October), you file and pay your quarter VAT at the local tax office. In Spain, VAT is 21%, and you will apply that extra rate to the different invoice services you send to your clients.

How to file VAT

In order to file your VAT, you must fill out and submit a Modelo 303 form. This document is mandatory for all self-employed workers that have to pay social security contributions or freelance tax (Autónomos).

When filing this form, you must provide evidence of the expenses incurred, such as food expenses, maintenance costs or professional fees.

During each quarter, each invoice you send will include an extra 21% on your prices. For each business-related invoice you received and for all those invoices for work-related products you have purchased (like a new phone or computer), you will pay that 21%.

At the end of the quarter, you must sum up all VATs you received, subtract VATs paid, and the difference is what you must pay to the Tax Agency. You will do that using Model 303.

You may be exempt from paying this tax if you deal with business customers outside Spain (but within the E.U.) and are VAT registered.

How to deduct VAT

For instance, if you’re a computer programmer and purchase software, computers, or ergonomic chairs, they’ll be tax deductible. If you submit an invoice for non-business items like a refrigerator or table set with six chairs, unfortunately, it won’t pass silently but will qualify should your business specialize in hospitality services.

How to file your annual VAT

At the end of each year, you must also submit Model 390, including a summary of all VAT transactions throughout the year. Completing this annual VAT declaration form will provide you with a comprehensive overview of all your incoming and outgoing VAT transactions. You can do it quickly and conveniently online through the Agencia Tributaria website. However, if you deliver educational services, artworks, or specific types of freelance writing, then filing your Value Added Tax Return is not required – but that also means no tax deductions for those activities.

Which are the expenses you can deduct?

But now comes the good news: what you can deduct and all those concepts that will help you save money. That is because, on your income tax declarations, you can deduct several invoices you have been paying throughout the year to lower the final tax base.

You can get a tax credit in Spain if you have paid freelance or self-employment taxes. In most situations, a deductible item should be credited to the yearly return. If not, you cannot file a tax deduction. As business owners, you can claim deprecated assets on your company property.

What exactly is deductible?

Your monthly social security contributions
Any type of expense related to sustaining your freelance activity
Tax and accounting invoices you paid
Any tool or service that works as a subscription base that you use for your working operations
Your health insurance monthly payment (up to 500€)
Utilities like your phone and internet invoices
Supplies, like your office
Vehicles, in case those have been used for your freelance activity
Tax services maintenance expenses

Important note.

For all deductions to be applicable, you must prove the corresponding expenditures through formal invoices, in which your name, address, and tax identification number must appear.

How to file freelance tax in Spain

After filing a tax return with the tax authorities, your earnings must be reported at least three times per year. You declare your earnings from October to December and pay 20% of your tax. This is a Model 131 form, and it is required for every employer to submit a request. Every self-employed person must use model 132 for their freelance income tax in Spain. Each year, you will do your yearly income tax declaration, which uses model 100 and contains all the incomes you received and taxes you paid during the previous year.

Options to file tax returns

There are two different options to file tax returns: online with the Spanish tax authority (Agencia Tributaria) or through a personal visit to your local Tax Office. In either case, you must provide all personal information, income, taxes paid, and deducted expenses in the annual income statement.

Additionally, there are extra tax declarations that you may need to submit depending on your personal situation and business activities. For instance, If 70% or more of your clients make tax withholdings on your fees, on each invoice, you send to your clients, you can choose to subtract from the total a standard 15% income tax, or a reduced 7%. Then, once you do your annual income tax declaration, and according to how much you have generated during the year and after subtracting all the different allowances and bonification, you will pay (or receive) the difference.

But there is also another alternative. Using Model 130, you would quarterly pay, in advance, a 20% income tax for all the incomes you declare quarterly (without subtracting the 15 or 7% on each invoice). But, if you use a modular system called “estimación objetiva”, you would use model 131 instead, and your income levels will be based on estimations rather than actual income.

A word from SpainDesk

From the look of it, taxes for a self-employed worker in Spain are quite favorable given all the deductions available to qualified individuals.

Being a freelancer means spending your money on supplies and services. However, you can offset some expenses against your personal income tax, social security contributions, and freelance tax deductions. Knowing which items are eligible for these deductions is key to maximizing the amount of money you save in taxes each year. Additionally, knowing the fundamentals of finance and law is essential in order to maximize your savings while being self-employed.

After studying our guide, we strongly believe you have a better comprehension of what it costs to be an independent contractor in Spain. Even if this information may appear overwhelming at first glance, do not worry; SpainDesk has got your back. We are here to assist you to make the most out of your freelance experience by providing any support or answers that you need.

May 16, 2023

What is a Gestoria?

Taxes

In Spain, the word “Gestoria” or “Gestor” is someone who you go to for difficulties with Spanish bookkeeping, accounting or taxes. Whenever you have any problem or are stuck in financial or administrative difficulties, people advise you to go to Gestor, but what is a Gestor?

On one hand, a Gestoria helps companies, mainly, because it is an administrative link between the public administration and society. On the other hand, a Gestoria can provide functions for a private person. In short, the gestor performed actions in the interests of another person.

What is its primary role?

The role of Gestoria is to interface between the administration and the public. Generally, you don’t need an interface in most countries, but having a Gestor is quite necessary if you are living in Spain. Here is a primary function performed by a Gestor in Spain:

Promotion of administrative procedures carried out on behalf of a third party. It would encompass the filing of tax returns.
It offers administrative support in various areas such as tax management, accounting management, or labor management. The agency serves as a support and guidance for a person or a company to adapt its accounting to a particular territory.
Ability to issue individual certificates or public deeds that is valid for future general procedures. Often these companies have the public authority or permission to create documents or certificates of general validity.
The collaboration of an external administrative manager is often essential for the efficient management of a company, as is the case with SMEs or Startups.

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What differentiates a Gestoria from a consultancy?

One way to know the functions of a Gestor is by comparing it with a consultancy. It is common to confuse as both concepts have some common factor. A Gestoria deals with broad aspects of the administrative management of a company. On the other hand, consultancies have their role limited to tax, accounting, and labor advice. However, Gestoria offers a broader service of procedures:

Tax procedures such as filing taxes in the Public Tax Administration
Management of accounting and billing of a business
Management for the constitution of a company
Processing of grants and subsidies, both public and private
Legal and official representation between the company or self-employed and the public administration
Management and processing of self-employed registrations and cancellations
Help and processing for the acquisition of a billing program and even its subsequent management
Labor procedures such as the registration and termination of workers, hiring, firing and payroll management, and other practices with Social Security

What can a SpainDesk do for my company?

SpainDesk will help you with the processing of public deeds, all kinds of certificates, property transfer taxes and documented legal acts, import and export of vehicles, registrations, transport cards, and registry reports, among many others. Considered in a grouped manner, the agency provides the following services to companies:

Tax procedures: The agency keeps the company’s accounting in terms of policies as relevant as the withholdings to be applied.
Study processing: the processing of subsidies and studies requires considerable paperwork to entrust to the gestoria.
Labor procedures: The preparation of payroll is the most common service; it includes registration processing, forecasting expenses, and workers’ cancellation.
Business management: The agency can offer management solutions adapted to the company’s needs, which will cover different services.
Certificates: The processing of very various certificates is another of the tasks carried out by agencies.
Creation of companies: The consultancy can facilitate the procedures to create anonymous and limited companies by delegating all the paperwork.

SpainDesk can also perform other services such as procedures related to inheritances, licenses, or various administration certificates, immigration, and even traffic fines.

Why SpainDesk?

The SpainDesk administrative managers are professionals who graduated in Law, Economics, Business, Politics and Management, and Business Administration. At SpainDesk, you will connect with a professional team of business lawyers. Here you will get advice on the creation of a company, as well as on business management.

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal advice. We highly recommend seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.

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September 2, 2022

Spanish Inheritance Tax: 4 Steps to Calculate it

Taxes

Calculating the Spanish Inheritance Tax is not as simple as it appears. There are several aspects that need to be considered in order to calculate the amount of Spanish tax that will be due. In this article, we will take a look at key points that need to be considered when calculating the Spanish Inheritance Tax.

Keypoints to calculate the Inheritance Tax in Spain

The succession tax rate is calculated the same as the gift tax rate.
The Inheritance Tax in Spain is generally set by the state, however sometimes the autonomous regions have set their own specific inheritance law and tax allowance.
The Inheritance Tax Rate is a progressive tax.
Tax residents and non-residents will pay different amounts of Inheritance Tax.
Within the Spanish Inheritance, there are several allowances and reductions.
Almost everybody (including children and spouses) needs to pay Inheritance Tax.
Spanish Inheritance Tax doesn’t have to be paid if the deceased left everything to a spouse or children.
To work out the amount of Spanish Inheritance Tax you’ll need to pay, you must first know the value of the estate. This includes all property, money, investments, and possessions.
You will also need to take into account any debts that the deceased might have had.
Inheritance Tax in Spain must be done within 6 months.

Table for the Inheritance Tax in Spain

Here are the tables used to calculate the Spanish Inheritance Tax when you are liable for the state tax.

4 steps to calculate Inheritance Tax

The inheritance process in Spain can be complicated and time-consuming, the Spanish inheritance law is broad. Calculating the Spanish Inheritance Tax is an important step to determine how much you will inherit. Below you find the three steps to find out how much Inheritance Tax you need to pay.

1. Determine the value of the assets

When you inherit assets in Spain, you will need to determine the tax value of those assets in order to calculate any Inheritance Taxes that may be due.

In the case of real estate, the cadastral registry is used to determine the property value. If the asset is a vehicle, you will need the initial price of the vehicle when it was new.

Next to property and cars, typical assets that are left behind are jewellery, antiques, and art. These items need to be assessed by an expert in order to determine their value for tax purposes.

Savings accounts or stocks and investments should of course also be taken into the calculation.

2. Determine whether the deceased was a tax resident or non-tax resident

The amount of Spanish Inheritance Tax you need to pay depends also on the fact whether your and the deceased person was tax resident or non-tax resident. If the deceased is a Spanish national or resident, you will be subject to Spanish inheritance and gift tax on their worldwide assets. However, if they are not a resident of Spain, you will only be subject to Spanish inheritance and gift tax on assets located in Spain. This is known as the “residency rule.” If the beneficiary is a resident of Spain, they will also be subject to inheritance and gift tax on assets gained outside of Spain.

You are considered to be a resident in Spain if you are there for more than 183 days during the year. If you live in Spain for less than 183 days, you will be considered a non-resident. Other reasons you may be considered a tax resident are if your main economic activity takes place in Spain or if your spouse or children live in the country.

There are some exceptions to this rule. For example, if you pay taxes in another EU country or another foreign country with which Spain has a double taxation agreement. You can avoid paying the Inheritance Tax in Spain because you are already paying the Inheritance Tax on the assets located outside of Spain. This is because Spain doesn’t want to give you a double taxation problem

3. Determine what the will says

If there is a Spanish Will for distributing the Spanish inheritance, it will need to be taken into account when calculating Inheritance Tax. The will may state that certain assets are to go to specific individuals. It may also specify that an Inheritance Tax is to be paid out of the estate before distributions are made to beneficiaries.

The Spanish will may also designate a spouse or registered partner as the sole heir. In this case, the surviving spouse may be exempt from paying Inheritance Tax.

If there is no Spanish will to distribute the Spanish Inheritance, the Spanish Inheritance Laws will apply.

Understanding the Spanish Will is important to understand how much succession tax you will need to pay, it will determine the amount of tax allowance you will have.

4. Adjust the taxable amount using deductions, allowances and rebates

There are a number of reductions and allowances that can be applied to the taxable amount in order to reduce the amount of Inheritance Tax that is owed. The most common tax reduction is the deduction for debts and expenses, which can reduce the taxable amount by up to 100%.

Spanish Inheritance Tax Rates are set by the autonomous region where the primary residence of the deceased person is located, and each autonomous region has its own rules regarding deductions, allowances and rebates.

Deductions include the deduction for family members that we discuss in the next part, a deduction from the funeral, a deduction on the age of the car, and a deduction for donations to charity.

Other tax allowances include the allowance for the principal residence, an allowance for small estates, an allowance for agricultural property, and an allowance for business assets.

Each of these deductions has specific requirements that must be met in order to qualify, so you will need to review the requirements carefully before claiming any deductions.

If the beneficiary already has existing wealth, this may impact the amount of tax that is owed on the inheritance. In general, the Spanish Inheritance Tax rules state that the taxable amount is increased by the value of any assets that the beneficiary already owns, similar to the wealth tax.

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Deductions for your Inheritance Tax

As discussed before, the Inheritance Tax in Spain is calculated for each beneficiary. Therefore the personal circumstances are taken into account. The amount the taxpayer will have to pay is based on a multiplier (coefficient or factor). The coefficient of relationship, age, disability, and existing assets of the beneficiary determines this ratio. The more distant the relationship to the deceased and the greater the existing wealth of the beneficiary the more tax will be owed.

Group I

In this category, children younger than 21 years of age are included. They will be exempt from Inheritance Tax for the first €47,859, which means they won’t have to pay any Inheritance Tax on the first €47,859.

Group II

In this category fall people over the age of 21, their children, spouses and parents/grandparents (including adoptive). They don’t have to pay tax up to €15,957.

Group III

The siblings, aunts, uncles, nieces, nephews, in-laws, and their descendants are among those who will receive an Inheritance Tax exemption of €7,993.

Group IV

The cousins, other relatives, unmarried partners (unless the region permits it) and those who are not related will be in the fourth category. They will not benefit from an Inheritance Tax exemption.

Disabilities

The government provides a disability benefit of €47,859 or €50,253 to those with impairments.

Where to pay Inheritance Tax in Spain

In Spain, the Inheritance Tax is regulated by both the state and the autonomous communities. The autonomous communities have the authority to set their own rates and thresholds, within certain limits set by the state.

As a result, the amount of Inheritance Tax that is payable can vary depending on where the property is located. If the autonomous community didn’t set its own rules, then the general Spanish Inheritance Law applies that the state has set.

Paying your Spanish Inheritance Tax is done on the website or via an appointment at the relevant autonomous community.

When to pay Spanish Inheritance Tax?

The Spanish Inheritance Tax must be paid within six months from the date of death, and late payments are subject to interest and penalties. There is no difference if you are a resident or non-resident of Spain.

During the time that the tax is being paid, some Spanish assets of the estate cannot be distributed to the heirs. If you are unable to pay the Inheritance Tax in full, you can arrange a payment plan with the autonomous region.

Get help with the Spanish Inheritance Tax

It is very common to seek professional help when dealing with the Spanish Inheritance Law, as it can be confusing. A good Inheritance Lawyer will know the ins and outs of the law and can guide you through the process to ensure that everything is done correctly.

They can also help you to minimise the amount of tax that you have to pay by taking advantage of deductions and exemptions.

If you are dealing with a complex estate, it is even more important to get professional help. An Inheritance Tax Lawyer can help to ensure that the estate is divided up correctly and that all of the paperwork is in order. Contact us today to speak to one of our experienced Spanish Inheritance Lawyers.

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May 29, 2022

Tax in Spain for Residents: Everything You Need to Know

Taxes

If you are a tax resident of Spain, there are certain tax rules that apply to you. In this blog post, we will go over the different types of taxes that you must pay if you are a resident for tax purposes in Spain. Keep reading for more information.

Tax Non-Residency vs Tax Residency in Spain

According to Spanish law, you will be considered a tax resident if you spend more than 183 days in the country per year. This is different from many other countries, which typically use a 12-month period for tax residency purposes.

It’s important to note that the 183 days don’t have to be consecutive. So, even if you only live in Spain for part of the year, you could still be considered a tax resident. This is something to keep in mind if you’re planning to work or start a business in Spain.

Other reasons you may be considered a tax resident in Spain are:

Having economic interests in the country. In other words, you realize your main professional activity in Spain.
Having a marriage in Spain or having children or a spouse living in Spain.

Being a tax resident has significant consequences. For example, tax residents will be subject to Spanish taxes on their worldwide income. While non-residents are only taxed on their income in Spain.

Difference between tax residency and residency permits

Tax residency and residency permits are two completely different things. Tax residency is determined by a number of factors, including where you live, work, and have assets. Residency permits, on the other hand, are issued by the government and grant you the right to live and work in a country. In order to obtain a residency permit, you usually need to meet certain requirements, such as having a job or being enrolled in a school. While tax residency can be complex, residency permits are typically quite simple: if you have one, you can stay; if you don’t, you need to leave.

How does the Spanish Tax System work for tax residents?

The three important things to keep in mind when filing taxes as a Spanish resident are:

File your taxes on time. For example, Spanish tax law requires that taxpayers file their income taxes by April 30th of each year.
Keep accurate records of your income and expenses. The Spanish tax authorities can request documentation at any time.
Be aware of the various deductions, benefits, and double taxation treaties. This way you don’t overpay.

How to file your Spanish taxes as a tax resident?

Spanish residents who want to file their taxes will need to follow a few simple steps.

Gather all of the necessary documentation. These include statements, tax numbers, certificates and any other relevant financial information.
Fill out the relevant tax forms at the Spanish Tax Authorities. The form will ask for basic personal information, as well as information about income and deductions. Once the form is complete, Spanish residents can submit it online.
Pay or receive any taxes that are owed. Spanish residents can expect to receive a refund if they have paid more taxes than they owe.
Use the validation service on the Agencia Tributaria website. Check that your tax return is complete and accurate.

If your taxes seem complicated, you can also choose to have a professional prepare your taxes for you. This is very common in Spain.

Types of taxes in Spain for Residents

There are several different types of taxes in Spain, and if tax residents need to pay these taxes depends on their personal circumstances. Typical taxes for tax residents are:

Income tax: Paid by anyone who earns money from employment, self-employment, investments or renting out property
Wealth tax: Paid by residents on the size of their worldwide assets
Value-added tax (VAT): Paid on all goods and services bought in Spain
Inheritance tax: Paid by residents over the worldwide assets they inherit
Property tax: Levied on owners of buildings or land

As you can see, there are a variety of taxes in Spain, and the amount that each person pays will depend on their individual situation. Below we go through each individual tax.

Income tax in Spain for Residents

The main tax you will pay is the Spanish income tax. Spain has a progressive income tax system, meaning that the more you earn, the higher percentage of tax you pay. Income tax is called IRPF in Spain. Residents of Spain are taxed on their worldwide income, regardless of where it is earned. The income tax is split into two types to calculate it.

General taxable base

The general taxable income base is the income on which all taxpayers must pay taxes at the progressive income tax rates. This includes items such:

Employment
Self-employment
Pensions
Investments
Rental property
Capital gains

The income tax depends on the autonomous region where you live. The general income tax rates for residents of Spain are as follows:

Up to 12,450 euros – 19%
12,451-20,200 euros – 24%
20,201-35,200 euros – 30%
35,201-60,000 euros – 37%
Over 60,000 euros – 45%

Income tax from employment is will have their taxes deducted at the source by their employer. These are known as ‘retenciones’. The amount of tax you pay will depend on your income and your personal circumstances. When you file your annual tax return, you may be entitled to a refund if you have paid too much tax during the year.

Income tax on savings

Savings taxable income is basically composed of the interests of any financial products that you may have, such as:

Bank deposits
Savings accounts
Investment funds
Life insurance policies
Dividends from shares

This income is taxed separately from the general income tax base. The tax rates for savings taxable income are as follows:

Up to 6,000 euros – 19%
6,001-50,000 euros – 21%
50,000-200,000 euros – 23%
Over 200,001 euros – 26%

As a non-tax resident, you will be taxed at a rate of 24% on any income you earn in Spain. This significantly lowers then the income tax for tax residents. If you are a tax resident and would like to pay this non-tax resident rate, you can apply for the Special Tax Regime for Expats (also known as the Beckham Law).

Social security for tax residents in Spain

According to the Spanish government, all tax residents in Spain are entitled to social security coverage. This coverage includes a number of different benefits, such as healthcare, unemployment benefits, and pensions. In order to qualify for social security coverage, you must be registered with the Spanish Social Security system.

You can do this by applying for a Foreign Tax Number (NIE) at your local Spanish consulate or embassy. Once you have a Foreign Tax Number, you will need to register for social security with the Spanish government. You can do this online or in-person at your local Social Security office. Once you are registered, you will need to make contributions to the Social Security system in order to receive benefits. The amount of your contribution will depend on your income and employment status.

If you are self-employed you will need to make monthly contributions, and if you are employed your employer will make the contributions on your behalf. The amount of your contribution will depend on your income.

Deductions of income tax for tax residents

If you are a tax resident in Spain you can deduct a number of items from your taxable income. These include:

Charitable donations
Social security contributions
Energy efficiency
Investments in companies
Deductions for political parties
Maternity deductions

Depending on the autonomous region, the amount you can deduct and what you can deduct may vary.

If you are not a tax resident you can’t deduct any of the items from your taxable income.

Wealth tax in Spain

In Spain, the government imposes a wealth tax on tax residents with a net worth above €700,000. However, this may vary in the region. The tax is assessed on the value of assets including real estate, cash, investments savings, art, and jewellery. The tax rates for wealth tax in Spain are as follows:

Up to €700,000 – 0%
€700,001 to €2 million – 1.5%
Over €2 million – 2.5%

Inheritance tax

Inheritance tax in Spain is levied on the beneficiaries of an estate when someone dies. It is levied on the assets of the deceased person in Spain. The amount of tax that is due depends on the relationship between the beneficiary and the deceased, as well as the value of the estate. For example, a spouse or child would generally owe less tax than a more distant relative or friend. In addition, the tax rate is progressive, meaning that larger estates and people with more wealth are taxed at a higher rate than smaller ones. The calculation of inheritance tax can be quite complex.

The Spanish government also offers a number of exemptions and deductions that can reduce the amount of tax owed. For example, there is an exemption for inheritance between spouses, and certain charitable donations are also deductible. Spanish inheritance law is different from that of other countries, so it is important to seek professional advice if you are inheriting an estate in Spain.

VAT Tax

Value-added tax (VAT) is a type of tax that is applied to the sale of goods and services. In Spain, VAT is known as Impuesto sobre el Valor Añadido (IVA). The standard rate of IVA in Spain is 21%, although there are reduced rates for certain items, such as food (10%) and accommodation (4%).

Most businesses in Spain are required to charge IVA on their products and services, and therefore you will need to pay it whether you are a resident or non-resident.

Double treaty conventions

The Double Tax Treaties in Spain are agreements between Spain and another country, which aim to avoid the same income being taxed twice. For this purpose, the treaties establish the rules according to which the income will be taxed in each of the countries. These rules establish that, in general, the income obtained in a country by a resident of the other will only be taxed in that first country.

In this way, it is arranged that, for example, a Spaniard who obtains income from France is not taxed both in France and in Spain for said income.

The Treaties also regulate other aspects such as, for example, when a company carries out activities in several countries. These regulations seek to prevent tax evasion and promote investment between the countries concerned.

May 19, 2022

Plusvalia Tax: Everything on the Municipal Capital Gains Tax

Taxes

When you sell a property in Spain, you are liable to pay a tax called Plusvalia. This article discusses what the Plusvalia is, how it’s calculated on the property price, and who needs to pay it.

What is the Plusvalia tax?

The Plusvalia Tax on the Increase in Value of Urban Land (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana, IIVTNU) is a property tax levied by the Spanish government on the increase in value of urban land.

The goal of this tax is to tax the increase in the value of the land, whether there is a property on it or not. Some of this increase in value is due to improvements to the area that the local government has made.

Local property tax

The Plusvalia tax is similar to the capital gains tax; only it is paid to the municipality; in other words, the Plusvalia is the municipal capital gains tax. It is set by the local tax office where the property is located and is based on the value of the land value and the number of years that the seller has owned it.

When do you need to pay Plusvalia tax?

When you sell a property, the municipality has the right to collect the Plusvalia tax from you. The tax is payable when the transfer of ownership of the property is registered with the Land Registry (Registro de la Propiedad).

This can happen when:

Selling the property
Donating the property
Inheriting the property

Whether the property transfer is business-related or not is irrelevant, the municipality will still charge the Plusvalia tax.

How is the municipal capital gains tax paid?

The tax obligation happens when the taxable event is carried out, and the tax needs to be paid at one time.

When inheriting, the tax payment is due in 6 months.
When selling the property, the tax needs to be paid in 30 days.

You can pay the tax at the local town hall, local tax office, or online.

How is Plusvalia tax calculated?

The amount of Plusvalía tax you have to pay depends on three factors, including:

The municipality where the property is located
The number of years you have owned the property
The base (which is the value increase of the property)

You don’t have to pay the tax when you lose money on the sale of your property.

Base property price

The base value is determined by subtracting the purchase price from the sale price. The taxpayer has two options for the base of the calculation.

Real capital gain: the difference between the purchase price of the land and the selling price.
Nominal capital gain: a base that reflects the real property market. Which means the real capital gain.

If the real capital gain is higher than the nominal capital gain, the Plusvalía tax can be decreased.

The calculation

Base (real or nominal capital gain) * percentage = plusvalia tax

The coefficient depends on the number of years and can be found in the following table.

The table above is an indication and set as a maximum by the government. Depending on the municipality or time you check the table, the coefficient could be lower or higher.

What happens when land and construction are transferred?

When construction is on the land, the construction will be subtracted from the sales price to calculate the capital gain of the land.

Who needs to pay Plusvalia?

Depending on the situation, the person that needs to pay the Plusvalia tax is:

The seller: The property seller is responsible for paying the tax; however, the seller can negotiate with the new property owners to pay the tax. In some cases, where the property is sold as part of a company, the company is liable for payment.
The buyer: In case the seller is a non-resident in Spain the buyer will have to pay the Plusvalia tax. This is because the seller might leave the country and will never come back to pay the tax.
The donee: When it comes to giving, the donee, or recipient of the donation, is responsible for paying capital gains.
The beneficiary: In the case of inheritances, it will be the beneficiaries who must pay this municipal tax.

A word from SpainDesk

We hope you enjoyed this article. We advise you to seek legal counsel or tax advice for more information or specific cases.

If you would like to know more about Spanish property law or if you need assistance with your legal or tax case in Spain, contact us. We are happy to help.

March 23, 2022

VAT Spain: Rates, Types, Meaning, Due dates, and FAQ

Taxes

The VAT rate in Spain is 21%. VAT stands for “Value added tax” and it’s a tax in Spain that has to be paid when selling goods and services. In Spain VAT is called the IVA, which stands for (Impuesto sobre el valor añadido).

In this article, you can find more information about the Spanish VAT. This is beneficial for people that are moving to Spain, or are starting a company in Spain. Topics that will be discussed are the meaning of the VAT, the different kinds of VAT rates, where and when to file the VAT taxes, the VAT number, VAT returns, VAT exemption, and more.

Types of Spanish VAT Rates

There are four different Spanish VAT rates. The regular VAT (21%), the reduced VAT (10%), the super-reduced VAT (4%), and the Zero VAT (0%).

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The regular VAT rate in Spain (21% IVA)

The standard Spain VAT rate is 21%, this is applied on regular supplies of goods and services. It is the most common type of rate. The regular Spanish VAT rate applies to products such as:

Clothing and footwear
Furniture
Petroleum products and vehicles
Alcoholic beverages and soft drinks
Electronics
and many others

The reduced VAT rate in Spain (10% IVA)

The Reduced VAT rate in Spain is 10%. It is put on products and services which are deemed necessities or cultural beneficiaries. For example, the reduced rate applies to:

Agricultural supplies
Agricultural products such as cut flowers and plants for food production
Cultural or sporting services
Mineral water, lemonade, and fruit juice
Medical products for veterinary uses
Napkins
Tampons and panty liners
Condoms and other non-medical contraception
Passenger transport
Hotel and restaurant services
Certain printed books, newspapers and magazines.
Normal Construction work
Cultural events or touristic services are offered by hotels, restaurants or cafes.
Entry tickets to museums, parks, monuments, shows
Works of art

The super-reduced VAT rate in Spain (4% IVA)

The super-reduced VAT rate in Spain is 4%. It is applied to even more basic necessities such as:

Bread-making flours
Milk, cheese, and eggs
Fruits, vegetables
Tubers
Cereals
Pharmaceutical products and medicinal products for human use
Social services, such as construction work on social housing
Books, newspapers and magazines not containing advertising
Domestic care services

Zero VAT rate in Spain (0% IVA)

Some products are not charged with VAT at all in Spain. However, there are not many. Products with zero vat rate are in the category:

Gold coins, ingots and bars
Intracommunity and international transport

VAT exceptions for regions

Some regions in Spain have different VAT rules as the ones stated before. These regions are:

The Canary Islands
Ceuta and Melilla

The Balearic Islands are seen as Spanish territory, they follow the normal IVA rate.

The VAT rate in the Canary Island

The Canary Islands are a Spanish territory in the Atlantic ocean. The VAT in the canary island is called the Canary Island General Indirect Tax (IGIC). The regular IGIC rate is 7%, and the other IGIC rates are 0%, 3%, 9.5%, 15%, and 20%.

This means that in general, you have to pay less VAT when importing goods from other countries to the canary islands. Next to this, when you buy something there, you have to pay less tax than if you bought them anywhere else in Spain.

VAT in Ceuta and Melilla

In Ceuta and Melilla, sales tax is applied instead of VAT. The sales tax is called IPSI (Impuesto sobre la Producción, los Servicios y la Importación or Tax on Production, Services and Imports). The standard rate is between 0.5% and 10%. For example, the fee for importing yachts is 10%.

Due dates to pay VAT in Spain

Companies with a Spanish VAT number are required to make periodic reports on the supplies they have sold and the supplies they have purchased. The VAT return is done on a monthly or quarterly basis. In general, the reporting period in Spain is quarterly. You will have to send the Spanish tax office the information by the 20th of the month following the end of the quarter.

Next to the quarterly VAT return, you also have to do an annual IVA return by the end of January every year in Spain. You can find the calendar with due dates on the website of the Spanish tax authorities:

Exceptions when to file VAT return

While the VAT return dates will be set by the local tax authority where you have registered your vat number, there are some general national guidelines. These are:

If the total amount of goods or services is more than 6 million € annually, you will have to file VAT monthly.
If the total amount of domestic sales in the year is below 35.000€ and the total amount of intra-community supplies of goods and services in the year is below 15.000€, you can file your VAT yearly

VAT registration for businesses

When you are starting a new business in Spain, it is required by law to register your business for VAT. Your Spanish company VAT number will be the same as your NIF number.

You will need to contact a Spanish tax office to get this number. Getting a Spanish VAT registration can be complicated, so it is advised to have a corporate lawyer to help you set up your business properly.

When you register for the VAT number, you will be put in the VIES system (VAT Information Exchange System).

The VAT number

Spanish VAT registered numbers (IVA numbers or NIF-VAT numbers) are built as ES + NIF number. An example of the NIF-VAT number is ESB73475571.

The first digit of the NIF-VAT number is always an ES, which stands for Espanol. This third letter is the type of business entity. The following 7 numbers are the ID of your Spanish VAT registered company, and a final character is a control number.

Requesting the Spanish NIF number is necessary to get a NIF-VAT number.

When do you need a VAT number as a business?

There are some rules about when you need a Spanish VAT registration. For example, if you buy and sell cars often, then you will need it. Other scenarios when you need a VAT registration are:

When you regularly sell products and services to people in Spain
When you perform work for more than one client
When you are selling goods to other EU countries from Spain
Importing products from other countries
Organizing live events, conferences, and other activities in Spain
When you are selling products over the internet to Spain
When you are holding goods in a warehouse in Spain as stock for resale
When you have a commercial interest and try to make a profit
When you invest in your business, for instance, personnel or stock
When you request more than a symbolical fee

Collecting VAT invoices

To be able to do your vat returns properly. It is essential that you know how much VAT was paid. Make sure you collect the following when you are doing your administration

Request an invoice from suppliers and keep it to deduct the VAT paid.
Keep a receipt for every purchase made.
Keep the invoices you sent to your customers.
Keep a copy of all invoices and receipts in case the tax office needs more information or want to audit you.
Keep the Spanish VAT number that your suppliers provide.

Keeping track of your invoices is important because you will need to deduct the VAT that you pay on your purchases and add the VAT of your sales. It is a requirement under the Spanish VAT law. Spanish authorities will sometimes audit businesses. If you are not keeping track of your VAT invoices properly, you might get fined or charged more tax than you should.

Frequently asked questions

Below you can find some frequently asked questions on VAT in Spain.

How much do I have to charge for VAT?

You have to include the VAT on your prices, based on your regional vat rate. You can not ask customers to pay more than the official price with included tax. Is my business VAT exempt?

If you are new in business and are starting out as a micro

When do you charge VAT in Spain?

Spanish law requires you to charge VAT when products are sold or services are carried out. On the invoice that you send your customers, you will need to state the VAT rates that apply to the goods or services.

What is the VAT threshold in Spain?

There is no VAT threshold for traders to be registered in Spain; before the start of taxable transactions, a VAT number is required. Resident and non-resident businesses must register for a VAT number before doing any business. You can register your company easily with our services for company formation in Spain.

Where do you pay VAT in Spain?

You will pay your VAT at the Spanish tax office called Agencia Tributaria (Agencia del impuesto de sociedades). You can log in online and pay the VAT of your company on their website. You can also pay using a bank transfer or at a Spanish bank counter.

How do I pay VAT in Spain?

You will have to pay VAT through a Spanish bank account. This is because Spanish authorities do not accept foreign bank accounts. If you are an individual, only a Spanish bank account will be allowed to make any transaction with the tax office or government agencies in Spain. The name on your bank account must match the name of the company that you are paying for.

If you are looking to open a business bank account in Spain, it is smart to go with a popular bank for foreign companies in Spain.

What VAT penalties are there in Spain?

Penalties are multiplied by a percentage of the VAT owed (so-called “recharges”). The recharges can be a percentage of the tax owed or a multiple thereof.

The six recharges in Spain are:

5% of the VAT is due between 3 months after the due date.
10% if paid between 3 and 6 months after the due date.
15% if paid between 6 and 12 months after the due date.
20% if paid after 12 months after the due date.

If you pay the amounts within the deadline stipulated in the letter with penalties stated, you can reduce them by 25%.

Penalties such as fines and jail time may be imposed by the authorities, especially when the corrections are triggered by an investigation or a Value Added Tax audit.

Is there a VAT refund for travellers in Spain?

When you are travelling in Spain as a non-EU resident, you can request to fill in a Tax-Free form in the shops where you buy your purchases. Then, within three months of purchasing get the form validated by the Spanish Customs.

The digital VAT refund process (DIVA) reduces the time it takes to validate your return. Simply ask the businesses who provide this service for a DIVA form, and submit it yourself at one of Spain’s major ports or airports’ automated terminals.

What other types of sales tax exist in Spain?

Besides VAT, there are several types of sales tax imposed on businesses in Spain. These include:

Impuesto sobre las Transmisiones Patrimoniales Onerosas (ITPO): The ITPO sales tax is applied when selling real estate and means of transport for between €2,000 and €50,000.

Impuesto sobre las Sucesiones y Donaciones (ISD): The ISD sales tax is applied if you inherit or give away property and applies to all estates above €10,000.

Impuesto por la Actividad Económica (IAE): The IAE sales tax is the equivalent of business tax in Spain and must be paid by all businesses registered in the Commercial Registry (Registro Mercantil)

Impuesto sobre el Juego (IJU): The IJU sales tax is applied on any purchase of products related to gambling.

Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana (IIVTNU): The IIVTNU sales tax is a land value tax applied if the property value goes up.

Impuesto sobre Bienes Inmuebles (IBI): The IBI is the equivalent of property tax and is payable by the owners of buildings, although it can also be paid by renters.

Impuesto Sobre Vehículos de Tracción Mecánica (ITV): The ITV is applied when registering a car or motorcycle.

Tasas y otros Ingresos (TIO): A TIO sales tax is applied when applying for business, vehicle or health certificates.

There is also other sales tax you may have to deal with in Spain. If you would like more support for your situation, please contact us at info@spaindesk.com.

Where can I find VAT numbers of Spanish VAT registered companies?

Companies must apply for a VAT number to do business in Spain. This is stated by the Spanish “Agencia Tributaria”. You can find these VAT numbers in the official mercantile directive (RMC). If you would like to find a company, you can also have a look at the Spain company register guide, where we explain everything about the vat directive.

What is VAT called in Spain?

VAT is called IVA in Spain, short for “impuesto sobre el valor añadido”. Spanish VAT is also sometimes called “impuesto al valor agregado”, “impuesto sobre el valor menorado y el valor añadido”, and “impuesto sobre el valor añadido”.

Help with your VAT declaration in Spain

Next to taking care of the company formation in Spain, our tax advisors can help you with your VAT declaration. We pride ourselves of being a one-stop solution for your legal and tax challenges in Spain. Let us take care of your (IVA) forms, VAT refund forms and other tax issues in Spain. Feel free to contact us by emailing info@spaindesk.com.

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January 27, 2022

A Guide to Financial Advice for Expats in Spain

Taxes

Financial advisors in Spain are professionals that help you with financial planning and help to provide financial services. They work as tax planners and financial planners and often give financial advice and information, including options for saving and investments, retirement planning and managing money. Financial advisors are not the same as lawyers and accountants. Lawyers will give advice and guidance on legalities, while accountants give advice on tax and perform declarations.

Financial advice when you need it the most

Spain is one of the most popular countries in Europe for foreign residents. The country has a rich culture and beautiful landscape, making it an attractive place to live. It is one of the oldest countries in Europe with a rich history and culture mixed with modernity, making it an attractive destination for expats and firms who want to find happiness and reach their goals abroad. Financial advisors in Spain can help you navigate the Spanish new environment so that you can enjoy your time there without any money worries.

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Tax planning for expats

When you are an expat and are planning to buy a property in Spain, financial advice on mortgages in Spain is very good to have. If you are not familiar with mortgages in Spain, you might not get one or pay too much. Through the financial analysis of the advisor, you can reduce the interest rates for your loan. There are also other financial services advisors can offer. For example, they can assist you with tax planning to reduce income and capital gains taxes.

Advice for pensioners in Spain

When you retire in Spain and have a pension, you can request financial advice on a wide range of financial services. These services include financial planning, financial investment and financial risk assessment. They can advise you on the best way to bring your pension over to Spain, as well as assist you with mortgages if you need one.

Financial advice for your business in Spain

Financial advice in Spain is also available for firms in Spain. For example, it can be very useful when you are starting a business in Spain with a significant loan. While you need lawyers to guide you through the company formation and accountants to guide you through the taxes in Spain. Financial advisors can help you plan for the future and give you advice on what financial products would be best for your company. This financial advice can help protect your company from financial risks and give you more financial freedom.

Businesses can request financial advice on how best to manage their financial resources. Financial advisors will provide loan analysis and investment management services. They can use advisors regarding corporate financial products. These include pensions, share schemes, financial planning for retirement, financial investments, financial risk assessment and financial reporting. Businesses can also use financial advisors to guide them through the financial aspects of mergers and acquisitions.

What financial services do financial advisors offer in Spain?

Financial advisors offer a range of financial planning and management services, including financial analysis, financial management, financial advising services, and financial analysis.

They can assess financial risk and evaluate investments to give you financial plans designed for your individual needs. They will provide you with the best financial products to meet your budget and financial goals.

Although they typically advise on all financial matters related to an individual or company’s finances, their financial expertise extends beyond financial planning and financial advising.

At the very basic level, financial advisors in Spain help provide financial security and financial services, while more complex financial advisory services can be employed for personal or business use.

Financial services consist of

Analysis
Planning
Tax financial services
Risk assessment
Advising
Coaching
Information and guides

What is financial analysis?

Financial analysis is the process of reviewing and examining data, such as financial statements and working papers, to determine different types of risk exposure or financial health. Financial advisors use financial analysis to examine a company’s balance sheet, statement of financial position, and other financial reports to make a financial assessment.

What is financial planning?

Financial planning is the process of determining the financial goals you want to achieve in life and then creating financial plans that meet those needs. Financial advisors help clients prepare financial plans by assessing their current financial situation, determining where they want to be financially in the future, and then creating financial plans that will get them to their financial goals.

The financial planning process can be done when financial decisions are made at any point in life. Suppose you face significant financial decisions in your life, such as buying a home or retiring. In that case, financial advisors in Spain can help you make the best choices for your financial situation.

What are financial tax services?

When you want to use Spanish tax advantages, it is wise to get help from an expert. Financial advisors can assist you with financial tax services, including advice on tax planning. This financial advice can provide additional financial security for investors. It can alleviate the financial burdens. If you need assistance declaring your taxes, accountants can help you with this.

What is financial risk assessment?

Financial risk assessment is a process performed by financial advisors to assess financial products or services’ financial risk. It is the assessment of financial risk undertaken by financial advisors to determine whether financial services are appropriate for an investor’s needs and expectations of financial returns.

Financial Risk Assessment also includes evaluating how well a portfolio or investment strategy fits with their financial goals, experience, risk tolerance and other personal factors that affect financial risk.

What is financial advising?

It is a financial service provided by financial advisors in Spain in which they provide financial advice to individuals and businesses on financial products, financial planning and budgeting.

It is a financial advisory service where financial advisors provide information and education on credit cards, debt relief services, debt consolidation loans, financial planning, financial services, financial management, financial risk assessment, loans that are offered by financial institutions.

Financial advisors can give financial advice to both individuals and businesses. Businesses need financial advisors to handle the financial operations of their companies for them. Financial advisors can help with finding the most effective way for a company’s money to be used and help financial managers maximize financial potential.

What is financial coaching?

A financial coach, also known as a financial planner or personal financial advisor, can provide financial coaching to anyone who wants to develop financial knowledge and skills for themselves. Coaching provides the opportunity (and motivation) to take control of your own finances by making you more confident in financial matters.

Coaching is particularly useful for people who are new to financial planning, or those looking to change the way they think about financial planning. You can also get financial advice on how you manage your financial life in Spain. It will help you identify areas for improvement.

What is financial information?

Financial information includes financial reports indicating financial health. It can also contain guides for investing and explanations on financial services, such as mortgages, credit cards or retirement plans.

The financial information may also take the form of daily, weekly and monthly financial updates and news on financial markets and financial institutions in Spain.

Investment management

Investment management is financial advice on financial products. It helps investors achieve their financial goals. Financial advisors in Spain provide investment management services involving financial planning, financial investments, financial risk assessment and financial reporting in Spain.

Investment management involves an assessment of an investor’s financial profile (assets, debts, income and expenses) together with their financial objectives to help them plan for short-term financial goals, such as a home purchase or a financial emergency.

It also includes financial planning for retirement and financial risk assessment to determine the right investment mix to help achieve financial goals. Investment management may also provide financial advice on corporate financial products such as pensions and share schemes.

Types of financial institutions in Spain

There are many types of financial institutions in Spain, including banks, insurance companies, brokerage firms, financial planning professionals and credit unions. All financial institutions are regulated by the financial authorities in Spain and have to comply with financial regulations.

Popular financial products in Spain

One of the financial advisors in Spain may advise you on financial products such as:

Loan products
Savings and investments
Retirement plans
Insurance contracts
Housing loans and mortgages
Investments and financial instruments such as shares, bonds and units in mutual funds
Pensions

Types of taxes in Spain

You will have to deal with many types of taxes when you live in Spain. The financial advisors in Spain can help find information about which taxes apply to your financial situation and how best to deal with them. Ordinary taxes you will find in Spain are:

Spanish financial advisers will provide financial advice relating to taxation, housing plans, household finance planning, personal financial planning, savings plans and investments. Tax is compulsory for all citizens residing within the economic borders of Spain.

Biggest mistakes by expats

The financial advisor in Spain may tell you which financial mistakes are common among expats. Common mistakes made by expats include:

Not filing tax returns at all or without financial information
Submitting incorrect financial details due to lack of understanding
Attempting to save money by avoiding financial advice
Failure to plan financial advice, underestimating financial needs
Claiming too many allowances
Language barriers
Filling the wrong forms (Modelo’s)
Not properly dealing with debts
Not properly dealing with gains

Expats who are new to Spain should ensure they understand the financial requirements of living there. Because making financial mistakes can result in financial penalties.

A word from SpainDesk

When dealing with a significant amount of money, it is essential to get an independent advisor. By law, financial advisors in Spain must disclose any financial relationships with financial products. This means you can trust your financial advisor not to recommend a financial product because it pays them more money. They will provide impartial financial advice on taxation issues and financial planning in Spain.

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered as professional legal advice. We highly recommend seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.

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January 26, 2022

Corporate Tax Spain: Rate, Due Dates, and Laws

Taxes

Spain has its own set of corporate tax laws and owns corporate tax rates, which are different to other countries. Whether you are already running or still need to form a company in Spain, knowing what corporate income tax you will need to pay is essential. In this article, you can read everything you need to know. Keep in mind that this article is not professional advice and can contain outdated information. Always do your due diligence or contact an accountant in Spain for advice on your specific situation.

Corporate Income Tax Rate in Spain

Generally, the corporate tax rate in Spain is 25%. However, the tax rate can vary depending on the type of company and industry. For instance, if you are an entrepreneur, your newly incorporated company will pay the corporate tax rate at 15% during its first two years of operating.

It’s important to know that, unlike personal income tax, the corporation tax is not based on various income thresholds but is a fixed rate to be paid. In addition to a general corporation tax, companies must pay trade tax and municipal business tax, among others.

Corporate Income Tax (CIT) in Spanish is “Impuesto Sobre Sociedades”. It is the direct tax based on the profits made by companies and legal entities residing in Spain and its territories. The worldwide income and accounting profit are the main factors used to determine the tax base and amount paid by the corporation.

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Due dates for corporate income tax in Spain

The corporate income tax filings have to be done after 6 months ending the financial year, within 25 days. So usually between July 1st and July 25th of the following calendar year. There are also two advance payments to be made during the first six months of the company’s tax year and the second before the end of the year.

Types of companies that have to pay corporate tax

Companies that have been required to file corporate income tax and pay corporate tax are:

Limited liability entities (such as the SL in Spain and SA in Spain)
Civil companies
Foundations
Cooperatives
Investment funds, pensions, venture capital, etc.
Non-resident entities with a permanent establishment
Non-resident entities that carry out business activities through a branch or dependent agent in Spain.

Corporate Income Tax Rates exemptions

As it has already been mentioned, while the general corporate tax rate in Spain is 25%, other rates may apply based on the type of company or the sort of business it conducts. Under certain circumstances and requirements, the following entities can be granted a different taxation rate under Spanish law:

Listed collective investment institutions inclusive of real estate investment funds (1%)
Certain cooperatives fiscally protected (20%)
Entities engaging in oil and gas research and activities (30%)
Listed corporations for investment in the real estate market (19%)

Resident companies pay corporate tax on worldwide income

Companies that reside in Spain are taxed on their worldwide profits. In other words, if a company is resident in Spain, the corporate tax rate will be on all of its income whether that may be from within or outside of the country.

Permanent establishments in Spain

A permanent establishment in Spain is a fixed place through which the business is wholly or partly carried out; an example would be if a company had its own branch in Spain. In other words, it is a workplace from which the company runs its operations.

If a non-resident company has a permanent establishment in Spain, it will pay corporation tax on its income derived from this establishment and profits attributed to the permanent establishment.

However, suppose a permanent establishment in Spain is considered a dependent agent. In that case, the Spanish tax authorities will consider that income as attributed to its parent company and thus not taxable in Spain. In this case, the dependent agent is completely dependent on another company and has complete control. In other words, if the company isn’t legally and economically independent from its principal foreign company, it won’t be taxable in Spain.

Spanish tax treaties with other countries

If you have business interests in another country, your country has likely signed a double taxation agreement (DTA) or an exchange of information agreement with Spain. These agreements aim to avoid the company being taxed twice on the same income – once by its domestic state and again by another state.

To avoid double taxation on your income or assets, a company must file the taxes correctly. Depending on your specific circumstances, you may be required to submit an income tax return in both countries. But while you may be required to file two tax returns twice, you won’t be charged twice for the same earnings.

Spain has many different tax treaties with other countries. You can find the double taxation agreements signed by Spain (in Spanish) on the website of the Agencia Tributaria.

The tax rate on branch offices in Spain

A branch office is an establishment through which the company performs its activities in Spain. The branch office will be flagged as a corporate entity. With this, the branch office will be treated as a separate legal corporate entity for tax purposes. It needs to be incorporated in Spain and apply for its own taxpayer reference number to declare taxes on the income derived from its activities in Spain.

The branch profits tax is not charged on corporations established in other EE.U.Member States/countries with which Spain has a tax treaty. However, if the branch office carries out activities independently of its parent company, or at least 50% of that income originates in Spain, then it is likely the company needs to pay income tax in Spain. Consult with a professional tax accountant to get more information on your particular situation.

Resident companies in Spain

Resident companies in Spain must pay capital gains tax in Spain. A resident company must:

Be established in compliance with the laws in Spain.
Have the company’s headquarters in Spain.
Have management and overall control in Spain

Company residence in tax havens

Companies located in tax havens or zero-tax jurisdictions may be deemed Spanish tax residents under the CIT Law. The Spanish tax authorities deem this when

Most of their assets are located in Spain.
Most of their assets are used in Spain.
Most of their activity is undertaken within the Spanish territory.

This may be overcome when the business is incorporated in a tax haven, and the domicile and effective management are there. There are compelling commercial reasons for having the company incorporated in the tax haven.

Corporations owning subsidiaries via intermediary companies

If corporations own subsidiaries or any form of indirect shareholdings in other companies, the tax rule is that they must pay corporate tax on all or part of such profits. The corporate tax rate payable will depend on the percentage held and whether it is a resident or non-resident company.

Spain corporate tax rate on newly-formed companies

Newly incorporated businesses are taxed at a 15% rate for both the first and following tax periods, regardless of whether they make a profit in either. It’s important to note that there are a few exemptions from this lowered rate, such as:

Equity companies: Companies not engaging in business activity
National or International groups: Newly created companies that are a part of larger groups or organizations
Previous activity: Companies whose business was previously carried out by a related company or individual

What is the taxation period in Spain?

The corporate tax period aligns with the fiscal year of each entity or company and cannot exceed twelve months. The end date of the tax year should be identified in the by-laws of the company in question. If not, the closing date will be considered December 31st of each year. It’s important to note that the corporate income tax is accrued on the final day of the tax period.

In some cases, although the standard fiscal year may not have ended, the tax period is considered to have concluded. Early completion of a tax year will happen in the following situations:

In case the entity or company is disbanded.
When the legal residence of an entity or company is changed from a Spanish territory to a foreign territory.
When the legal classification of an entity or company is changed, it would result in it no longer being subjected to a corporate income tax.
If there are modifications or restructuring made to the company or entity that would result in a different corporate income tax rate or the application of a different tax regime.

What forms are required?

There are four primary forms used to file corporate tax reports in Spain:

Form 200: This form is used by companies and entities with residence in the Spanish territory subject to standard tax legislation, regardless of the size or activity.

Form 220: It is very similar to form 220. Only this type of return is mandatory for tax groups. The parent company of the group in question must file this return; however, it’s still required for each entity under this group to file individual returns using form 200.

Form 202: If your corporation had a positive tax result in the previous Form 200 submitted, then you are required to file this additional form. This form is considered an advance payment for your following Form 200 and is made in instalments in the months of April, October, and December. These instalment payments will subsequently be deductible from the amount to be paid of the Corporation Tax.

Form 222: Similar to Form 202, another mandatory payment instalment form for company tax groups.

Regarding forms 202 and 222, please note that if your tax result is negative in July (or the six months following your company’s fiscal year), you’re entitled to a refund of the amounts you prepaid. Additionally, you won’t be required to pay the total amount when your result is positive since you would have already partially paid in advance. All of these forms should be filed electronically.

Accounting Requirements

All companies and entities liable for the corporate income tax are also required to maintain all of their accounting books in compliance with the Code of Commerce. Some of the documentation required includes:

A journal is used to record all of the operations carried out for activities regarding business development. These must be listed in chronological order.
An inventory book and annual account to be opened with a detailed initial balance sheet of the company. This book should be transcribed with all sums and balances and trial balances (the second accounting statement) at a quarterly minimum. The inventory at the end of the year (the third accounting statement) along with the annual accounts (the last accounting statement) is also required to be recorded there annually.
Corporate books, including minute books, registered shares in joint-stock companies and limited liability companies, and the registration books of partners involved in limited liability companies.

The last accounting statement contains the annual accounts, including the balance sheet, profit and loss reports, statements of any changes in equity, all cash flow statements, and any notes regarding these financial statements. This last accounting statement is crucial for determining the company or entity’s tax base and all of the subsequent taxes owed.

It’s also imperative that these accounting ledgers are kept for at least six years following the last entry. In situations where the company in question is disbanded, it’s the responsibility of the liquidators to safeguard them for the remainder of the time necessary.

Additional Information: Spanish Tax Groups

There are several advantages to setting up a tax group in Spain. By doing so, multiple companies can apply a special tax consolidation regime for purposes related to the corporate income tax. With the possibility to offset profits and losses throughout the different companies in the group, it’s a beneficial structure that shouldn’t be ignored.

When a group’s parent company holds at least 75% of both the voting rights and the share capital of the subsidiaries it isn’t required to be a resident of the country for tax purposes. Thus, opening the door for multinational groups to utilize this structure.

Frequently asked questions

What are the penalties?

The tax authorities in Spain are rigorous on corporate income tax, and there are severe penalties for late tax filing or undisclosed assets. For example, suppose you neglect to disclose company assets such as accounts, shares, or real estate located overseas. In that case, fines of a minimum of 10.000 euros are subjected to you.

Additionally, assets that are not disclosed within the established time constraints will be considered unreported income. In this case, fines of 150% of the gross tax liability will be enforced.

Which companies and entities are exempt from the Corporate Income Tax?

There are two categories of exemption from the corporate income tax: total exemption and partial exemption.

Entities who can benefit from total CIT exemption include:

The State
Autonomous communities
Local entities and their autonomous bodies
Social Security management entities
The Bank of Spain

These entities are all granted a total exemption, meaning they are not required to file tax settlement declarations, comply with registration or accounting requirements, and so on.

Some of the entities that are allowed partial exemption are as follows:

Non-profit organizations
Charitable or public utility entities and institutions
Non-governmental organizations (NGOs)
Professional or business associations
Official chambers
Unions
Political parties

A partial exemption means that these entities are still obligated to declare the income they obtained in a given financial year.

How are the tax base and corporate income tax calculated?

There are three methods used to determine a company or entity’s taxable income: the direct assessment method, the indirect assessment method, and the objective assessment method.

The direct assessment method applies to most corporations and is determined by evaluating the difference between the revenue and expenses of the entity during a given tax period. Thus, the taxable income is primarily based on the income disclosed in the company’s financial statements. However, in some cases, the income outlined in the accounting books may not be entirely representative of a corporation’s actual contribution capacity. In these situations, various corrections or accounting adjustments will be made by applying the tax principles established outlined in the legislation.

Therefore, the tax base (the amount to which the tax percentage should be applied) is determined through the overall income, expenses, deductions and any adjustments made in a company’s fiscal year.

It’s worth noting that in instances where the resulting tax base is positive, negative tax bases from previous years can be offset.

What other taxes need to be paid by corporations in Spain?

Revenue tax also has to be paid. This VAT tax in Spain will have to be paid quarterly, monthly, and yearly depending on the amount of revenue the company makes.

Is there a tax incentive to incorporate a company in Spain?

While the Canary Islands within Spain are considered a tax haven, Spain is not. However, there are many tax incentives, including the following:

There is a lower tax rate for newly formed companies, 15% instead of 25%.
Tax credits are available for research and development.
There is a tax credit available for technological progress.
There is a tax exemption/deduction to protect you from double taxation on both an internal and international level.
There is a tax credit for investments in Spanish feature-length film productions.
There is a special tax regime for listed real estate companies in Spain that make investments, called SOCIMIs. SOCIMIs enjoy certain tax breaks, including the exemption of both taxes on dividends and CIT.

There are also other tax incentives in Spain. When you work with us, we will make sure you are in compliance with all Spanish laws and regulations and we will reduce your tax rate when possible.

How does the Spain corporate tax rate relate to other countries tax rates?

The corporation tax rate in Spain is 25%. As of writing, above the EU average. The United Kingdom has a corporation tax rate of 19%, while Germany’s corporate income tax rate is 15%. France’s corporate income tax rate is 28.41%, and Ireland’s rate is 12.5%.

Guidance on your corporate income taxes in Spain

The procedures to file corporate income taxes are complex and require a deep understanding of Spanish taxation law. Suppose you’re unsure how to file your company’s taxes or would like advice on the process. We can help. Our team of experienced accountants are ready to assist you through the many challenges of corporation tax.

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January 25, 2022

Common Spanish Modelo’s: Numbers, Meaning, and Uses

Taxes

If you already have an existing business in Spain, or you already live in Spain, you might be familiar with some the modelo’s. These are forms you have to fill in, and they are mandatory by the Spanish tax authorities. At SpainDesk, we have professionals specialized in every one of the forms, including the more unique and complicated tax forms.

This article provides more information on the more common forms and information returns. It gives an idea of what you will be dealing with with the Agencia Tributaria. The information is incomplete. Contact us if you would like us to take care of your situation. We offer a variety of services.

Individual and Resident Category

Below you can find some information when you are a non-resident or resident in Spain.

Modelo 30

Form 030. Tax register of parties liable for tax Payments-Declaration of registration, change of address, and variation in personal data in the tax register. Form 030 is provided for parties to register as a fiscal resident with the Tax Office and liable for tax payment, private individuals, or communicate any changes in your data or to indicate an address for notifications if you wish to receive them on another than your fiscal address. Spanish citizens or non-residents can use form 30 to request a tax identification number (NIF).

Modelo 100

Form 100. Personal Income Tax. Annual tax return. The Tax Agency is responsible for issuing form 100 and resident of Spain needs to complete this form as income tax statement within their first year. Also, completing this form means you agree to the Spanish Revenue, and in compliance with HMRC, you are resident in Spain for Spanish tax.

Form 123 (Annual equivalent of M193)

Form 123. Withholdings and payments on account for Personal Income Tax, Corporate Tax, and Non-Resident Income Tax (permanent establishments). Residents of Spain must file form 123 to provide information on certain income from movable capital for tax purposes.

Modelo 145

Form 145 is required by Tax Agency form to record information on personal income tax through which taxpayers inform their payer—including their employer, about their tax and family status. It is also used to define the income tax withholding percentage applied to their wages.

Modelo 151

Form 151. Income Tax Return for individual National Tax Administration Agencies. This form enables online filing, or pre-filing of Income Tax for individuals under the special regime applicable to workers relocated to Spain.

Modelo 210

Form 210. Non-resident imputed income tax and rental tax. Non-residents in Spain are required to pay a percentage of their income and property owned by the state. The current rate for EU members for this tax is 19% and 24% for non-EU members.

Modelo 714

Form 714. Assets or Wealth Tax Declaration of Spain. It includes the necessary information related to the properties owned by the taxpayer and a Statement of Assets by anyone who owns properties that exceed a net value of €700,000. The first seven hundred thousand euros is a nil rate band, and the excess is taxed following a sliding scale. Nationally this scale is 0.2% – 2.5% of net assets.

Modelo 720

Form 720. Declaration of Assets and Rights Held Abroad. All citizens and non-residence of Spain are required to complete form 720 for assets owned in another country. The 720 form is essential, and the information provided is necessary for fraud detection purposes only. Also, it outlines, if any, and what assets are owned and could be subject to significant fines for failure to complete it.

Business Category

Below you can find some Modelo’s you might need when you are dealing with corporations.

Modelo 111

Form 111. Withholding tax (IRPF) due for the company’s employees and any invoices received withholding tax retained. It is a quarterly requirement to complete general invoices from economic activities incomes, notaries, capital gains from forestry development, and self-employed people (autónomos).

Modelo 115

Form 115. Withholdings and payment on account. Income or yields from the leasing or sub-letting of urban buildings. It is completed and submits quarterly by a self-employed person who rents a property with the withholding included in the invoice.

Modelo 165

Form 165. Informative return of individual certificates issued to partners or participants of newly or recently incorporated organizations. As developed in section 1 of article 69 of the Regulation on Personal Income Tax, it sets out how the new informative tax return must be presented.

Modelo 190

Form 190. Information Return. Withholdings and payment on account. Work income and income from economic activities, prizes, and certain capital gains and income allocations. It must be completed annually, including information about the workers and professionals with their names, surnames, ID, perceptions, and withholdings. It is an informative statement and summary form of withholdings for professionals and workers.

Modelo 200 / 202

Form 200. IS. Tax Return for Consolidated Groups. Corporation tax and non-resident income tax. Payment or refund documents. Businesses have to pay taxes simultaneously to (national treasury and regional treasury) and file self-assessment for corporation tax and non-resident income tax (permanent establishments and organizations under the income allocation system incorporated abroad with terms approved by these in the Spanish territory.

Modelo 232

Form 232. Informative return on related-party transactions and transactions and situations relating to countries or territories classified as tax havens. Obligation to expressly report transactions with related persons or entities and information on trades and conditions relating to countries or territories classified as tax havens.

Modelo 303

Form 303. VAT. Self-assessment. Complete filing of the self-assessment for value-added tax, which should be submitted quarterly if you develop any activity subject to VAT. It can be paid or deducted in certain situations.

Modelo 322

Form 322. VAT. Groups of organizations. Individual form. Monthly self-assessment. A complete filing of the monthly self-assessments for value-added tax corresponding to groups of organizations, a personal record.

Modelo 347

Form 347. Information Return. Annual information return on transactions with third parties. Formalities Information and Assistance. It is required to be completed annually with details on the statement of operations with third parties. Deals worth more than € 3005.06 with the reoccurring party will need to submit this form.

Modelo 349

Form 349. Information Return of intracommunity transactions. It is completed with a disclosure statement. Businesses are required to file the capitulatory return of intracommunity transactions during the corresponding period.

Form 353

Form 353. VAT. Group of entities. It is an aggregated and Monthly self-assessment form that is required to be completed by the parent company on Value Added Tax, through which the payment of the tax debt or refund or the request for compensation is made.

Modelo 368

Tax Form 368. Declaration-settlement of the special VAT regimes applicable to telecommunications, broadcast or television, and electronic services. It is completed quarterly and required for companies dedicated to sales of digital services or registered in a one-stop mini-shop for online sales to EU countries.

Modelo 390

Form 390. VAT. Annual summary tax return. It is required to summarize all transactions related to VAT collected, deducted, and paid by your business during the year. Spanish autónomos and small companies are mandatory to file as there is no payment involved.

Self-Employed Category

Below you can find some Modelo’s you might need when being self-employed.

Modelo 36/37

Forms 036 and 037. Tax register of business persons, professionals, and withholders – Tax register declaration of registration, modification, removal, and simplified tax register declaration. The individuals who should be included in the register for business people, experts, and withholders ought to submit declarations using 036 or 037. A record ought to likewise be offered for adjustments or expulsion from the register.

Modelo 130/131

Form 130. IRPF (Personal Income Tax). Companies and professionals are taxed under the direct evaluation system. Installments. It is mandatory to be filed by individuals who carry out economic activities including agricultural, livestock farming, forestry, and fishery under the direct evaluation system, standard or simplified modality in Personal Income Tax.

Modelo 303 (390)

Form 303. VAT. Self-assessment. It is required to be filed as a VAT return form by all self-employed people in Spain. Every quarter, form 303 is completed to declare their earnings and pay tax.

Real Estate Category

Below you can find some information when you are dealing with real estate in Spain.

Modelo 180

Form 180. Information Return. Withholdings and payment on account. Income from urban building leasing. Annual summary. To be completed yearly as an overview of Personal Income Tax, Corporate Income Tax, and Non-residents Income Tax for incomes acquired from leasing or subletting buildings.

Modelo 211

Form 211. IRNR. It is mandatory and completed for Non-residents’ income tax and withholding in property purchases from non-residents without permanent establishment.

Modelo 296

Form 296. Information Return. Withholdings and payment on account for non-resident income tax (without permanent establishment). The tax form 216 is completed annually by Non-Resident Income Tax (IRNR), which must be paid by companies or individuals who receive some income in Spain, but do not reside in the national territory.

Inheritance Category

Below you can find some information when you are dealing with inheritance in Spain.

Modelo 182

Form 182. Information Return. It contains information about donations and contributions received. Further, it is required to file the right to a deduction in income tax, corporation tax, or non-resident income tax.

Modelo 650

Form 650. Inheritance and Gift Tax. Self-assessment inheritance tax return. If you own assets in Spain, you should plan for your demise, requiring you to file form 650 within 30 and pay inheritance tax. Filing and pre-filing can be done online.

Get support with filling in your Modelo’s in Spain

If you would like us to help you fill in your Modelo’s in Spain, then contact us. We have a team of expert and local tax administration experts ready to assist you. We can take care of it for a fixed fee.

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal advice. We highly recommended seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.

January 20, 2022

Modelo 720: Meaning, Due Date, Rate, and Penalties

Taxes

As a Spanish resident, you must use the Modelo 720 to report your overseas financial holdings when the total value of all the specified overseas assets in which you have ownership in, is more than the specified reporting threshold. The form provides three reporting categories including bank accounts, investments and immovable property.

The Modelo 720 is designed to help the tax authorities obtain information regarding the amount of specific type of assets held by Spanish residents outside Spain. Also, information on income, insurance, securities or rights obtained overseas is a substantial part of the declaration. The Modelo 720 is an important document in the Spanish tax system, let’s review its meaning, due date, rate and associated penalties.

Who should use the Modelo 720 form?

The obligation to file Form 720 and declare all financial entities located overseas lies on the owners, beneficiaries, representatives, whether individuals or companies with rights of disposal or full ownership. Spanish tax residents are legally mandated to fill out the 720 tax form, indicating to the relevant tax authorities of their fiscal activity in other nations.

According to the Spanish Tax Office, Modelo 720 applies to all Spanish residents and legal persons who, at any time in the year owned overseas assets worth €50,000 or more. You must report on Modelo 720 all specified foreign holdings, regardless of whether some or all of the foreign holdings was sold before the end of the year.

The €50,000 threshold is based on the cost amount of the asset. When it comes to foreign assets acquired as a gift or inheritance, the cost amount is considered as the fair market value at the time the assets were received.

The components to submit in the Modelo 720 also includes values such as:

Homes
Shares, stocks, and bonds
Trusts
Life or disability insurance policies
Cryptocurrencies
Pension funds

For individuals who have already filed Modelo 720 in the past, you will have to file it again in case the value of an existing asset grew by more than €20,000 or you traded in new assets.

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Can I file Modelo 720 electronically?

Form 720 is submitted electronically at the Spanish Tax Agency, so you cannot file it in person. The taxpayer must have an identification with a digital signature (electronic ID or an electronic certificate. Submitting the Modelo 720 with professionals guarantees greater peace of mind.

In case the taxpayer does not have an electronic signature, the individual in charge of submission must be authorized to submit the declaration on behalf of third parties. Consequently, only a registered tax office collaborator or legal professional can submit the form on your behalf.

What is the due date for filing the Modelo 720 form?

The tax form needs to be submitted before 31st March of every year. You can file it after the submission period but you will have to pay a penalty.

Are there any penalties for not declaring foreign income?

There are considerable fines imposed for non-compliance with the Modelo 720, starting at €5,000 and can reach six-figure sums. Therefore, advisers and taxpayers must take great care in their Modelo 720 compliance, and when handling enquiries and disclosures.

Get advice for filling in your Modelo 720

The taxation of income and all gains from foreign interests can be complex. At SpainDesk, we help our clients ensure compliance, especially concerning issues of residence and tax liability.

The importance of filing Modelo 720 for Spanish residents cannot be overstated. In this regard, maintaining proper records of all foreign holdings is critical to minimizing the time, hassle and potentially the cost of completing this form. Based on Spanish tax laws, errors or omissions, even if accidental, could lead to penalties. As a result, it’s essential that you complete the form correctly and subsequently file it on time.

As a Spanish taxpayer, you want to take advantage of existing treaties and tax laws to mitigate double taxation when dealing with foreign assets. We strongly recommend consulting a professional tax advisor, especially if you are not very familiar with the existing tax regime. We can help you, just fill in the contact form and we will contact you back right away.

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January 19, 2022

Taxes in Spain: A Complete Overview for Expats

Taxes

As in most developed economies, Spain supports its welfare and social services system thanks to taxes. Spanish residents, non-residents, and citizens enjoy numerous social programs that taxpayers pay for through various taxes. The Spanish tax system pays for the health and education system, social assistance to low-income people, unemployment insurance, commonly called “unemployment pay”, the retirement pension system, citizen security, and other public services.

The Spanish tax rates that residents and non-residents pay are different, and understanding precisely the difference will allow you to manage your savings and income more efficiently. You can distinguish taxes by direct taxes and indirect taxes.

The main direct taxes in Spain

Direct tax is an income or property tax paid directly to the government by the taxpayer. Among the direct taxes in Spain are:

Personal income tax: the personal income tax is taxed based on the taxpayer’s income. If you are a tax non-resident, the government will only tax Spanish income.
Corporate income tax (IS): Companies need to pay a corporate income tax (a business tax).
Wealth tax: The local Spanish tax office levies taxes on people’s wealth. However, some autonomous regions in the country completely discount it. If the government taxes your wealth, you need to pay tax on your assets minus the debts.
Inheritance and gift tax: When a succession happens, and you receive an amount of money, you will have to pay inheritance tax over this income.

The main indirect taxes in Spain

An indirect tax levied on transactions (sales) of goods and services. Among the indirect taxes in Spain are:

Value Added Tax (IVA): The value-added tax is the most important indirect tax, and it taxes the consumption of goods and services by individuals and companies. It is well known because it affects us all in our day-to-day life, and it is very little loved since it makes products more expensive, an issue that hinders the competitiveness of the seller and the purchasing power of the buyer. Some products have a lower IVA to minimise this negative impact, as they are considered essential products. There are three types of IVA at 21%, 10%, and 4%.
ITPAJD: Three groups fall under these taxes, which are asset transfers (related to property tax), corporate transactions (related to the incorporation of companies), and documented legal acts (related to notarising commercial and administrative documents).

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Are you a tax resident or a tax non-resident?

It is essential to determine if you are a tax resident or non-resident in Spain. Whether you are a resident for tax purposes or not will determine the height of the taxes you will have to pay.

You will be regarded as a tax resident if you fulfil one of the three following conditions.

When you are a resident of Spain for more than 183 days each calendar year, from January to December (the days need not be consecutive to count).
When you have a dominant professional tie to the country, which means you do a job or have employment in Spain. This scenario is typical for someone who works for a Spanish company for part of the year but spends most of his time travelling and meeting clients worldwide.
Your spouse or children reside in Spain.

This distinction only applies to tax concerns and has nothing to do with the residence permit, allowing you to reside in the nation lawfully. This implies that you may have a residence permit in Spain, but you could be classified as a non-resident for tax purposes if you do not fulfil the criteria.

The personal income tax (IRPF) for tax residents in Spain

The personal income tax (PIT) for Spanish tax residents, also known as the Impuesto sobre la Renta de las Personas Físicas (IRPF), is generally on their worldwide income regardless of the earning location. The PIT is a progressive income tax. Who makes more will pay more.

The calculation for income tax for tax residents is with the general income (Renta General) and savings income (Renta del Ahorro). The personal income includes:

Payroll and benefits.
Gains on assets via another party, such as lottery winnings.
Interest and other revenue generated.
Dividends and other income from company investments.
Revenue generated from capitalisation transactions and life and disability income insurance.
Capital gains from transfers of assets.

The progressive income tax for tax-residents in Spain

Below you can find an idea of the progressive income tax for tax residents in Spain. You should always calculate the actual personal income tax rates by looking at the autonomous region in Spain where you are a tax resident.

Taxable base (up to)	Tax liability	Excess of taxable base (up to)	Tax rate
€0	€0	€12,450	19%
€12,450	€2,365.50	€7,750	24%
€20,200	€4,225.50	€15,000	30%
€35,200	€8,725.50	€24,800	37%
€60,000	€17,901.50	€240,000	45%
€300,000	€125,901.50	Remainder	47%

Income tax brackets differ a lot in the different autonomous regions. For example, Madrid has a lower income tax compared to Catalonia.

The income tax has deductions

The Spanish income tax has several deductions. These deductions will help you to pay fewer income taxes in Spain. Make sure you know which of these exemptions apply to you, and get the help of a tax advisor if you are not sure. That way, you don’t pay more Spanish income tax than necessary. Some of these allowances are:

A tax resident in Spain will get an allowance based on their age. This tax allowance will increase as people age.

under the age of 65: €5,550
age 65: €6,700
age 75: €8,100

In addition, the tax resident has a deduction for each dependent child. If you have children under 25 living with you, you can claim an additional allowance of:

€2,400 for the first child
€2,700 for the second
€4,000 for the third
€4,500 for the fourth
An additional allowance of €2,800 for each child under three years

There are also income tax deductions in Spain for:

Payments into the Spanish social security system and pensions
Charity donations
Certain costs for purchasing and renovating a home
Dependents who are disabled to a certain degree.

There is no PIT on wage income earned by tax residents in Spain but who perform their business activities entirely outside the country. However, there is a maximum limit of up to 60,100 euro’s. In general, you can apply this if:

The work is physically outside Spain.
The work is for a non-resident Spanish company or entity.
In the nation where the employee performs the work, a similar or identical tax as the Spanish PIT is used. The country where the services is not a tax haven. The government has a tax treaty to avoid double taxation, with an exchange of information clause.

Income tax in Spain for non-residents

In the same way that the resident population in Spain is subject to personal income tax, non-residents need to pay the Non-Resident Income Tax, also known as the Impuesto sobre la Renta de No Residentes (IRNR). This declaration, which depends on the type of income and country of residence, applies tax rates between 19% or 24%. This includes income obtained in Spain through economic activities, income from real estate capital, possession of a second residence, and pensions.

In some cases, you must pay taxes derived from activities in Spain and in your country of residence. Spain has signed double taxation agreements with several countries, the list of which is published by the Tax Agency, and this double taxation agreement will determine where you will pay taxes.

In addition to the IRNR, other taxes for non-residents can be the Real Estate Tax (IBI), the Tax on Patrimonial Transmissions (ITP), and the Wealth Tax (IP) of the assets that are in Spain and have a value of above 700,000 euros.

Non-resident tax will be due if you are not a fiscal resident but have a property or other assets in Spain that generate income. This non-resident tax is on your assets and firms in which you are a shareholder.

This Spanish tax will be levied at 24% if you are a non-EU citizen and 19% if you are from the European Union.

Taxes on rental income in Spain

If you profit from renting properties in Spain, you need to pay taxes on this income.

Non-residents are subject to the flat non-resident Income Tax (IRNR, Impuesto sobre la Renta de personas No Residentes) which is a flat tax rate of 19%. If you are not from the EU or EAA countries, the flat tax rate is 24%.

You can find more information about the rental income tax in Spain in our article.

Wealth tax in Spain

The Spanish wealth tax, often known as the ‘Impuesto sobre el Patrimonio,’ is a yearly levy on people and families in Spain with substantial assets.

Wealth tax for a tax resident in Spain

The wealth tax for tax residents in Spain takes all the person’s assets into account, and you can calculate by subtracting a person’s assets minus their debts. Tax residents will generally pay wealth tax in Spain on their worldwide assets.

In general, you will pay taxes on wealth valued above €700,000. But this can vary from region to region. For example, Catalonian residents will pay tax on assets above €500,000, while people in Madrid are don’t pay wealth tax at all.

The national progressive wealth tax in Spain

The national wealth tax in Spain is for residents who reside in an autonomous region that has not set a wealth tax rate, which is:

Taxable base	Full fee	Rest base payable	Applicable rate
0,00 €	0,00 €	167.129,45 €	0,2 %
167.129,45 €	334,26 €	167.123,43 €	0,3 %
334.252,88 €	835,63 €	334.246,87 €	0,5 %
668.499,75 €	2.506,86 €	668.499,76 €	0,9 %
1.336.999,51 €	8.523,36 €	1.336.999,50 €	1,3 %
2.673.999,01 €	25.904,35 €	2.673.999,02 €	1,7 %
5.347.998,03 €	71.362,33 €	5.347.998,03 €	2,1 %
10.695.996,06 €	183.670,29 €	Onwards	3,5 %

Wealth tax deductions

Primary home in Spain (up to 300,000 EURO)
General household contents (except any items listed above)
Pension rights
A range of small business assets and family company holdings
Bonds for Life Assurance

Wealth tax for non-residents in Spain

If you’re living in Spain as a non-resident for tax purposes, you will pay tax on your assets within the country that are valued at over €700,000. This means that if all the rest of your possessions are located outside of Spain, they are not subject to wealth tax.

Non-residents pay wealth tax on a national level. Non-resident wealth tax rates have increased since prior years, ranging from 0.2% to 3.5%. The top tax bracket begins at around 10 million euros.

Look at our article on Spanish wealth tax if you would like to learn more about it. We can also answer your questions on Spanish wealth tax through consultation.

Inheritance and Gift Tax in Spain

When a succession happens and people receive an amount of money, this is considered by the tax agency as obtaining an income, so it fits perfectly into the name of direct taxes. The most common case in which inheritance tax is applied is when an inheritance is received. The most important points are:

Because there is no concept of a person’s “estate” in Spain, all beneficiaries are charged inheritance tax in some manner or another.
The Spanish inheritance law states that two-thirds of your belongings will be given to your children automatically upon your death.
If the assets are outside of Spain and the beneficiary is not a resident in Spain, no tax is applicable.
There are also local inheritance taxes, as well as state inheritance taxes. If no regional guidelines apply, the Spanish Civil Code takes precedence.

Inheritance tax rate in Spain

Inheritance	Percentage
Up to €7,993:	7.65%
€7,993 – €31,956	7.65 to 10.2%
€31,956 – €79,881	10.2 to 15.3%
€79,881 – €239,389	15.3 to 21.25%
€239,389 – €398,778	25.5%
€398,778 – €797,555	29.75%
€797,555+	34%

Capital gains tax in Spain

Capital Gains Tax in Spain is a tax that people must pay when they sell, transfer or redeem any type of financial asset. Typically, the Capital Gains Tax concerns people that are selling a property for profit. Capital gains tax will apply if you sell an investment at a higher price than you originally bought it for.

Assets that are liable for Capital gains tax

This tax is not only levied on the sale of real estate alone, as it can also apply to the sale of financial assets. Other items that are included are:

Stocks
Collectables
Bonds
Buildings, lands, houses and flats
Precious metals, Jewelry

Now that you know for which assets you must pay capital gains tax let’s look at the rate.

Capital gains tax for residents

According to Spanish tax laws, if you’re a resident, you are applied a scale between 19% and 23% and can get tax relief if you have lived in the property for at least three years before selling it. You will pay:

19% for the first 6.000€ obtained as a profit.
21% between profits from 6.000€ to 50.000€.
23% on your profits that are 50.000€ and up.

Capital gains tax for non-residents

You’ll pay capital gains tax on your income from the sale of your property. The capital gains tax for non-residents from EU/EEA countries is 19%, for non-residents from other nations it’s 24%.

There are no exemptions for non-residents, except for one. Non-residents of Spain are eligible for a capital gains tax exemption if they are lawfully residing in any other European Union nation with a tax agreement with Spain. They will also benefit if they meet the condition for main home exemption.

If you would like help with your taxes when selling property, our capital gains tax in Spain article can help provide it. Furthermore, you can contact us for tailored legal guidance when buying or selling property in Spain.

Plusvalia Tax

The Plusvalia tax is a property tax levied by the Spanish government on the increase in the value of urban land. The goal of this tax is to tax the increase in the value of the land, whether there is a property on it or not. This tax is similar to the capital gains tax; only it is paid to the municipality.

The Plusvalia tax is payable when the transfer of ownership of the property is transferred via the Land Registry. This can happen when selling the property, donating the property, or inheriting the property. The amount of Plusvalia tax you have to pay depends on three factors, including the municipality where the land is located, the number of years you have owned the land, and the base (which is the value increase of the property). When you sell your home for a loss, the tax isn’t charged. You may pay the tax at your local town hall, tax office, or online.

The tax is calculated by multiplying the base (real or nominal capital gain) with a coefficient set by the government. The real capital gain is the difference between the purchase price of the land and the selling price of the land in the land registry. The nominal capital gain reflects the real property market, which means the real capital gain.

Property transfer tax

There is a variety of property taxes when buying a property in Spain. Property transfer tax in Spain is a tax imposed on any person buying a property from another person in Spain. The rate varies from autonomous region to autonomous region.

A property transfer tax must be paid if the home is regarded as a second or subsequent transfer in Spain. In the case of a new home, you don’t have to pay a transfer tax. The tax is usually between 6%-10%, and commonly the buyer will pay for it. It is a replacement for the VAT.

There is also stamp duty imposed by the region. This tax is a percentage of the purchase price, and you must pay it when buying real estate. Currently, the stamp duty is between 0.75% and 1.5%.

VAT taxes in Spain

The value added tax (VAT) or impuesto sobre el valor añadido (IVA) is the most common indirect tax. It taxes the consumption of goods and services by individuals and companies.

It is well known because it affects us all in our day-to-day life, and it is very little loved since it makes products more expensive, an issue that hinders the competitiveness of the seller and the purchasing power of the buyer.

In general, the IVA in Spain is 21%. However, because some products are more essential than others, Spain also has lower rates for essential products which are 10% and 4%.

General: 21% on general goods and services
Reducido: 10% on items such as agricultural supplies, mineral water, lemonade, fruit juice, passenger transport, hotel, and restaurants services, and alike.
Super Reducido: 4% on items such as essential food, medicine, caregiver services, books, magazines, newspapers.

In our article dedicated to VAT in Spain, we discuss more how to calculate VAT, the rules surrounding VAT, and VAT refunds.

Corporate income taxes in Spain

The general corporate income tax in Spain is 25%. For the first two years of business, the rate for newly-formed firms is 15%. The most common limited company entity is the Limited Company (SL). There are some exemptions for certain companies:

Listed collective investment institutions, including real estate investment funds, have a corporate tax rate of 1%.
Certain cooperatives will have a corporate tax rate of 20%.
Entities engaging in oil and gas research and activities will have a corporate tax rate of 30%.
Listed corporations for investment in the real estate market will have a corporate tax rate of 19%.

How to pay taxes in Spain

To pay taxes, you will need to get a NIE. A NIE number is a Número de Identificación de Extranjero. It is a unique tax identifier assigned to foreign nationals in Spain. You may obtain this number through the local Foreigner’s Office (“Oficina de Extranjeros”) or a police station. You must do so within 30 days of your arrival in Spain. Then, to declare your responsibility to pay Spanish tax for the first time, you must fill out Form 30 (Modelo 30). When you have your NIE you can register with the “Agencia Tributaria”, and start filing your taxes.

Special expat tax rule: The Beckham Law

Non-resident individuals in Spain who move to the country and acquire their tax residence there become residents for tax purposes. However, if they meet certain requirements, there is a special tax regime that they can take advantage of, known as the ‘Beckham Law‘ or ‘Beckham Clause’.

This specific regime allows these residents for tax purposes to pay taxes according to the regulations of non-residents during their first six years. In practice, this means paying a fixed rate of 24% instead of a progressive one that can go up to 45% if it exceeds 600,000 euros per year.

The ‘Beckham Law’, which tax deduction can also apply to administrators of companies incorporated in Spain that do not own more than 25% of the company, is generally used “for employees who move to Spain under a new employment contract or with one already existing.”

Although the Beckham law is the most commonly used path to save taxes, another alternative can help you become a non-resident for tax purposes. It may be the right strategy if you don’t meet the requirements of the Beckham regime. We refer to those cases where your employer is not in Spain, but you live permanently in Spanish territory as a foreigner.

Spanish double taxation treaties

Spain has signed treaties with about a hundred countries to avoid double taxation. These treaties aim to prevent both countries from taxing your income or capital gains, where you can claim the credit against your Spanish tax liability for taxes paid abroad.

There are many cases in which individuals don’t have to pay tax on their foreign-earned income, and there are only some conditions you need to meet. Where conditions are met, foreign tax paid on income not taxable in Spain may be credited against Spanish tax.

For example, suppose you are a US citizen and pay US tax on your worldwide income, including interest earned on investments made with savings while living in Spain. In that case, you can claim credit for the US taxes paid against any eventual Spanish liability. The Spanish tax credit is usually limited to the amount of Spanish tax owed on the total taxable income of an individual. For this rule to work, you must be a non-resident for tax purposes.

In addition to the above, nationals from some countries sign special agreements with Spain to benefit from a special reduction in their Spanish taxes.

Tax Refund

How to get your tax refund depends on what type of residential status you have.

Resident for tax purposes:

Tax residents can get a tax refund by filing their annual income tax returns.

Non-resident individuals:

Non-residents can get taxes paid in Spain reimbursed. To do so, they must file a tax return and meet some requirements.

Want to hire a professional tax-deducted service?

Now you know what the central taxes are paid in Spain, both direct or indirect. If you are thinking of starting a business or already have one, you are very likely not optimising your taxes to the maximum and are paying more. So, consult with an accountant service in Spain, and consider Spain Desk. Here, you can get guidance from professionals and your taxes efficiently in Spain.

For more information on the Spanish tax system, you can visit the Ministry of Finance and Public Administration.

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal advice. We highly recommend seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.

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January 18, 2022

Wealth Tax in Spain in 2021: What Do You Need to Know

Taxes

The Spanish wealth tax, otherwise known as ‘Impuesto sobre el Patrimonio,’ is an annual tax placed on wealthier individuals and families in Spain. While this form of taxation doesn’t necessarily apply to most people, it can significantly impact those with substantial wealth and even deter many from ever moving to this beautiful country. However, strategic and careful planning coupled with professional guidance will assist you in minimizing your wealth tax liability and, ultimately, fulfil your ambitions of living in Spain.

Residency considerations related to wealth tax

An essential distinction in Spain related to the wealth tax is between residents and non-residents. At the same time, both residents and non-residents need to pay wealth tax. In general, non-residents will have to pay less than residents.

You are a resident in Spain for tax purposes if you spend more than 183 days per year in Spain (6 months). On the other side, only spending 182 days or fewer in the country will classify you as a non-resident for tax purposes in Spain. In this way, having a residency permit does not automatically make you a tax resident in Spain.

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Non-residents in Spain and wealth tax

If you’re living in Spain as a non-resident for tax purposes, you’ll only be taxed on your assets within the country that is valued at over €700,000. This means that if all the rest of your possessions are located outside of Spain, they are not subject to wealth tax. Situations, where you will be a non-resident and have to pay wealth tax, are:

When you are a married couple, you can claim an allowance of €1,400,000 against all included joint assets.
If you inherit wealth above €700,000 from Spain, you will have to pay inheritance tax, and you will have to start paying wealth tax.
In general, when you have a double nationality, you will not have to pay wealth tax over all your assets when you are located abroad for more than 183 days of the year.

Exemptions for non-resident wealth tax in Spain

For non-residents, there is only an individual deduction of €700,000 on the Spanish wealth tax.

Residents in Spain and Wealth tax

If you are living in Spain as a resident for tax purposes, you will be taxed on your worldwide assets that are valued at over €700.000. This means that on top of your assets located in Spain, the value of all your assets will be included for wealth taxation purposes in Spain, which can lead to a significant overall tax increase. Situations where you will have to start paying wealth tax as a tax resident are:

Working in Spain full time
Retiring in Spain
Staying 183 or longer in Spain

Exemptions for tax residents in Spain

There is a range of exemptions, and you can also claim a personal tax-free allowance that varies based on the region you live. Some exemptions include:

Individual deductions on the national level are €700,000. However, autonomous regions can have a different rate. For example, the deduction in Catalonia is only €500,000.
Married couples are entitled to individual deductions on their share of the main home owned, provided joint name ownership.
You can get an allowance of up to €300,000 against the value of your primary home.

Therefore, in some cases, the homeownership and individual deductions combined allow married couples to have a total tax-free allowance of up to €2,000,000.

Bear in mind that tax treaties may be enacted with other countries if taxed elsewhere. For example, double taxation treaties are in place with the United States, Canada, and various countries throughout Europe.

Exact percentages of wealth tax in Spain

Wealth tax in Spain is a progressive tax in Spain. The more value your assets have, the more you will pay. The different autonomous regions have various wealth taxes in place, and some don’t have any. In general, wealth tax in Spain is between 0.2% and 2.5%. Below is more information.

The national progressive wealth tax is:

The national wealth tax in Spain is for non-residents and residents who reside in an autonomous region that has not set a wealth tax rate. Wealth tax rates for non-residents have increased since previous years and range anywhere between 0.2% and 3.5%. The top percentage bracket starts at around 10 million euros.

Wealth Tax Table

The autonomous regions have different wealth tax between:

Spanish residents are taxed based on their fiscal residency location within the country. While the percentages listed for non-residents are also the national standard for residents, some Spanish Autonomous Regions have set their percentages and tax brackets.

Andalucia, Balearic Islands, Cataluña, Murcia, Valenciana, and Madrid all have specified different wealth tax rates, varying between:

Andalucia	0.2% – 2.5%
Balearic Islands	0.28% – 3.45%
Cataluña	0.21% – 2.75%
Murcia	0.24% – 3%
Valenciana	0.25% – 3.5%
Madrid	0%
Canary Isles	National default rates apply.

Avoiding wealth tax in Spain

There are ways you might be able to “avoid” Spanish wealth tax. However, they do come with some caution. They need to be correctly and legally executed for the assets to be exempt.

1. Bonds for Life Assurance

When the policyholder of the life assurance bonds, has waived his right to redemption, and an irrevocable beneficiary has been named. The policyholder can’t exercise the right of redemption.

When the policyholder can’t access the assets, it’s not part of its assets, and therefore, they don’t have to pay wealth tax. According to Spanish courts, the minimum period of waiving rights through the policy is three years (V2516-17, V3070-17, V0993-18).

2. Pensions

In Spain, pensions and their assets are not subject to wealth tax. The person receiving the pension can’t use it, so it’s not considered part of their assets.

3. Shareholding

Shareholders in companies with the following characteristics:

The firm is a trading business.
There is ownership of at least 5% of the company’s share capital or 20%, excluding shares held by a spouse or other family members.
You manage the firm’s operations.
You receive a wage for these jobs at least half of your total net earnings.

4. Giving money away

By giving money away, you can take it out of your estate. Often it is given to children or grandchildren to avoid estate taxation.

5. Share money between your spouse

When you transfer assets to your spouse, you can take them out of your estate.

6. Other potentially exempt assets

Household effects, businesses meeting certain standards, intellectual property rights, and business assets that are used for the taxpayer’s major source of income are all examples of special classes that could be considered exemptions.

Of course, you should always seek expert advice before taking significant steps like those mentioned above. Always keep in mind that the rules of taxation change over time, so make sure you check them frequently.

Key assets included in the Spanish Wealth tax

There is a range of specified inclusions to the Spanish wealth tax. While there may be some things that require special clarification. These are the essential items to consider that are covered under the Spanish wealth tax:

Real estate properties
Artwork and antiquities
Vehicles, boats, planes, etc.
Insurances, deposits, and temporary income
Luxury items – e.g. expensive jewellery, expensive coats, racing cars

Key assets exempted from the wealth tax in Spain

Primary home in Spain (up to 300,000 EURO)
General household contents (except any items listed above)
Pension rights
A range of small business assets and family company holdings

Other deductibles include any loans taken out on the condition that they weren’t used to invest in any of the assets considered exempt from the wealth tax.

Wealth tax and the 60% Rule

Spanish residents have a rule that stipulates an individual’s cumulative wealth and income tax cannot exceed 60% of their total taxable income.

So wealth tax + income tax cannot be higher than 60% of your taxable income.

For example, if an individual has a taxable income of 100,000 Euros (savings or general), then their wealth tax + income tax cannot exceed 60,000 Euros.

However, it’s essential to remember that you must pay a 20% minimum of the total original wealth tax calculation. So you will never be fully exempt from wealth tax. In this way, it is wise to take as little income as possible.

The payment of the wealth tax

Provided you have any wealth tax liabilities, you’re required to complete the wealth tax forms at the end of each year (31st of December), with the final amount payable between May and June.

It is also determined if you are a non-resident or resident.

For married couples considering filing joint income tax returns, you’ll need to calculate your wealth tax on an individual basis and then add it together with your total income tax due as a couple.

Professional advisory on wealth tax

Need assistance with Spanish taxation? Reach out to our team of Spanish wealth tax experts for relevant guidance, meticulous planning, and filing management. We will handle your case strictly confidential and get you a second opinion. You can contact us at contact@spaindesk.com.

At SpainDesk, we’ll work closely with you to provide a custom service specifically based on your needs. Not only do we have a wealth of experience with tax strategies and tax planning solutions, but we also have a verified track record navigating the legal and tax system for expatriates and foreign investors.

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January 16, 2022

Capital Gains Tax in Spain: Tax Guide When Selling Property

Taxes

If you live in Spain or are planning on investing in property or other assets within the country, you may eventually encounter the capital gains tax when it comes time to sell the property. It is important that you become acquainted with the tax requirements so you can plan ahead and determine what exemptions are applicable to your situation.

What is Capital Gains Tax in Spain?

The capital gains tax is the main tax in Spain to consider when selling your property and is a fairly straightforward concept. In short, the capital gains tax is paid on the profits earned when you sell an asset such as property or company shares within Spain. For example, if you purchased a property for €200,000 and then resold it for €250,000, the capital gains tax would be applied to the €50,000 – just the profit itself.

The tax itself primarily applies to property (buildings, apartments, houses, and land), company shares, government bonds, and precious metals.

Capital gains tax and Plusvalia tax

When it is time to sell, you will also need to pay the Plusvalia tax. The Plusvalia tax is similar to a capital gains tax, but paid to the municipality instead of the tax office, and is based on the increase of land value. It is typically less than the capital gains tax discussed in this article.

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Residency considerations:

Your residency status within Spain is a determining factor for what percentage you’ll be required to pay on your capital gains tax.

Residents

Something very important to note, if you’re living within the country for more than six months out of the year, you will automatically be considered a tax resident in Spain.

The capital gains tax brackets for residents are:

Up to €6000	€6000 to €50,000	€50,000 to €200,000	€200,000+
19% tax	21% tax	23% tax	26% tax

Please note that these percentages only apply to the actual profit earned on the transaction, not the overall selling price.

Non-residents

If you don’t intend to stay in the country for more than six months (183 days) out of the year, then you’ll be classified as a non-resident for tax purposes. For capital gains tax, non-residents are split into two key categories:

Non-residents from elsewhere in the European Union (EU) or European Economic Area (EEA)	A fixed 19% rate on all capital gains
Non-residents from countries outside the European Union (EU) or European Economic Area (EEA)	A fixed 24% rate on all capital gains

Once again, these rates only apply to the actual difference between your original purchasing price and what you’re selling the property/investment for – just the profits.

3% withholding tax for non-residents

When going through the process of selling your property as a non-resident, there is also another percentage you need to take into consideration. The CGT withholding or retention tax is a levy of 3% of the overall selling price that the buyer must pay to the Spanish tax authorities to cover any capital gains liability.

You can reclaim this money once the authorities are completely satisfied that you have paid all of your capital gains tax. However, this process takes a significant amount of time. Additionally, there have been reported incidents where non-residents have had difficulty reclaiming these funds for various reasons. So it’s imperative to have all of your documentation and paperwork in order to minimize the possibility of this happening.

Tax exemptions:

Exemptions for residents

There are a few different ways you can completely avoid or reduce the capital gains tax on the sale of your property or assets, provided you are a resident.

1. Reductions on assets purchased before 1995

If you are a resident of Spain who acquired property, shares, or other assets before 1995, you can benefit from a capital gains tax reduction. However, there are a few requirements:

The property or asset must have been purchased on or before December 31st, 1994.
The reduction can only be applied to gains up until January 2006. Meaning, the value increase of your property or asset after this timeframe will still be taxed at the standard rate.
You must sell your property or asset for €400,000 or less to be eligible for this tax reduction.

If the asset in question meets all of these requirements, you can benefit from reductions of 11.11% on properties, 25% on company shares, and 14.28% on any other assets.

2. Main home exemption

Residents can avoid the capital gains tax on the sale of their property altogether, provided the money earned from the sale will be reinvested in a new property that will be used as a primary residence. Two key things need to be proven to benefit from this exemption:

The property you’re selling must be your habitual residence as well as the property you’re acquiring with the money from the sale.
The property for sale or to be purchased must be located within the EU or EEA in order to qualify.

3. Exemptions for taxpayers over 65 years

If you’re a resident who’s 65 years old or over, then you’re not required to pay any capital gains tax on the property sold, even if you have no intention of reinvesting the profits into a new home. The main requirement is that the property you’re selling must have been your primary residence for more than three years.

Additionally, you may be exempt from capital gains tax on the sale of any other property or assets on the condition that you use a portion or all of the profit obtained to invest in a whole of life pension annuity, otherwise known as renta vitalicia, within six months of making the sale. Please note that only the money invested in the pension annuity will be exempt from the tax in this situation.

Exemptions for non-residents

Unfortunately, related to real estate selling, non-residents don’t have many options at their disposal for tax reductions or exemptions.

However, if you’re a resident of another country within the EU or EEA that participates in the tax information exchange agreement with Spain, you could be eligible to claim the main home exemption. Bear in mind that there are a number of requirements, and qualifying as a non-resident can be complicated, so we recommend seeking professional guidance before starting the process of your sale.

Spain does have tax benefits for non-residents such as the Beckham Law.

Changing your tax residency

If you’ve been a tax resident of Spain for at least 10 out of the previous 15 years and intend to leave the country and move elsewhere, you may encounter a Spanish exit tax. While this is a complex concept, we’ll break down the key things you should take into consideration.

The exit tax is applied to any unrealised gains made on various assets regardless of what country they are located. Unrealised capital gains are the difference between the purchase value and the market share value.
While the circumstances may vary, this exit tax should only be applicable if the value of your shares or assets exceeds €4 million or if your shareholdings are more than 25% and are valued at over €1,000,000.
Unrealised capital gains will be taxed under the standard resident thresholds at 19% for up to €6000, 21% for €6000 to €50,000, 23% for €50,000 to €200,000, and 26% for €200,000+.
If you happen to move to a country with a tax treaty and information exchange agreement with Spain or leave on a temporary work assignment, the exit tax can be deferred or may not apply. However, we suggest seeking professional advice before proceeding.

Planning ahead

We highly recommend obtaining all invoices, fees, and licences related to your property, as these may be valuable to help you reduce your capital gains tax in Spain when selling property.

If you require any guidance through the legal process of selling your property or assets, you can contact us for tax advice and property law services. We will be ready to assist you.

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January 14, 2022

Autónomo Tax in Spain: Types, Returns, and Deductions

Taxes

Every person that is self-employed in Spain is required to pay autónomo tax in Spain. The autónomo tax consists of three parts. The income tax, the vat tax, and social security contributions.

Both income tax and vat tax are paid with a quarterly and annual tax return. Social security contributions are paid monthly. In this article, you will learn about the autónomo tax obligation, autónomo returns, and deductibles.

Every autónomo in Spain is responsible for preparing his/her annual income tax return. It is very common to transfer your annual tax return preparation to an accountant, this way you don’t have to worry about the deadlines and calculation of your autónomo tax in Spain. However, if you decide to prepare your autónomo return, it is important that you know and stays up-to-date with taxes in Spain that apply to you.

Autónomo income tax Spain

When you are a freelancer or self-employed in Spain, your income is taxed at the same rate as other individuals in Spain. The rules of the personal income tax, also apply to you when you are self-employed in Spain. The Agencia Tributaria doesn’t have a different income tax rate for freelancers.

In Spain, there is a resident tax and a non-resident tax. You are a tax resident if you spend more than 183 days in Spain during a year. You are a non-resident for tax purposes if you spend less than 183 days in Spain during a year.

The income tax Spanish tax residents are paying is called the IRPF, it stands for Impuesto Sobre la Renta de las Personas Físicas. In Spain, freelancers are subject to a progressive tax rate. As a result, rates vary depending on how much money is earned.

Remember that different regions of Spain charge taxes at varying rates, so the rates differ across the country. For tax residents, income tax in Spain varies between 19 to 47%, according to income earned.

The income tax Spanish non-residents for tax purposes are paying is called the IRNR, it stands for Impuesto Sobre la Renta de no Residentes.

The amount of tax you have to pay as an autónomo in Spain depends on whether you are considered a tax resident or tax non-resident.

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Modelo 130: Quarterly income tax returns

Every quarter, you must submit this form to the Hacienda to declare your gross income and deductible expenses. If positive, small business owners must make a payment on account of their ultimate tax obligation.

Modelo 100: Annual income tax return ‘Renta’

The payments on account taken every three months will be used in calculating the final tax bill on this return. It is due by the 30th of June. Even if you are not required to complete an annual return, it can be useful to do so because then you know your income and expense figures for the full year.

When you have overpaid on your quarterly returns, you can claim a refund by completing this form. When there are additional taxes to be paid, the form is used to declare it.

The tax year in Spain comes to an end on December 31, and all autónomos must submit their Spanish and international earnings by June 30.

Autónomo VAT Tax Returns

Just like limited companies when you are an autónomo you also need to pay vat tax. The VAT tax rate in Spain is a fixed tax that you need to pay over the revenue you generate throughout the year. The vat tax is called IVA in Spain.

In Spain, the general VAT rate is 21%. Depending on the type of goods or services, the lower rates are 10%, or 4%, respectively. The VAT applies to all services rendered by freelancers, even if they are performed outside of Spain.

Goods and services that have a lower tax are items such as educational services, artistic endeavours, and some forms of independent writing.

VAT within the European Union

If you engage with business clients outside of Spain but within the EU, you may be eligible for VAT exemption. This is because they pay the VAT at their own country’s rate, not at yours.

If you plan on doing this, you’ll need to register with the Agencia Tributaria to get a tax identification number and submit quarterly reports regarding your intra-community business.

Modelo 303 and 390: Quarterly and Annual VAT returns

Autónomos must submit a quarterly report and pay any outstanding amounts. The quarterly VAT return called Modelo 303 is used for this. When you don’t have anything to declare, you still have to submit it.

It can be carried forward if the quarterly return results in a negative balance. Any refunds that you may receive can be applied to your account at the end of the year.

Social security contributions and benefits for self-employed workers in Spain

If you work as a self-employed individual (Autónomo), you are obligated to pay social security contributions. After you’ve paid into the scheme for 15 years, your contributions will be matched by the government, and you’ll receive a pension as well.

At the same time you register to pay income taxes and VAT, you must also register for social security. To receive your autonomous classification, you must complete a new form indicating your status. This is because several types of employment result in different social security payments, so if your work is considered hazardous, you will have to pay more in contributions. The Spanish Social Security system is comparable to the National Insurance program in the United Kingdom.

Even if you don’t earn anything, you must make payments to avoid being fined 10% of your bill. You will not be eligible to use public health facilities, get a pension or sick pay, or take paid parental leave if you do not make the required payments. Self-employed individuals who take maternity or paternity leave are not required to pay into Social Security, as they are not considered employees. They will however need to have at least 12 monthly payments.

Social security rates for freelancers

In 2021, the starting amount in Spain ranges from €944.40 to €4,070.10. This number is then multiplied by 30.6 per cent, resulting in a monthly payment of at least €288.98 (Autonomous- Employee Contribution). In other words, in 2021 the minimum contribution is 289 euros per month.

The more you pay into the scheme the more you will get. In other words, the amount of social security contributions paid is a factor in determining how much social security benefits are received.

The amount you pay in social security payments each month is calculated using the base salary amount and the multiplier to arrive at it. Social security payments are on a progressive scale, the more you earn, the more you will pay out over time.

Registering for freelancer tax in Spain

To become a freelancer in Spain, you must complete both phases of the procedure. The first step is to register with the tax agency (Agencia Tributaria or Hacienda). To do this, you must fill out Form 030, which is available from the government website.

You’ll need a Spanish national insurance number (An NIE) and a Spanish bank account for the autonomous registration. If you’re not from Europe, you’ll need a work visa or residency permit. You can have an immigration lawyer in Spain help you with this.

Then you must join the autonomous social security system (Regimen Especial de Trabajadores Autonomos or RETA). To enrol in the autonomous social security system (RETA), you must already be a member of the social security system.

You must be a resident of Spain to register for the Agencia Tributaria, so you must complete the Modelo 36 or Modelo 37 forms and submit them to the Hacienda.

The form requires you to state your name, address, and type of business activity. You must indicate where your firm is located and whether you will pay VAT in Spain.

You may want to hire a professional to assist you in becoming an Autónomo or with starting your business. We provide specialized company formation services in Spain, so make sure to get a free quote.

Costs that are deductible on Spanish Income Tax

Any expense that may be deducted is limited to your economic activity as a freelancer. This implies that you cannot deduct anything from your income taxes that may not be used to generate extra money through your day-to-day activities.

The most important aspect is to properly explain them. If you do not provide sufficient documentation, it will be much more difficult to argue their validity in the future.

You can still use goods and items for personal or family expenses, but they must be marked as such. In this case, these costs should not be deducted from your income tax liabilities.

Freelance tax deductions often apply to business expenses. However, other costs can be deducted from your income if they meet certain guidelines outlined by law.

Utility and supply expenses

If you work as a freelance from home, you may deduct 30% of your utility or supply expenses related to your business. These costs can be deducted from income, but you must be able to prove that these are related to your business.

The costs associated with the work’s location are deductible in the proportion of the m2 impacted and the percentage of ownership.

Food

The expenses of food for the company are deductible for income tax purposes if they are charged to a credit card and paid in a restaurant and catering business. This is the most crucial distinction because if a payment is made in cash, it will not be accepted. In Spain €26,67 per day is deductable, abroad that is €48,08.

Health insurance

The costs of health insurance premiums paid by taxpayers and their spouses or partners, as well as children under the age of 25 who live with them, are deductible to the extent they comply with these limits:

€ 500 for each individual
€ 1,500 in the case of disability

Expenses you can deduct entirely

Below you can find some key expenses that can be deducted in full from your income for tax purposes:

Your monthly social security payment.
Purchases of inventory or stocks made as a result of your company’s activities
Supplies (such as pens, toner, and ink cartridges)
Costs coming from advisor agencies (accountants, experts, tax advisors, or lawyers).
Mail charges
Bank charges for business accounts.
ICT services (server, website, etc.)
Costs for business travelling
Any marketing or advertising expense
Any expenses associated with retaining personnel, such as wages or educational costs
You can also deduct the franchise fee if you have established a franchise.
Expenses related to your office (for example rent)

There are more expenses related to your company you can deduct, but it is good to keep in mind that the expenses must be related to your business. You can best check with a tax advisor to see if your expense is deductible from your Autónomo tax in Spain.

It is important to keep the invoices of the expenses, as well as their date and location. You can then adjust these expenses when filing your annual income tax return.

Deductibles on VAT as an autónomo in Spain

The VAT quotas paid in the course of an economic operation are only deductible for supplies, services, or imports that are directly affected by the business activity and justifiable by invoice.

If something is only partially intended for your business, you can deduct a percentage of the VAT. This percentage is determined by your invoice and its related activity.

For example, in case the company buys a car. The company’s VAT obligations are based on the vehicle’s total mileage. If a car is used in your business, you can deduct any repairs, gasoline, tolls/fees, or parking charges at the same rate as your firm’s activities.

These quotas are deductible from VAT on income obtained during the same taxable period. It must be under the name and number of the taxpayer’s registry, as well as having an invoice of payment.

Frequently asked questions

Below you can find some of the most frequently asked questions about deductibles as an autónomo in Spain:

What invoices should I keep?

You must keep any invoice or receipt you receive from your supplier for any purchase. Any expense, such as gas or food, requires a receipt to be deductible.

How long do I have to keep my invoices?

It is required by the Tax Administration’s standards to maintain all invoices and documentation for at least four years. This is the tax statute of limitations, which allows the Treasury to undertake an audit and examine the employer or self-employed individual’s tax records for 4 years after declaration.

What expenses can I deduct?

Taxpayers may only deduct the business expenses they need to carry out their activity, which is exclusively related to it. Expenses that do not benefit your business cannot be deducted.

What is the difference between a Spanish autónomo and a company?

First of all, it is important to understand that there are two different kinds of Spanish companies: the limited liability company (S.L.) and the corporation (S.A.). It may be necessary to consult with a tax advisor in terms of which type of company will best suit your business structure.

Do I need an accountant as an Autonomo?

Yes, it is recommended that you keep your records and use an accountant in Spain to prepare your annual income tax return. It will be more secure and save you time and headaches.

Concluding the autónomo tax Spain

In this article, we have discussed the different taxes, deductions, and documentation in filing your taxes as an autónomo in Spain.

Keep in mind that the deductions must be related to your business, and not for personal use and that you keep your invoices saved securely.

Contact us if you would like help with filing your taxes. Our tax specialists can function as your tax advisor, accountant, bookkeeper, or simply help you file taxes online. We will create a quote tailored to your needs.

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January 11, 2022

Beckham Law Spain for Expats: Benefit, Conditions, Filing

Taxes

The Beckham law creates opportunities for expats to save money. It is also know as the Special Expats’ Tax Regime (“SETR”) or Régimen Especial para Trabajadores Desplazados. Knowing the rules to take advantage of this law allows you to keep more money in your pocket when filing taxes. In this article, we will discuss what it is, what conditions their are, as well as how to file a tax return under these guidelines.

What is the Beckham law in Spain?

The Royal Decree 687/2005, popularly known as the Beckham Law is a special expats tax regime. It enables foreigners that are approved by the relevant Spanish tax authorities to pay a 24% flat rate for income earned in the country.

Expats who fall under this regime are not treated as tax residents whose worldwide income is taxed as an progressive tax rate of 19% up to 45%.

Normally when you move to Spain to work, you become a tax resident and are subject to the normal rate for Spanish citizens. However, with the Beckham law, instead of being taxed at the resident income tax rate, you can pay it as a non-resident.

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Types of residencies in Spain

To grasp a better understanding of what the Beckham law implies we discuss the different types of residencies and taxes for foreign workers in Spain.

Residents in Spain

A resident in Spain is someone that lives in Spain on a permanent basis. This means that their principal interests are situated in the country, not outside of it.

As mentioned before, there are several conditions that can lead someone to become a tax resident and thus be subject to the flat rate set for Spanish residents:

You live in Spain more than 183 days during the tax year (which runs from January 1 through December 31).
You live in Spain less than 183 days, but your spouse and children or those of your legal dependents stay outside Spain at least 183 days during the tax year. If you are present in Spain for more than 183 days, but this is not the case with your family members, you will be a resident for tax purposes.
Your center of economic interest is situated in Spain. This means that the main part of your economic activities and interests is carried out inside Spain, regardless of your physical presence or activity abroad.

Normal tax implications for residents of Spain

Residents of Spain are subject to the same Spanish income taxes as Spanish citizens, this tax is known as the Spanish Personal Income Tax (PIT), or Impuesto sobre la Renta de las Personas Físicas (IRPF).

This tax is levied on all income and capital gains, whether foreign or domestic. The tax is a progressive tax on income and capital gains with a tax bracket that starts at 19% and goes up to the top marginal rate of 47%.

Non-Residents in Spain

A non-resident in Spain is a person who is not resident in Spain. The law states that you are considered to be a non-resident in Spain if one of the following conditions applies:

You live outside the Spanish territory more than 183 days during the tax year (which runs from January 1 through December 31).
You live in the Spanish territory less than 183 days, but your spouse and children or those of your legal dependents stay outside Spain at least 183 days during the tax year. In this case, those family members are also considered as non-residents.
Your center of economic interest is situated outside Spain. This means that the main part of your economic activities and interests is carried out outside Spain, rather than in a country other than Spain.

Normal tax implications for non-resident of Spain

Non-residents in Spain are only required to pay income tax on their earnings from Spain. It is also known as the Non-resident income tax (NRIT) or Impuesto sobre la Renta de No Residentes (IRNR). In general, the flat tax rate for non-residents is 24%. For citizens from the EU/EAA the rate is 19%. They will be charged a flat and set rate.

Residents with Beckham law tax residence

When you are a resident in Spain, and you get approved for the Beckham law you will be considered as non-resident in Spain. This means that your worldwide income is not subject to Spanish tax, but only what you earn in Spain.In other words,

You can spend more then 183 days in Spain without having to pay taxes on your worldwide income.
You will only be paying taxes on your income in Spain
You won’t pay the progressive tax and instead a flat 24% up to 600.000 Euro. When this is exceeds you will pay a fixed 45%

As you can read, this Spanish income tax law is very attractive to foreign nationals who will need to work more then 183 days in Spain. With the Beckham law in Spain the tax burden can be significantly lowered.

What are the conditions for the Beckham Law?

In order to apply the Beckham Law, the person should not have been a resident in Spain during the 10-year tax period before the year they are settling in the country. Also, the applicant must be moving to Spain for work reasons. For this reason, you are required to have an employment contract where the employer is a Spanish company.

Other criteria that need to be met by expats that want to apply are:

To qualify, the applicant must be a first-time resident of Spain.
The applicant must have moved to Spain to take up a work contract.
Employment responsibilities must be carried out in Spain, but if they are required to perform part of their duties outside of Spain, the proportion of their income derived from these sources cannot exceed 15 percent.
Within 6 months of beginning the employment contract, the application must be submitted.
The agreement is valid for a total of 6 years.
All capital gains made in Spanish territory are taxed at a rate of 35%.

If you wish to be a director in a Spanish company, then you must have equity in no more than 25% of the company.

Applying for the Beckham Law

When it comes to the application process, the application must be submitted within 6 months starting from the date of the inscription in Social Security as an employee for the Spanish company. As a result, applications after the 6 months are promptly declined.

The application process starts by first filling out and sending the Modelo 149, which informs the Spanish tax agency of the intention to benefit from the tax regime. Candidates need a passport, NIE number and Social security number.

Model 151

After applying via the Modelo 149, and getting accepted, the person must then do their tax declarations by filling out and presenting Modelo 151.

Other taxes and the Beckham law

Next to paying lower income tax, other taxes also need to be payed Spain. Below we discuss the taxes and how the Beckham law effects them.

Capital gains

Capital gains are not exempt under the Beckham law. Dividend gains, including profits earned from sales of movable and immovable assets (property), are charged at a fixed rate of 19%. As a non-resident, you are liable to pay income tax in Spain for any capital gains earned from outside Spain. Capital gains earned from outside Spain must be still paid to the corresponding nation per their taxation rules.

Wealth tax

When you fall under the Beckham law you will only have to pay wealth tax on your assets located in Spain. If you would fall under the PIT, then you would have to pay taxes on your worldwide assets.

The wealth tax is a tax payed on the net value of your assets such as real estate, stocks, accounts and life insurance.

Local taxes

A resident under the Beckham Law must pay local taxes. For example when you own property in Spain, you might have to pay local property taxes.

Help from experts paying your income tax

If you are looking to move to Spain, then we can help you with Tax advice in Spain. will help you decide what works for you based on your personal objectives, and current Spanish compliant requirements. If you qualify for the Beckham law, we will guide you through the entire process and describe all the steps you should consider to make more informed decisions.

Where did the Beckham law come from?

British Footballer David Beckham was one of the first foreigners to benefit from the decree, hence the popular name “Beckham Law”. He was taxed as a non-resident when he famously played for Real Madrid in Spain.

The Beckham Law is, without doubt, a significant tax benefit in terms of tax savings. It has benefited a diverse group of people including athletes, foreign entrepreneurs and wealthy expats. Essentially, it enables non-resident foreigners to make significant investments in Spain while being liable to pay less tax than a resident would pay. The special tax regime is ideal for foreigners who become Spanish tax resident because of an assignment to Spain.

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January 10, 2022

Non-Resident in Spain: Tax And Other Information

Taxes

If you are planning on relocating or buying a property in Spain, you may be faced with the decision of whether or not you want to be a non-resident in Spain. If so, there are several things that will need to be taken care of in advance.

This article explores what it means if a person is considered a non-resident taxpayer in Spain and how this affects their taxes. It also provides information about the various types of income that will have different tax rates applied.

What is a non-resident in Spain?

You are a non-resident if you live in the country for less than 182 days. For example, a tourist first will be a non-resident because they have a non-permanent aim in mind.

Even if you have a residency permit, such as a short-stay visa. You will still be considered as a non-resident when you are staying less than 182 days.

It is possible for a non-resident to own property, open a bank account, and get income from Spain. This does not make them a resident in Spain.

People visiting in Spain will automatically be deemed non-resident taxpayers the day they arrive in the country. This is important to note, as it can have a direct bearing on how much you will be taxed for certain instances such as real estate purchases and inheritance.

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Tax in Spain for non-resident ex-pats

There are two types of taxes in Spain that will need to be paid by those who are staying in Spain as non-resident. These are income earned from work or from passive income, such as income from a rental property for example.

In terms of the first category, the rates may vary depending on how much you earn and whether you have Spanish residency.

Some of the advantages of living in Spain as a non-resident:

There is no inheritance tax in Spain for non-residents. This also applies to properties that were purchased before moving abroad.
You do not have to pay social security contributions to the state, though this does not apply if you are self-employed and just want to buy private health care.
The only tax that you will need to pay will be on any property that is owned in Spain. If you do not reside in the country, this can be quite low and means that there is no increase in property taxes each year.
If you leave your primary residence empty for two years or more, you will not be charged any taxes on it. However, you must keep the property up to date in terms of maintenance and renovations.
If an individual is under 65 years old and has resided abroad for more than 10 years (or is over 65), they are able to claim Spanish residency, which will provide them with a number of benefits.

Non-resident tax in Spain

In general, non-resident taxpayers pay a rate of 24 per cent on income earned in Spanish territory or obtained from Spanish sources and a rate of 19% on capital gains and financial investment earnings derived from Spanish sources. Various other sorts of income are subject to different rates.

Non-resident individuals who are tax residents in a country/jurisdiction of the EU or of the EEA and have an effective exchange of tax information with that nation/territory are taxed at a rate of 19%.

Capital gains tax for non-residents in Spain

Non-residents from outside the European Union (EU) are required to pay a 24% fixed capital gains tax rate. However, if the nonresidents are from a European country, their capital gains tax is lowered to just 19%.

Compared to the capital gains for residents which is 19 per cent for the first €6,000 profit, 21 per cent for profit between €6,000 and €50,000, and 23 per cent for any profit above €50,000.

Jewellery, stocks, collectables, bonds, property, precious metals, lands are subject to capital gains tax.

Non-resident tax rates for income that is earned in Spain

Certain rules apply to those who are living outside of the country and earning an income through employment or other means. This includes dividends, rental property, etc.

Those who do not live in Spain but own properties within the country will be taxed under non-resident taxation

Spanish Wealth tax for non-residents

Non-residents who own properties in Spain will have to pay wealth tax. This holds true even if the property is not being used as a primary residence.

The wealth tax rate in Spain is between 0% and 3.5% depending on the region you are registerd in.

Frequently Asked questions on non tax residency

Below you can find some of the commonly asked questions on non-tax residency and their answers.

Who can help me file my tax return?

It is recommended that you work with a tax advisor if you are filing taxes in Spain for the first time or have any concerns about the process. As every country has its own rules and regulations regarding personal income, it can be quite confusing for non-residents to get an understanding of the process.

What are the tax consequences when choosing between being a resident and a non-resident taxpayer in Spain?

The main difference between these two types of taxpayers is that one will be taxed more heavily than the other. It usually depends on your status as a resident or a non-resident, though there are some exceptions to this rule.

What is the tax year in Spain?

Residents of Spain pay taxes on a calendar-year basis, with January 1 to December 31 as the tax year. Between April 6 and June 30 of the following year, eligible residents must submit tax forms to the Agencia Tributaria. In Spain, there are no further extensions to filing income tax returns.

What do I need to pay taxes in Spain?

To pay taxes in Spain you will need a NIE number and a fiscal number. You must also have a Spanish bank account to pay taxes in.

What happens if I don’t pay my taxes on time?

The Agencia Tributaria will charge late payment interest to those who do not file their income tax returns by the given deadline. There is also a penalty of up to 10% for those who fail to make any payment within two months after the due date for filing your return.

How much is the capital gains tax for non-residents in Spain?

Non residents pay 19% on capital gains and financial investment earnings derived from Spanish sources.

When do i have to pay income tax in Spain?

The deadline for submitting the Spanish income tax returns to the Agencia Tributaria is between April 6 and June 30 of the following year. There are no further extensions.

Do I have to pay wealth tax in Spain as a non-resident?

No, wealth tax is only applicable to those who are residents of Spain.

Do I have to pay tax on my rental income as a non-resident?

Non-residents are required to pay a tax of 24.75% on rental income. You cannot reduce 50% as in the case of resident owners. If you are a resident, you must include your rental income with your other income when making your annual Spanish tax return.

Do I have to pay Spanish social security while living abroad?

Only if you live in Spain for 183 days or more then you will be subject to Spanish social security laws.

Are pensions paid by Spanish social security to non-Spanish residents who do not have an agreement with the country taxable?

Non-resident individuals that retire in Spain and who receive retirement pensions or other types of pensions are subject to non-resident income tax.

Do I need to pay taxes on my worldwide income as a non-resident in Spain

No, you are only required to pay taxes on income earned in Spain.

Which income tax form do I need to declare as a non-resident?

It is necessary to submit Form 210.

A word from SpainDesk

In this article, we have discussed the non-resident tax in Spain. If you would like to have professional tax advice, contact us at contact@spaindesk.com and get more information on how we can help you.

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January 6, 2022

Buying Property in Spain: Everything You Need To Know

Taxes

Buying a property in Spain can seem like quite the task, but it doesn’t have to be. Here we will cover what you need to know before buying Spanish property and some of the best ways to find properties for sale. This article is meant as a guide for those looking into purchasing their own home or investment property in this beautiful country to make an informed decision on whether or not Spain is right for them.

Is buying property in Spain a good idea?

There are two reasons why people would want to buy a property in Spain. The first reason is to live in Spain, and you can do this by buying a property to live in full time or by buying a holiday home. The second reason is to purchase property as an investment.

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Buying property in Spain for living

Spain as a place of living – Spain is a beautiful place to buy a house. People love Spain for its weather, beaches and culture. People live day by day relaxed and stress-free, making the most of their time relaxing on the beach or enjoying every single moment to spend with family. Of course, there are many more things that you can do (if you want), but this is the typical Spanish way of living.

Spain is a trendy place to live because of its nice weather and beautiful beaches and its fantastic culture and history. Many people decide to buy property in Spain considering this since we have several different options depending on our needs and budgets: apartments, villas or even luxury houses with private swimming pools.

Buying property in Spain to invest

There are many reasons why investing in Spanish property exists. The first reason is the same as the previous one: it’s due to great weather and beautiful landscapes such as beaches and its great culture and history. But there is another important thing in Spain that makes it attractive for property investment.

Spain is one of the most visited countries in the world. Millions of tourists visit Spain every year attracted by its nice weather, beautiful beaches and fantastic culture. With this great tourism industry comes a very strong commercial property market with a generous offer in different sectors, including retail, commercial, office and logistics.

The second reason people would buy a property in Spain as an investment is its economic stability. Spain has been showing important economic growth for several decades now, attracting many investors looking to invest in the Spanish economy.

Property buying Spain: Influence of nationality

Whether you are a Spain resident or non-resident, you can still buy a property in Spain. However, there are some differences that you need to take into consideration.

Non-residents: Being a non-residence requires a unique NIE number, “Número de Identificación de Extranjeros,” for the sale to happen following the Spanish property legislation. We can help you get your NIE, contact us, and our lawyers will take care of it.
Resident: There are no minimum requirements for residents or citizens of Spain when buying a property in Spain.

Language and buying property in Spain

This has proved to be a significant constraint in closing deals unless you speak fluent Spanish. This can be a barrier to those who do not know the language as you must understand Spanish legal documents and regulations.

Buying property in Spain has some peculiarities. If you want your first deal, we recommend hiring a bilingual real estate agent with the experience to help you through all stages of buying: from finding your dream house to closing the deal.

We also advise you to find a bilingual, independent lawyer with experience in Spanish land and property law to help you buy your property in Spain. This lawyer will help you throughout the buying procedure, ensuring that all procedures are correctly followed and done legally. A good lawyer can also offer you translation services if your Spanish is not fluent enough to read documents in the Spanish language. We offer these services, so do not hesitate to contact us for further information.

How to choose a location to buy property in Spain?

Spain is an attractive choice when considering buying a property, but finding the right one requires a significant effort. First, you will need to ask yourself the practical question, “what do you want?”.

Do you want to buy a property as an investment or for your personal use?
Are you looking for a permanent home or seasonal retreat?
Are you looking more to the South of Spain, Mediterranean coast, Costa Blanca, Costa del Sol, Costa Brava, etc.?
Are you looking for a mountain view and cooler temperatures?
Are you looking more to the North of Spain, Atlantic coast, Costa Daurada, etc.?
Are you looking for beach views and warmer temperatures?
Are you looking for an apartment, country house, villa, or bargain property?

As you can see, you have to ask yourself many questions before you start your property journey. Next to knowing what property type you are looking for, you also have to ask yourself if you want to work with a real estate agent. When buying in a foreign country, dealing with a property expert from that country is always recommended. When buying property in Spain, it is best not to run into any problems because they are harder to fix when you don’t know the property scams, pitfalls, and right pricing. A trusted real estate agent can help you with this.

Getting a real estate agent involved

You can find a real estate agent in most Spanish towns and cities; we recommend choosing the most reliable one, not necessarily the cheapest. They usually charge between 3% and 6% of the final purchase price. If you are looking for a free service, make sure that you know what they will be offering in return (this is where property scam cases come up).

We have defined three general types of real estate agents you can choose from:

Agency real estate agents

This type of agent is responsible for the business of selling properties on behalf of different owners, representing them legally. They can also help people find properties on the market.

Independent real estate agents (freelancers) / Personal shoppers

Offer the same services as agency real estate agents but are not representing a specific seller or owner. They usually work remotely, online, and work to get the best price for your property.

Property developers

They design and build properties but do not sell them. Once the construction is over, they advertise and sell rooms or flats to individual investors or companies. If you are interested in buying a property from a Spanish developer, you will be required to pay additional costs for the new build, such as up-front payments and deposits. Sometimes this fee is added to the selling price of the property, so the developer can recover fees they have paid out before selling it to you. This is not to be confused with the developer’s profit margin, which should remain separate.

Charges for buying property in Spain

The average property commissions range from 1% to 5%. The percentage of the house’s total value is usually lower for properties that are not located in large cities, while it tends to be higher if you are buying a home in Madrid or Barcelona.

Finding a property on the internet

The internet has become an excellent source for finding real estate listings and contact details. In addition to this, there are many property portals both in Spanish and English that provide more information on each listed property, including photos, the current status of the projects and the number of bedrooms and bathrooms. On portals like Idealista, you can find customer comments concerning their experiences with the listed real estate agencies.

Some realtors offer a service called “virtual tours”, which are 360-degree images of the property that allow you to feel as if you were there or even walk through it to see all parts of the building.

Popular locations to buy a house in Spain

The most popular areas to buy a house in Spain are the coastal regions – Costa Blanca, Costa del Sol, and Costa Brava – because of their mild climate and beaches. They are also popular because they are close to Valencia, Alicante and Barcelona.

The Costa Blanca and Costa del Sol are both in the south of Spain. The Costa del sol has a dry climate with little rainfall, while the Costa Blanca has a more humid, rainy season from October to March.

The Costa Brava has a milder climate than the other coastal regions and is more protected by mountains, and it also has more rainfall and fogs than the other two coasts.

Costas: The coast can boast of many attractions, such as international airports, big cities close by and good nightlife, which attracts foreign people looking to move permanently to Spain

Take the legal steps

Unless you want to go through the stress of buying a home yourself, we recommend hiring a Spanish property lawyer to help you through the stage of legal requirements stated below.

Signing the “contrato de Reserva”

A purchase contract fee of 3.000 to 6.000 euros expresses your interest in buying a property and gives the power to remove the property from the listing within a duration of 14 to 21 days.

Sign the “contrato de Arras”

This is a private contract that requires you to pay a deposit of 10% of the property worth within ten days.

Get the Nota Simple

A document provided by the registry of properties that identifies the proprietor of the property.

Certification of domain and charges

This document guarantees the genuineness and fiscal security of the property, which is signed directly by the registrar. Additionally, it includes details on charges or debts, mortgages, embargos, or pending lawsuits on the property at the time of issue.

Inscription in the Registry of Properties

This process transfers the property’s ownership from the previous owner to you.

Communication to the Catastral office

A notification from the registry of lands and buildings regarding your property acquisition is sent to the Catastral office. This division produces a map of properties with their respective values. A tax is charged for the updating of this file.

Changing the name on utility bills

You need to get new bills with your name since the property’s previous owner used for utilities is part of the records.

Copy of title deed

When making the purchase official, you can receive an Escritura. This document is the physical proof of the property.

Community ownership documents

It’s mandatory for the person buying property in Spain to contribute to the community in Spain, an amount based on how many square meters you own.

Buying a property is complex, and our property lawyers can help you with the entire process. Contact us today, and get a free quote.

Property taxes and costs

When you buy property in Spain, many taxes and costs are involved. Among these costs are property transfer tax and notary fees. If you want to rent out your property, other costs will also play a role. We have dedicated a post about the costs involved when buying property in Spain.

Notary costs

These are fees charged by the notary in charge of writing up your promises related to ownership. This cost can be shared between both parties or paid entirely by only one party.

Agent fee

An agent is a person who works with the specific goal of finding a property for you. The buyer and seller can each pay a fee to their agent, or the agent can work together and agree on one fee from the buyer.

Lawyer fee

The property lawyer’s task is to ensure that all legal proceedings are carried out correctly. The lawyer will create the (governmental) forms and contracts needed to acquire the property. They will also make sure that the rights of both parties are recorded in the documents, that all taxes are paid in full, and that your real estate agent or other party involved is not doing anything illegal.

Buying land to build a new property in Spain

When you want to build a new property, several steps are involved. Firstly, of course, you will need to buy land in Spain where you can obtain building permits for. If you don’t have the patience required to follow through with finding land, SpainDesk has specialists who can help you buy land and obtain the appropriate building permits.

Secondly, you need to choose an appropriate location for your property. You need to be specific on the area of your property, the orientation you want it to have, whether you want a garden or have other specifications are taken into consideration.

Thirdly, you will need to get the architectural plan approved by the town hall (Ayuntamiento) before the building starts. This step can take up to 6 months or longer since the construction must fit with the local architecture of the area.

Finally, once all requirements are met, you will begin construction. This can take several months depending on the size of the building and, more importantly, where you live within Spain.

Since this process can take some time, SpainDesk has experts who can speed up land buying and obtaining building permits. Contact us today, and our lawyers will help you with your case.

Taxes to buy a house in Spain

The amount of property tax in Spain charged by the Spanish government varies depending on whether you purchase a new property or a resale property. The term “New” refers to a property that has never been sold before, and it’s usually purchased straight from the developer in this case. The term resale is used to describe properties that have previously been sold.

New property taxes

New property owners will have to pay the following two property taxes:

VAT (IVA): 10% of the purchase price.
Stamp duty: 1.5% of the purchase price. The stamp duty is paid to the Spanish land registry, and it is a kind of land registration fee. The stamp duty needs to be paid for every new property purchase, and it’s one of the costs that need to be included in your budget when buying a house in Spain.

Resale properties

There is only one tax on resale property. That is the transfer tax (Impuesto de Transmisiones Patrimoniales/ITP in Spanish). The amount you pay depends on the price of the house. It is less expensive when it is cheaper and more expensive when it is more expensive. Transfer tax depends on the location you are buying the property, and it can be around 8-14%.

Different types of land you can buy in Spain

Spain has an abundance of different landscapes, climates, and views, which means that you can easily find the type of property or plot of land for your needs. Here are some of the most common types of land in Spain:

Mountain land

Extremely steep or irregular plots that are difficult to access. You can find areas in the mountains that have been used for building but it is quite rare.

There aren’t many opportunities to buy land with a view over the sea since this type of property is sought after and is, therefore, very expensive.

Plots of land on the outskirts of big cities

Generally speaking, these are more affordable than central areas, but there is more building involved to make them developable. The construction process also takes longer because of local legislation, which forces you to follow stricter codes when building.

As far as purchasing plots of land are concerned, the most important thing is to consider that it is an investment and not just a purchase. You need to be sure of what you are buying. However, there are plenty of options available for any budget.

Different types of houses you can buy in Spain

There are also different properties you can buy in areas close to cities depending on the size you want and where you want it to be located. The following are some of the most popular:

Apartments

In most cases, this refers to an exclusive housing development where you can find both properties for sale or rent. There are many different types of apartments, and depending on the location, they will be more or less expensive. Some of these can be seen as bargain properties compared to other countries.

This is a property designed for one family only, which consists of at least two rooms plus other ancillary services such as bathrooms, etc. It can be found in the countryside, but it is rare.

Townhouses

It is an urban building with two or more floors with at least one wall shared with another property, usually in its courtyard or garden. They are discrete buildings, but they do have a lot of advantages. There is less land involved, so prices tend to be more affordable, and there is a greater chance of getting a roof terrace or balcony.

Villas

The traditional Spanish villa comes to mind when you hear the word “Spanish dream home”. They are generally detached houses with lots of space and gardens. There are also some villas in big cities like Madrid, Barcelona or Valencia (although they tend to be extremely expensive). Still, most villas are located on the coast, where they are mainly used as holiday homes.

Finca’s

Finca’s are a type of rural property found in Spain. They are typically used for agriculture or livestock farming, but can also be used for forestry. Fincas can be owned by individuals, families, or businesses. They are very interesting to buy, however, come specific issues on registration and use that need to be considered.

Castles

They are the most exclusive properties in Spain, and they tend to be located in rural areas with stunning views. Even though castles in ruins can sometimes be purchased, very few of them are in a condition that would allow you to live there.

The most expensive places to buy a home in Spain?

Property in Spain can get very exclusive and expensive. This is not just the case for houses but also if you are looking for land to build on. There are, however, some cities where property prices are particularly high.

Formentera

Formentera is so small that their property prices reflect on the island itself. If you are looking for a bigger house with stunning sea views, this is the place to go look.

Deià

It is a very picturesque mountainous region. The houses there are built on the hills and have beautiful views of the mountains.

Sant Joan de Labritja

Sant Joan de Labritja is located in Mallorca, which is one of the reasons why its so popular. It has a very similar landscape to the rest of the island, but it is more exclusive.

The town of Ibiza

This is the most exclusive place in Ibiza. It has stunning houses, some even with private beaches, golf courses, pools and spectacular beach views. It is considered a party island by many and a popular holiday destination.

The capital of Gipuzkoa

The houses there are very modern, and they have great outdoor spaces. The town of Bizkaia is a great place to live in if you want an exciting social life and a bustling city life.

San Sebastian

If you want to live in a big city with mountains and the sea nearby, this is a great place to go. It has great nightlife, great restaurants and is very multicultural.

Baqueira in Lleida

This is a great place for people who love winter sports and nature. It is located in the Pyrenees mountains, and it has ski resorts nearby.

Frequently asked questions:

What are common pitfalls when buying Spanish Property?

You need to be careful that you don’t fall for some common pitfalls when buying property in Spain.

Understanding all the hidden costs
Getting Illegal mortgages
Buying a property that had an incorrect renovation
Not reading your contract in detail
Bad timing
Lack of research in the area
Not having a proper estate agent

Should you buy or rent Spanish property?

There is no correct answer to this question. It depends on your circumstances and financial situation. If you are looking to settle down in Spain and plan on living in the country for an extended period of time, then buying might be your best option. If you are only visiting for a few months and not plan on coming back, then renting is the best choice.

What is the NIE Number?

The NIE number is the identification code used for foreigners who are not residents of Spain. The number is required to open a bank account, apply for an identification card or passport, enrol your children in school etc. Getting one varies depending on whether you live in Andalusia, Catalonia, Madrid or other regions.

Can I get a Spanish Visa if I buy Spanish Property?

You can get a Spanish Golden Visa if you buy Spanish property that is worth more than 500,000 euros. The Golden Visa is a residency card that allows you to live and work in Spain. With this visa, you also get the ability to travel freely within the Schengen zone of EU countries.

When should I go on my viewing trip?

This of course is a personal decision and it depends on your individual circumstances. If you will be living in the area of your Spanish house or near enough, then going at any time would make sense. If not, we recommend going during the high season of your chosen town. That way, you get a feel for what it is like during peak times and can get a sense of what it’s like to live there. If you go during the off-season, it might look dead and not so exciting, affecting your decision to buy a house in Spain.

How long should my viewing trip last?

We recommend between 5-7 days to properly get a feel for the place. Of course, it depends on how much travelling you want to do but at least this time should be enough to visit the area, get an idea of what life is like there and decide whether or not to buy Spanish property.

Do I need to do a property surveyor for an inspection?

There is no need to hire a property surveyor for a viewing trip or an inspection. However, if the property looks sketchy, odd or in disrepair, it might be worth paying for one. But most importantly, if you are not perfectly comfortable with the house and aren’t sure of its state, that’s when hiring a surveyor makes the most sense.

Where do I start my property search?

There are many different sites where you can search for Spanish properties to buy, but the simplest and quickest way is with the help of a property agent. They will be able to show you the most suitable houses in your price range and make sure you don’t waste time viewing properties that are not worth buying.

Can I purchase a property from my home country?

Yes, you can! You can buy through SpainDesk with the Power of Attorney. With this, we will be able to take care of the property purchase in Spain for you. However, you will have to visit a Notary in your home country. Contact us, and we will explain this buying process to you.

When is the best time to buy Spanish Property?

The property market in Spain is on the up at the moment. This means if you plan to buy property in Spain, you are buying in a seller’s market. It might be worth waiting until the market calms down a little if you are in no rush. But if you want to buy right now, there is excellent potential for long term growth both in capital and rental income.

That being said, prices may also vary depending on the area and type of house you are looking to buy. You could say that some places will always be popular such as the Costa del Sol (i.e. Malaga, Marbella, Fuengirola etc.), Costa Blanca (i.e. Alicante, Torreviaja etc.), Costa Brava, (i.e. Palamos, Tossa de Mar, Blanes etc.) Balearic Islands (Mallorca, Ibiza etc.), and the Canary Islands (i.e. Tenerife, Gran Canaria etc.).

Can I get a Spanish mortgage?

It is possible to get a Spanish mortgage, but the requirements tend to be strict, and you will need to have a certain amount in savings. Remember that Spain also has 100% mortgages available, which means you can buy a house without paying any deposit. The thing about Spanish mortgages is that they vary significantly from bank to bank, so it might be worth looking around to find the best offer for you.

Do I need a Spanish bank Account to buy property in Spain?

You don’t need a Spanish bank account to buy property, but it can make your life easier. That way, you can manage all your Spanish accounts in one place.

A word from SpainDesk

Buying a property is a complicated venture, and it is recommended to get property experts involved. We can help you with everything through a power of attorney contract. This way, our lawyers will be fully protected during your purchase. We can provide this service to you and make acquiring your property in Spain easy and safe. Contact us for more information and get a free quote.

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January 6, 2022

Costs Buying Property in Spain: Taxes and Services

Taxes

Spain has no shortage of excellent property options for commercial and residential purposes. Spanish property prices are relatively lower than in many neighbouring countries and capital cities. Let’s explore the ins and outs of costs and fees for buying property in Spain.

Can foreigners buy property in Spain?

Having property in Spain is an alluring prospect for many foreigners, both EU nationals and Non-EU nationals. Foreigners can buy property in Spain and take out a Spanish mortgage, even if they are non-resident. That being said, varying tax implications may apply between resident and non-resident buyers in Spain.

Buying property as a foreigner might not be the most straightforward process, but Spain is very welcoming for foreign investors. Before the purchase, you must have a NIE number (financial number).

Golden visa program

Under the Spanish Golden Visa program, foreigners can get a residency visa after investing more than 500,000 EURO in Spanish properties. A Golden Visa is a viable option for investors from outside the EU.

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Costs you can expect when buying property in Spain

It’s essential to be aware of the Spanish housing market quirks, regulations and taxes in Spain before purchasing a commercial or residential property. As a buyer, it’s your responsibility to pay for all costs and taxes associated with buying a property.

Property transfer tax

When buying Spanish property, the property transfer tax is at 6–10% for existing properties or 10% for new properties VAT (or IVA) fees are only 10% for new properties.

Rental income tax

The applicable tax should be submitted and paid to the local Spanish tax office regarding rental income. The income tax rate is 19% as of 2021 for the EU. However, You can deduct the relevant expenses (including mortgage interest) from the gross rental income. In our article about rental income tax in Spain, you can find more information about the rates, deductibles and process.

Insurance costs

Property insurance isn’t mandatory in Spain. However, some mortgage companies may have it as a requirement. In such a case, you might be required to take some form of insurance coverage before signing the mortgage contract.

As much as insurance may not be a legal requirement, we highly recommend taking insurance for both building and contents as a reasonable consideration to protect your investment from various risks.

Capital gains tax

Capital gains realized on Spanish real estate are subject to a capital gains tax, and the tax rate varies per property and is typically progressive based on the income itself. After selling your property in Spain, you must pay applicable capital gains tax after considering all deductions and allowances.

When purchasing property in Spain, we highly recommend keeping digital and hard copies of all invoices concerning legal fees, notary fees, property register fees, among other expenses. Also, you should keep copies of all licenses and invoices in case of property renovations and other building work on an existing property. Consequently, you can offset such expenses against capital gains when you sell your property, thus reducing Spanish capital gains tax.

Our tax advisors can help you make more informed decisions concerning applicable deductions and allowances depending on specific autonomous regions in Spain. We advise on the best strategies to reduce your capital gains tax liability.

Other costs involved

Additionally, you have to pay notary costs, title deed tax, and land registration fees, usually set at 1–2.5%. There are no fixed fees for lawyers or real estate agents in Spain, but you can expect them to range from 1-7%, depending on the level of service needed.

Is buying real estate in Spain worth it?

As always, location is vital when it comes to real estate. Depending on the specific location, buying property in Spain is an excellent long-term investment for both locals and foreigners. Also, it’s a viable option for investors looking to get residency quickly in the beautiful European Union country.

Some buyers apply for a mortgage, while others purchase without obtaining finance when it comes to property financing. Many Spanish and international banks provide mortgages services, with some of them giving tailored deals for foreigners from specific nations.

Buying vs renting a property in Spain?

Buying or renting in Spain primarily depends on your specific circumstances. For example, most people have limited access to finance, thus opting to rent, which involves a far less financial outlay compared to buying.

If you’re moving to Spain long-term, buying may be more cost-effective. However, renting may be a more prudent choice for a short-term stay or those unsure how long they will stay in Spain.

As with many other nations, both have pros and cons to consider. Thus it would help if you tried to make informed decisions.

We recommend checking the Spanish property market forecasts for speculative buyers before investing or, even better, seeking advice from a professional.

Legal, business, and accounting solutions in Spain

As much as it’s not a legal requirement to purchase property in Spain assisted by a qualified expert, it’s highly recommended that you do. Buying a property is one of the biggest investments people make. So, why take the risk by not obtaining professional advice?

Spain has it all and with the proper due diligence and professional assistance, properties in Spain can provide to be beautiful homes and viable investments for years to come. We offer property buying guidance in Spain which is full-service and will make your purchase safe, secure and easier. We can take care of many processes for you utilizing the power of attorney. Contact us for more information and a quote.

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January 5, 2022

Income Tax in Spain in 2021: The Essential Guide

Taxes

On the one hand, personal income tax in Spain is a complicated and, at times, confusing and lengthy process. On the other hand, understanding personal income taxes and your liability is crucial to avoid severe fines. Income tax is one of the most common taxes in Spain. This is an introductory guide to begin navigating what the personal income tax is, the rates, due dates, and penalties.

What is personal income tax?

Personal income tax in Spain or Impuesto de Renta sobre las Personas Físicas (IRPF) is a direct tax on an individuals personal income. It is not the same as corporate income tax. Spanish personal income taxes are divided between the state and the autonomous regions. Although the state has created simplified tax thresholds, the rates and tax bands will vary depending on the autonomous region you’re located in.

To get started, you’re required to apply for a tax identification number known as an NIE number. Citizens of the EU usually need to apply for this number after three months of residency in the country, while citizens from countries outside the EU will generally receive their application with their Spanish residency.

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Who pays income tax in Spain?

Even if you’re not a legal resident of Spain, you could still be considered a tax resident. You must file your income tax returns in the country if you meet any of the following requirements:

Have spent more than 183 calendar days per year within the country.
It’s important to note that short absences will be considered a part of this number unless you have proof of your tax residence in another country.
You have a spouse or dependents who are tax residents of Spain.
If you have a business or economic interests located within the country. For example, if you are starting a business in Spain, you will pay income tax in Spain.

Additionally, if you have a Spanish address, licence plate, phone number, bank account, or have used the healthcare system you could also be considered a tax resident unless you can prove otherwise.

Spanish tax for residents

For those employed by Spanish resident companies, the employer is required to withhold an amount of your taxable income to essentially pre-pay your tax returns. The deductions from your paycheck are an estimate of what will be paid at the end of the tax year. Authorities will then deduct these amounts from your final tax bill and refund any excess amounts paid.

In addition, tax residents of Spain are also obligated to declare any assets held outside of the country through the Modelo 720. This includes bank accounts in your name (or that you manage), insurance, real estate, and more.

Tax in Spain for non-residents

Non-residents of Spain are also taxed on income earned in the country. Typically this is a 24% flat rate on work income and 19% on capital gains and investment income earned in Spain. Next to this, it is important to note that tax returns for non-residents must be filed on an individual basis and not submitted jointly with a spouse.

Earnings subject to income tax in Spain

There are several different sources that Spanish tax residents are required to pay income taxes from. Two types of taxable income need to be taken into consideration when filing your taxes are the general taxable income (renta general) and savings income (renta del ahorro).

Taxes on general income

Spanish tax residents are liable to pay taxes on all worldwide income aside from savings income. This is inclusive of your salary, pension, rent, gambling winnings, etc.

Two parts make up the Income Tax in Spain, a national and regional tax. Generally, the percentages are the same; however, they may vary slightly depending on the region you’re located in. The progressive income tax table is as follows:

Taxes on savings and investments

If you are a Spanish tax resident, you will also be taxed on your worldwide savings and investments. This includes the following:

Interest gained on savings
Dividends and income gained from holding interests in companies
Any income from life and disability policies
Income from annuities
Capital gains made from the disposal or transfer of assets

The tax thresholds for savings and investment income are:

Up to €6,000: 19%
From €6,000 to €50,000: 21%
From €50,000 to €200,000: 23%
Over €200,000: 26%

Taxes on rental income

In addition to the previously mentioned income taxes, you are also liable to pay a tax on rental income in Spain. Any rental payments earned from a Spanish property are subject to a 19% rental income tax for both residents and non-residents from EU or EAA countries. If you are a non-resident not from the EU or EAA countries the flat tax rate is 24%. However, there are a number of deductibles on this tax, including expenses such as house insurance, local property tax, and repairs and management costs. This also includes a yearly 3% depreciation of the property.

Deductions and allowances

Spanish tax residents can enjoy a range of deductions and allowances on their personal income taxes. A standard allowance is granted for anyone under the age of 65 (€5,550), 65 and up (€6,700), and 75 and up (€8,100).

Additionally, if you have dependent children age 25 and under living with you, the following allowances are granted:

€2,400 for the first child
€2,700 for the second
€4,000 for the third
€4,500 for the fourth
€2,800 as an additional allowance for each child under the age of three

Furthermore, you can typically claim tax deductions for the following:

Payments made into the Spanish social security system
Pension contributions in Spain
Buying or renovating your home in the country
Joint tax filings
Charitable donations

Income Tax Deadlines

In Spain, the personal income tax year coincides with the calendar year. Therefore, the deadline to file your tax return for the previous year is the 30th of June.

Late Submission Penalties

Penalties for late income tax returns are judged on a case-by-case basis but generally include a fine for late submission and additional interest charges. However, you can usually expect something similar to the following interest rates for each timeframe past the due date:

3 months or less overdue: 5%
3-6 months overdue: 10%
6-12 months overdue: 15%
A year or more overdue: 20%

An interest of 5% is typically charged on top of these amounts for payments that are more than one year overdue. In addition to these interest rates, the fine for late submission is €100 for nil returns. However, if the Tax Office prompts the return, the fine will increase to €200.

Next to this, it’s worth noting that in situations where the return is not made voluntarily, the following penalties will apply in addition to the previously mentioned fines and interest rates:

Minor infraction: 50% of the tax due
Serious infraction: 50–100% of the tax due
Severe infraction: 100–150% of the tax due

How to file your Spanish tax returns

Everyone is obligated to file a Spanish income tax return in the first year of their tax residency in the country. The forms can be submitted online and require your digital identification certificate.

From the second year of tax residency onwards, it’s only necessary for you to file your tax return if you are earning over €22,000 as your employer will have already deducted the taxable amount. It’s important to note that this only applies if you have only one source of income.

Personal Income Tax Advice

If you need professional advice navigating your personal income tax returns in Spain, then contact us at SpainDesk. Our team of qualified tax and legal experts can offer specialized guidance and assistance to ensure your tax returns are filed correctly and on time.

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January 2, 2022

Rental Income Tax in Spain: Types, Deductibles, and Rates

Taxes

In this article, we will discuss the rental income tax in Spain. Among the taxes in Spain, rental income tax is a widespread Spanish income tax. Read this post for an overview about the types of rental income tax and the different rates.

What is the Rental Income Tax

You will have to deal with this tax when renting out your property. The tax can be divided into VAT tax and income tax. Depending on the situation, you will have to pay VAT tax or not. The income you create will be taxed similarly to other income taxes (such as personal income tax and corporate income tax).

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Do I need to pay VAT on rental income?

Whether you need to pay VAT tax or not depends on what type of property you are renting out, and to whom you are renting the property.

When don’t you need to pay VAT tax on your rental income?

When a renter will use your property exclusively for living, you don’t add VAT tax to your invoicing. For example, if you are renting out an apparent or house to be used as a residence for a family, the rental income is not VAT taxed. This applies to lettings with living spaces only, which include apartments, houses, rooms in shared flats or houses, and any separate living quarter.

When do you need to pay VAT tax on rental income?

When you are renting out to a business or self-employed person to execute their economic activity, you need to pay VAT tax and add VAT tax on your invoicing. For example, when you are letting to a bakery, a pub, a hair salon or a restaurant. The same applies to lettings with non-living spaces, such as retail space, business areas and any other premise accessible only from the street.

Next to this, when you are renting out a storage place, you will also have to pay VAT tax on the rental. For example, when you are renting out a parking space or stockroom.

Rental income tax for individuals

Rental income tax for tax residents and non-residents in Spain are different. The difference is in the tax rates, rental property tax deductions, and the frequency of declaring your rental. However, both residents and non-residents must make the tax declaration in Spain over all the income from rent.

Rental income tax in Spain for Non-Residents

Non-residents are subject to the flat non-resident Income Tax (IRNR, Impuesto Sobre la Renta de personas No Residentes), a flat tax rate of 19% if you reside in the EU or EAA countries. If you are not from the EU or EAA countries, the flat tax rate is 24%.

Rental income tax in Spain for Tax Residents

The tax for tax residents on rental income is called IRPF (Impuesto sobre la Renta de Personas Físicas). It is a tax levied on the income obtained during a year from natural persons residing in Spain, no matter if they are Spanish. It is also a progressive and direct tax.

The rental income tax for tax residents is on a progressive rate of 19% to 47%. When you generate more income, you will pay more tax. The property owner pays the rental income tax, not the renter. The rental income tax for tax residents is different than for non-residents.

Rental income tax for self-employed and companies

When you rent out business premises to a company or self-employed to carry out economic activities. You are obligated to pay VAT tax, and must register at the government as an Autonomo or company.

Rental income tax in Spain for self-employed

When you want to use a property management service, agent, lawyer or accountant for your property, it is wise to register as a self-employed (Autónomo) in Spain. Because when you are an Autónomo, your venture will pay the Autónomo tax, and being taxed as an Autónomo means you can deduct the VAT tax from renting your property.

Rental income tax in Spain for limited liability companies

When you plan a riskier venture or make more than 65.000 euro’s revenue from your Spanish properties, the Spanish limited company becomes attractive for its protective and cost benefits. For example, when people plan to build or make significant investments in Spain, they often form an SL company in Spain. Of course, with a Spanish limited liability company, you will be able to deduct the same property rental costs as an Autónomo.

Personal income tax tranches for tax residents in Spain

Below you can find the personal income rates for tax residents. You will be considered a tax resident when you reside longer than 185 days in Spain.

Income Taxes Trenches 2021	Total
Up to 12.450 euros	19,0 %
From 12.450 euros to 20.200 euros	24,0 %
From 20.200 euros to 35.200 euros	30,0 %
From 35.200 euros to 60.000 euros	37,0 %
From 60.000 euros to 300.000 euros	45,0 %
From 300.000 euros and on	47,0 %

Applying the marginal rate directly, a person who earned 65,000 euros would pay 45% of that income in taxes: 29,250 euros. Fortunately, the 2021 income tax table is progressive, and this is what you would pay:

First IRPF tranche: A person pays 19% of 12,450 euros – 2,365.5 euros
Second IRPF tranche: The person pays 24% of 7,750 euros (the difference between the first and second bracket) – 1,860 euros.
Third IRPF tranche: The person pays 30% of 15,000 euros (the difference between the second and third tranche) – 4,500 euros.
Fourth IRPF tranche: The person pays 37% of 24,800 euros (the difference between the third and fourth tranche) – 9,176 euros.
Fifth IRPF tranche: The person pays 45% of 5,000 euros (the difference between the fourth and fifth tranche) – 2,250 euros.
Sixth IRPF tranche: The person pays 47% of the difference between the fifth and sixth tranche, that is, the amount that exceeds those 300,000 euros (in this case, it would not apply).

Interestingly, the final percentage paid by personal income taxpayers is a division of two tax tranches. The first one is the state tax, which goes to the Government, and the second one is the autonomous tax, which the independent communities receive.

In addition, you must take other aspects such as the family situation into account, which includes: being married or single, having children under 25 years old, children under three years old, living with people over 65 years old, etc.

Situations to consider	Number of descendants
Situations to consider	0	1	2 or more
Single, widowed, divorced or legally separated taxpayer.	–	15.947 €	17.100 €
A taxpayer whose spouse does not obtain income exceeding 1,500 euros per year, excluding exemptions.	15.456 €	16.481 €	17.634 €
Other situations	14.000 €	14.516 €	15.093 €

Deductibles from rental income tax

According to the Spanish tax authorities, EU members and EEA citizens can deduct the following expenses from their rental income tax. You can deduct costs from the rent because they are used for the rental property to create income.

Administration and accounting costs: costs enquired to pay Spanish tax and properly follow Spanish tax laws.
Notary and Lawyer costs: e.g. for formalizing rental contracts drafting contracts, or tenant eviction.
Real estate agent fees or key holder fees
Water, electricity, laundry, cleaning, and utility costs
Security services: e.g. gated communities
Mortgage interests and unpaid rents: Note that rental income is the amount of rent receivable (not received). You can deduct due rents until six months have passed from the first debt collection action or if the tenant is legally insolvent.
Depreciation of the property at 3%: You can deduct the depreciation of 3% of buildings or the cadastral value. The cost of buildings is frequently unknown as the purchase deed does not usually separate the two. In this case, the building’s proportion is taken from the cadastral value. Failing this (e.g. non-Spanish property), the tax office will accept that buildings represent a reasonable proportion, perhaps 2/3rds of the total cost.
Interest on loans taken out to finance acquisition, improvements, and property maintenance.
Maintenance, repairs, and renewals: The property’s expansion or improvements are not deductible.
Non-state taxes and surcharges related to the property: This category covers costs like IBI and charges for the trash, and it includes any fines.
Insurance policies (e.g. for fire, civil liability, fire etc.)
Primary maintenance and reparation costs

Like other Spanish tax deductions, you must justify all deductible costs with relevant documentary evidence. They are valid only if you have the invoice, and quotations are not valid documents. If you have an accountant in Spain, you can send them your invoices, and they will take care of the rest.

Double taxation agreements and rental income tax

The Double Taxation Agreement is an agreement that might have been signed by Spain and your country of residence (or state where you need to pay tax). The Spanish tax authorities make these double taxation agreements to check and regulate where residents and non-residents will have to pay tax.

According to what is established in the OECD Convention model, the gross income generated through Spanish property must be taxed in Spain, regardless of the taxpayer’s tax residence.

Personal Income Tax Categories

The income tax consists of different income taxes, and you will need to consider all incomes when making your personal tax declaration.

Rental income tax: As the name already says, they are income obtained from tangible elements, such as leases of premises or subleases.
Payroll taxes: The most important one for the majority of the inhabitants is the income from salaries. Despite its name, this part does not include all income from work but only those earned as an employee of a company, and it excludes self-earned income.
Capital gains taxes: Income generated from selling a property is capital gains income. e.g. the income can be from selling a house, a plot of land, or commercial space.
Dividend taxes: Dividends or profits from participating in a business.
Business income tax. This last one comes from doing business on your account. Business activity, in turn, is defined as an activity that includes work and capital together and is aimed at making money.

For each part of the tax base, costs related to this activity can be deducted.

Examples of personal rental income tax calculations

Below you can find a few examples of rental income tax calculations.

Example 1: rental income tax rate in Spain for residents

In the following example, we consider the case of a resident in Spain with a taxable base net of 30,000 euros and no reductions that the regulations take into consideration as personal and family circumstances (a single). As we see in the table, the following types and sections would be applied:

19% to the first 12,450 euros
For the next 7,750 euros (from 12,450 euros to 20,200 euros) we would apply a 24%
And to the next 9,800 euros, until reaching 30,000 euros of the salary in the example, we would apply a 30%

In this case, the landlord with a gross of 30,000 euros per year would end up with a net of 24,393 euros per year, which divided by 12 payments gives an effective payroll, of 2,032 euros per month.

Example 2: rental income tax rate in Spain for non-EU/EEA residents

Using the same example as above, a person who has an annual rental income of 15,000 €, and expenses of 3,600 €, will pay the following tax on their rental income in Spain:

Total rental income: 15,000 €
Deductible expenses: 3,600 €
Tax base: 11,400 €
Tax rate: 24%
Total due: 2,736 € (11,400 € * 0.24)

Example 3: rental income deductions

Assuming you have a rental property that generates an annual rental income of €15,000. If the community expenses are €2,000 per annum and repair and improvement costs amount to €1,600 per annum, the tax on your rental income in Spain will be calculated as:

Total rental income: 15,000 €
Deductible expenses: 3,600 €
Tax base: 11,400 € (15,000 – 3,600)
Tax rate: 19%
Total due: 2,166 € (11,400 * 0.19)

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Frequently asked questions on Rental income tax in Spain

Below you can find the answers to some frequently asked questions about rental income tax in Spain.

Is the Personal Income Tax the same throughout the Spanish territory?

Partially, while the national Spanish tax office has put forward national income tax rates, there are still differences between the regions because they can set their tax rates. Next to the rental income tax rates, there are specific differences in terms of tax deductions. It is best to contact an accountant in Spain who knows the tax implications of the local property tax.

How to declare rental income?

The frequency of declaring your rental depends on your status as a Resident or Non-resident. For residents as we know, the Spanish tax on rental income declaration takes place on annual basis, nevertheless, for non-residents, the declaration has to be submitted every three months based on a set calendar, as follows:

April 20th: Declaration for incomes obtained in January, February, and March.
July 20th: Declaration for incomes obtained in April, May, and June.
October 20th: Declaration for incomes obtained in July, August, and September.
January 20th: Declaration for incomes obtained in October, November, and December.

What happens if I pay late?

The deadlines are very clear in the previous question. If you pay just one day late, the Tax Office will send you a penalty for:

5%: payment made within three months of the deadline
10%: if more than three months pass, but less than 6
15%: between 6 and 12 months
20%: plus interest if you pay more than one year late

So why does Spain have a rental tax?

The main purpose is to respond to the principle established by the Spanish Constitution that all Spanish Citizens must contribute to the support of public expenditures. On the other hand, it tries to favour those people who are in a more precarious situation. Thus, it aims to contribute to a more efficient economy by promoting or taxing certain activities.

How many income taxes are there?

In this article, we will focus on the rental income for individuals. However, there are two income taxes: the Personal Income Tax is levied on the income of individuals, while the Corporation Tax is levied on that of limited entities. In some exceptional cases, there are legal persons and other entities that do not pay Personal Income Tax or Corporation Tax, but it is the natural or legal persons involved in that entity who declare the income obtained based on their participation in that legal entity. There is also a tax on Tax on Economic Activities (IAE) in Spain, which is paid under certain circumstances.

Next to rental income tax, individuals that own property in Spain might have a tax liability in the form of wealth tax. Individuals that own more than 700.000 euros worth of assets in Spain, will have to pay this wealth tax.

A word from SpainDesk

In conclusion, Spanish rental income tax is one of the most common of Spanish property taxes. The Tax Office charges everyone who gets income in the Spanish territory regardless of whether they are a Spanish resident or not. Depending on how you are registered and the money you make you will either pay income tax, vat tax, tax on economic activities, wealth tax or taxes on your property. We strongly recommend hiring a tax advisor or accountant if you are planning to rent out your property. For a fixed fee, you can take care of all the government forms that are required in Spain. Contact us for a quote today.

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January 2, 2022

Investing in Spain

Taxes

At SpainDesk, we can help you with advice about investments in Spain. Here we have lined up popular investments that are currently being done in Spain. SpainDesk provides financial service in Spain. We know that investing is a big decision that needs proper guidance, because of the impact of money. So do you want to invest money while living in Spain? There is always a risk of losing your money when investing. Here are the 10 most popular investments in Spain; let’s have a look.

1. Cryptocurrencies

Cryptocurrencies are decentralized virtual currencies that are not regulated by any State or Central Bank. It works through blockchain technology and come with many advantages in the security and validation of operations.The truth is that blockchain technology is quite impressive, but this does not mean that cryptocurrencies are a worth investing in money.

2. Social Trading

Today, social trading is a new type of investment that replicates the investment portfolio of another person. In this way, you don’t have to choose the companies and investment assets, but it would be enough to trust other people based on their type of investment and history.

On the other hand, you can also work on the behalf, who invest their money and you will take part in their investment’s commissions. In a way, you can easily manage your investment without any funds.

3. Real Estate

Investing in real estate became very popular before the covid-19 pandemic situation. It consists of buying or purchasing a flat, house, land, premises, garage, or real estate to generate profitability.

There are several strategies for investing in real estate, such as reform to revalue, Speculate, rented property, and enable housing premises.

4. Forex Trading

The investment in Forex is to buy other currencies with the hope that its value will increase and generate profitability. The currency’s value is continuously changing and is affected by many factors, such as social, religious, commercial, etc.

Some of the people who invest in currencies use leverage; that is, they go into debt to invest more money. This allows you to earn more for your investments, but at the same time, it means taking a much greater risk.

5. Startups

This type of investment consists of investing in companies called startups, technology companies in the very early stages of their creation.Investing in startups consists of financing a company in its early stages, hoping that this company will grow and get your multiple investments back one day.

Keep in mind; it is quite a risky way to invest because you are investing in a profitable company that may not even generate income.

6. Company shares

The best money investment plan is to buy the company shares and for this manner choose an effective company that will become part of your portfolio.Before you move to this type of investment, it is necessary to study the company’s economic indicators. However, you need to understand its business and know the main characteristics of its sector. The purchase of shares is usually carried out through a broker, who acts as an intermediary in the purchase of shares.

7. Time deposits

If you are looking for a safe type of investment thus fixed-term deposits may be a good option. Since it is one of the least risky ways to obtain a return on your capital.Time deposits is a financial product that consists of lending your money to a bank for interest exchange. There are currently European deposits with up to 2% interest, which is a good interest for those looking for maximum investment security. Also, keep in mind that the money will be blocked if the deposit period expires.

8. Pension plans

Pension Plans are portfolios that formed by the investment funds or ETF, although they have an exceptional Spain feature. They have a great advantage for investments and deduct taxes, specifically income tax. It is essential to keep in mind that the money you invest in a Pension Plan will not be able to be used for a long time, which means you can’t use it for the medium-long term.

9. Investment funds and ETFs

The funds are financial investment instruments that meet the capital of individuals to an external entity. In other words, instead of you buying stocks or bonds directly, why not you choose your investment plan. There are two main types of investment funds:

Passive investment funds: These are funds that replicate a stock index so that they do not choose companies one by one.
Active investment funds: These funds are characterized by actively choosing companies or bonds.

10. Robo Advisors

These are investment platforms that first determine your profile, after that offer a personalized portfolio with products chosen by their financial analysts. They usually invest in low commissions, such as index investment funds or ETFs that replicate a stock index. Robo advisors have been present in Spain since 2015.

Investments in Spain. Consult Spain

Above are some suggestions for investing in Spain. There are always risk of losing your money when investing. Now you properly have the overall idea about the most popular investments in Spain. So, it depends on you to choose the right investment plan and double your money. Keep in mind, before you take a step of investment, it is best to have proper guidelines from financial experts. If you want any professional guidance or you stuck at one point, then don’t hesitate to contact SpainDesk.

November 18, 2020