Spanish Personal Taxes
are due by June 30, 2022.
Here's what you need to know.

The personal income tax return in Spain is applied to your worldwide income and is known as the IRPF or Declaración de la Renta. Avalanding can help you minimize what you need to pay.

 

Take advantage of our sound tax advice
for a good nights sleep

The Spanish lifestyle is famous the world over, but there is more than just a sunny social life on offer here. Ranked by HSBC as 2nd in the world for experience and 14th overall, the country appeals to those ready and with the time to enjoy it. Most of the expats here (55%) are retired while a growing segment are in full time employment, especially now remote workers. More than half were also attracted to the climate. Spain delivers on its promises. Three quarters of the expats here have lived in the country for at least five years and most have stayed because their quality of life is so good. Three quarters speak the local language or are learning, and just as many enjoy immersing themselves in the local culture. By far the largest group of expats living here comes from the UK (69%). But with a growing presence among French, German, Italian, Dutch and American citizens everyday life here appeals to a wide range of backgrounds. 

One thing is common to all the expats that have chosen to become residents of Spain, and that is their obligation to file tax returns.  

Personal Income Tax is complex, and when income from other countries is taxed it can get even more complicated as this worldwide income is included in the calculations. Through international double taxation agreements, countries establish rules to avoid double taxation and taxpayers with income from abroad are entitled to the deduction for international double taxation. 

Check Out: USA – Spain Tax Treaty

Check Out: UK – Spain Tax Treaty

With Avalanding helping you with your taxes in Spain, you can be sure that you have some of the best professional tax advice available. 

Contents

Paying Taxes in Spain

Who has to submit a tax return in Spain?

Its not just the amount of time you spend in Spain that impacts your tax residency. What determines whether a person is a tax resident is outlined in article 9 of the personal income tax (IRPF) when any of the following requirements are met:

  • When your stay on national territory is longer than 183 days a year.
  • When their main economic interests/activities are located in Spain.
  • Unless proven otherwise, it will be presumed that the taxpayer has his habitual residence in Spain when, in accordance with the above criteria, the spouse, and the minor children who depend on them, habitually reside in Spain.
 

Once the tax residence has been determined, the expatriate must pay taxes in Spain for all their worldwide income.

In general terms, they are obliged to declare the Income Tax Return in Spain:

  • Regarding income from work (which includes income as employees, and pensions received both in Spain and abroad) above 22,000 euros per year.
  • In some cases the limit is of 14,000 euros for those taxpayers who receive income from work or pensions that come from more than one payer (with certain exceptions). For example, if a British citizen residing in Spain receives a State Pension of 9,000 euros and another Private Pension of 6,000 euros, they would be obliged to declare since the limit for the obligation to declare is 14,000 euros.
  • Rental income exceeding 1,000 euros per year.
  • Dividend income, interest and capital gains, and provided they are subject to withholding in Spain, with a limit of 1,600 euros.

Spanish Tax return: Deductions and allowances

Tax deductions

When it’s time to file the IRPF, deductions that can be applied represent the primary way to pay less in taxes. The most important deductions to take into account when considering your particular situation:

  • The purchase of a main residence: only for those who purchased 2013 or later.
  • General reduction of €2,000 for income from work and pensions, that is, this reduction will apply to all expatriate residents with income from pensions or work, even if such income comes from other countries.
  • A 60% reduction applicable to income from the rental of housing, provided that the property constitutes the permanent residence of the lessee. This reduction is also applicable to rental incomes from properties located abroad.
  • Working mothers: The mothers of children under the age of 3 can deduct the amount of 1,200 Euro per year in the IRPF or collect the anticipated monthly allowance of 100 Euro.
  • Pension plans.
  • Donations: There are deductions for contributions made to charities and political parties.
  • Transmission of habitual residence for people over 65 years of age, the profit obtained is exempt from paying income tax.
  • Transfer of habitual residence for people under 65 years of age; for Taxpayers who obtain a profit from the sale of their habitual residence do not pay income tax if they reinvest the amount obtained in the acquisition of a new habitual residence.
  • The capital gains derived from the sale of urban properties located in Spanish territory that had been acquired from May 12, 2012, until December 31, 2012 (applicable to both residents and non-residents) are exempt by 50 %.
  • Exemption regulated in article 7 of the LIRPF (Ley del Impuesto sobre la Renta de las Personas Físicas) of the income received from work carried out abroad, with certain requirements, with the maximum limit of 60,100 euros per year.
 
It’s really very important to work with a team of knowledgeable experts in taxation in order to take advantage of all deductions that may apply to your particular situation.

Personal Allowances

Individual: € 5,550

Taxpayers over 65 years old: €6,700 per year

Taxpayers over 75 years old: €8,100 per year.

For joint tax cases, only possible for legally married couples (not for common-law couples), in addition to the previous allowances, we can add a reduction of 3,400 euros


Tax Rates in Spain

IRPF is a progressive tax, which means that the amount deducted increases in proportion to the income, gains or income allocation that the taxpayer obtains. 

In order to determine how much IRPF each taxpayer should pay, generally, the amount known as the base liquidable, or net tax base, must be calculated. This is the taxpayer’s net income with corresponding fiscal adjustments according to personal and family circumstances. 

IRPF tax rates or percentages are applied to the net tax base on a progressive scale. The aim is for people who earn more to pay more, as a percentage (and not just in terms of the absolute amount). 

The IRPF tax rates are the same throughout Spain, but the autonomous communities can apply variations. If you live in Barcelona, you must check the rates for Catalonia. 

The marginal rate is the highest that a taxpayer can pay, i.e. the highest percentage band that is applied to your net tax base. In the case of Catalonia, the marginal rate for 2021 is 48%.

However, in general, the income from investments and properties are subject to taxation rates of between 19 and 23%. 

Working with the team at Avalanding makes sure you are taking advantage of all options available to minimize your tax burden.


How UK pensions and other incomes are taxed in Spain

For expats who reside in Spain that obtain Government Service Pensions in the United Kingdom (such as teachers, police and other civil servants etc) this type of income will be taxed exclusively in the United Kingdom is not directly taxable in Spain.

However, under the double taxation treaty between the United Kingdom and Spain, this income is taken into account to determine the effective tax rate on your other taxable income.

This means that your progressive tax rate will generally increase for the rest of your general income. This mechanism is called “exemption with progression”.

  • Other types of Pensions, such as State Pension, Private Pension, Scheme Pension, (Article 17 UK/Spain double tax treaty) are taxed exclusively in Spain.
  • Rental Incomes (Article 6 UK/Spain double tax treaty). In terms of income arising from the immovable property for real estate located in the United Kingdom “the same can be subject to taxation both in Spain and the United Kingdom.” That way, the resident taxpayer shall have “the right to apply the deduction for international double taxation in the IRPF in Spain.”
  • Dividends (Article 10 UK/Spain double tax treaty)


Deadline for filing taxes in Spain

In Spain the tax year runs from January 1 to the end of December.

Therefore,  the deadline for filing the Tax Return for 2021 begins on April 1 and ends on June 30, 2022.

There is the possibility to split the tax payment, without interest or surcharge, that is, the amount of the tax debt resulting from your declaration of the Personal Income Tax can be divided into two parts:

The first payment would be equal to 60% of the amount owed; and the second payment, of the remaining 40%, which can be charged to your account (direct debit) on November 5, 2022.

What happens if I do not present the tax return in Spain?

If you do not file your return within the voluntary period established by the Spanish tax agency (normally from April 1st  to June 30th of each year) there are 2 scenarios:

Scenario 1. You file after the deadline but before a Treasury request

This is the most advantageous and least expensive way to proceed if your have missed filing your taxes.

  • The surcharge will be 5% of the amount of the taxes owed if the declaration is filed within 3 months after the end of the established legal term. This will have no extra interest for delay nor penalties.
  • The surcharge will be 10% of the amount of the taxes owed if the declaration is filed within 3 and 6 months after the end of the established legal term. This will have no extra interest for delay nor penalties.
  • The surcharge will be 15% of the amount of the taxes owed if the declaration is submitted within 6 and 12 months after the end of the established legal term. This will have no extra interest for delay nor penalties.
  • If the declaration occurs after 12 months, the surcharge is 20%. Additionally, in this case, the taxpayer must pay default interest for the period elapsed from the day following the end of the twelve months to the filing date (during the first twelve months, no interest is accrued).
 

Scenario 2. Treasury initialed assessment

When the Treasury has made a assessment and a request to pay has been sent to your because your declaration was not submitted, this scenario is the most burdensome and one that every taxpayer resident in Spain should avoid:

  • This scenario can entail sanctions of between 50% and 150%. The applicable sanction depends on the severity of the infraction committed. The Spanish tax treasury classifies the sanctions as light, serious or very serious depending on the amount stopped if there has been concealment or fraudulent means have been used.
  • Keep in mind that there are information exchange agreements between different countries and that the Spanish Tax Treasury can obtain almost automatically both economic data and the origin of income obtained outside of Spain. 
 
In the same way, we advise our readers that to avoid costly sanctions with the Treasury, if you do not know if you are obliged or not to file your income statement in Spain, contact us so we can advise you correctly of all the tax implications of your particular situation.

Wealth Tax

Wealth Tax is a direct tax that is levied on the mere ownership of assets and rights (including money).

Who is subject to this tax?

Both tax residents in Spain and non-tax residents can be liable for this tax. However, liability for non-tax residents in Spain is limited to assets and rights located in Spain

Rights (e.g. Loan granted) are deemed to be located in Spain when their exercise is done in Spain.

 

Liability depending on the are you live in Spain

For taxpayers tax residents in Spain, liability will depend on the region of Spain you live. For example, taxpayers living in Madrid would be not liable for Wealth Tax.

For non-tax residents, where the assets and rights are located in Spain do not have any options to avoid the Wealth Tax.

 

Exemption amounts

 

For tax residents, there is a general exemption amount of 500.000 euros, which can be increased to 800,000 euros if we add the first 300.000 euros of the value of the habitual home in Spain.

For non-tax residents, the exempt amount is fixed at 700.000 euros. Following that exempted amount Progressive tax rates do apply.

Example:

  • First 700.000 euros: EXEMPT
  • Rest of taxable wealth: 300.000 euros
  • Of this 300.000 of taxable amount:
    • 167.129,45 euros taxed at a rate of 0,210% = 350, 97 euros
    • 132.870,55 euros taxed at a rate of 0,315 % = 418,54 euros (this is the balance remaining of the taxable amount after the first level is taxed at its lower rate)
  • Total tax to be paid: 769,51 euros

Our Tax & Accounting team

Isabel Montero

Lusiné Minasyán

Isabel Palomares