Spanish Income Tax Q & A
Here are some commonly asked questions about Spanish income tax which might help you. You may also be interested in our page Spanish income tax rates 2015.
We operate a free query service (contact us) if you are unsure of what to do in your current situation. Note that priority will be given to clients during the busy tax return season, but we will try to answer your query promptly.
Learn more about our fixed fee tax return service here.
Who has to make a Spanish tax declaration?
With very few exceptions, anyone resident in Spain for tax purposes and with any income or capital gains anywhere in the world has to file a tax return. Non-resident property owners are also obliged to file tax returns (see separate page for non-resident tax return information).
What are the exceptions?
In the first year of your tax residency there are no exceptions, even if you have no income you must file a declaration to that effect. Subsequently if your income from all sources is less than â‚¬8.000 you can normally avoid having to file but there are other conditions, e.g. no more than â‚¬1.600 of investment income and â‚¬1.000 of rental income. Also if you are an employee earning less than â‚¬22.000 and have no other sources of income, you will not have to file a return (tax will already have been deducted from your salary). Finally if you receive a pension from abroad that has already been taxed then you may be exempt depending on the terms of the tax treaty between Spain and the relevant country.
To clarify your position further take a look at our guide Do you need to do a Spanish tax return?
When do I become tax resident?
The short answer is that living longer than 183 days in Spain (including occasional trips out of the country) during any one calendar year makes you tax resident, but so too can basing your family and/or business interests in Spain even if you yourself are absent. Note that failing to declare that you are resident for tax purposes does not alter the fact that you are in fact tax resident and liable to be taxed accordingly. Do not confuse obtaining a Spanish residency certificate with tax residency; this shows you are on the register of foreigners kept by the Police and does not equate to tax residency, although the tax authorities may see it as evidence that you are tax resident if it is ever a matter of dispute.
When do I file a return?
You should register your tax resident status with the Spanish tax authorities (La Agencia Tributaria) as soon as you become tax resident. Theoretically this is as soon as you are settled with the intention of staying more than 183 days but certainly after this period is up. There is a simple declaration called Modelo 30 (download here) which you complete, sign and take to your local tax office. If you want Advoco or another tax adviser to become your fiscal representative this is the time to appoint them. The fiscal representative will file the declaration on your behalf with their details on the form so that all communications from the Tax Office go directly to them. The first return will be made during May or June of the year following the first year of tax residency.
What gets taxed?
Worldwide income and capital gains. So for the declarations residents are making in May/June 2013 they will need to include, from the 2012 calendar year:
- Income from employment and pensions
- Gains and losses from assets disposed of, such as property, businesses and shares
- Investment income such as dividends and interest
- Rents received
What deductions are available?
There are many and varied credits and exemptions but the main ones are:
* Tax deducted at source in Spain (e.g. â€śretencionesâ€ť deducted by banks on interest or by employers on salaries), and abroad if there is a tax treaty in force
* Payments into the Social Security system
* Calculation of rental income and capital gains on property sales
* Your main residence (see below)
* Pension contributions (subject to limits)
* The first â‚¬1.500 of dividend income is tax exempt
Spain has some generous deductions for housing costs. The main ones are:
- the cost of buying, renovating or extending your main residence
- the costs of financing your house (mortgage)
- rent of your main residence if you earn less than 24.020â‚¬
The amount of the deduction can be a fairly complicated calculation but in general a maximum of 9.015â‚¬ mortgage costs can be offset against income at a rate of 15% and a similar amount of rent at 10.05%. Each autonomous community can add other deductions (e.g. Andalucia allows under 35 year olds to claim more for their rent than the national allowance).
What about charity?
Donations to charity are tax deductible in Spain. If the charity is recognised as an official charitable body then you are allowed to deduct 25% of your total donations from your tax bill i.e. your tax bill is directly reduced - it is not a deduction from taxable income.
One condition is that you must produce a certificate from the charity concerned showing that the donation was made. Most charitable bodies hand out certificates to regular donors automatically.
There is also an unusual feature of Spanish tax law that allows you to divert a small proportion (0,7%) of your tax to good causes (fines sociales) or to the Catholic Church. You just tick a box on the tax return and they will benefit from your action without you paying any more tax. In fact you can tick both boxes. Here is an explanation:
What tax rates are payable?
Every taxpayer has a personal allowance of 5,151â‚¬ that is not subject to tax. There are additional allowances for dependents, the amounts varying with age, disabilities and other factors.
After this the tax rate begins at 24,75% for income up to â‚¬17.707 and rises to 52%.
Do couples submit joint returns?
They can either submit a joint return or file separate returns. Your tax adviser will calculate the most beneficial option by doing two separate calculations of the tax due if necessary.
When is it due?
The declaration must be filed by the 30thÂ June during the year following the relevant tax year. So in 2012 everyone will be filing their 2011 tax returns in May/June. The tax is payable by the 30thÂ June also. Normally the taxpayerâ€™s bank details are included on the declaration and the tax is automatically taken from their account.
What if I donâ€™t pay?
Failure to pay tax can result in penalties of between 50% and 150% of the tax owed, plus interest. Late payment can result in penalties between 5% to 20% of the tax involved, plus interest. Â There is a more detailed guide on this here:Â Spanish Tax late reporting and fines
What should I do if I am behind with my taxes?
If you think you should have been regsitered to pay tax in Spain or are registered but are late with your returns, then contact us for some advice. Depending on the situation you could be able to put things right quite easily and cheaply and it will certainly be better to take the initiative yourself than wait for the tax authorities to come to you. Â Note that there is a statute of limitations of four years after which unpaid taxes cannot be collected by the Agencia Tributaria (unless they have already made a claim for the tax).
If you have any further questions or you would like to discuss our services, please contact us