Income Tax Guide
If you have arrived in Spain because your employer transferred you, they are responsible for ensuring that your tax rate is correct, collected from your paycheck and delivered to the tax office. The information here is not provided because you need to calculate your own tax, simply so you can understand the system and keep an eye on your finances.
Some quick facts:
- The tax year in Spain runs on a natural calendar year, January 1st-December 31st, and your tax return will need to be filed by June 30 for the previous year’s income.
- In order to pay your taxes in Spain, you will need a Número de Identidad Fiscal (NIF). This is exactly the same as your NIE (see the NIE and Residency section) and there is no need for you to apply for a new one. It just makes the forms less confusing if you know the difference between the acronyms.
- There are tax-free thresholds that work especially well for families (see Allowances below)
- Your tax rate is made up of two separate income taxes: the Spanish National Income Tax and the Provincial Tax Rate, which varies according to the region you live in. Unfortunately, Catalunya has one of the highest Provincial Tax Rates, depending on your income bracket.
- Expats can qualify for a heavily discounted tax rate if they meet certain criteria. NOTE: This is dependent on you being a Non-Resident, which brings with it all kinds of difficulties for everyday life. Think carefully before you take this option.
- The Spanish tax department is trying hard to make things easier by moving into online tax returns. The PADRE system helps you calculate your own tax and file your return, but you will still need to finalise the application at a bank or tax office (see the Tax Advisors section for more details)
Not everyone is subject to income tax in Spain. If you are a resident for less than 182 days in each calendar year, you do not need to pay tax. Also, if you do not make more than €17,707 per year, receive a rental income of more than €1,000 and/or receive a capital gains and savings income of more than €1,600, you will not need to pay tax.
If you are working in Spain, your employer can deduct your tax from your paycheck. It is also your choice not to have this happen, particularly if you are going to be paying tax in another country (see Double Taxation below). Most people in Spain do not have their tax deducted from their paychecks, instead paying their tax bill by June 20th for the previous year. Unless you are a good saver, this is not always the smartest option.
Personal allowances (tax-free thresholds) for Spanish income tax purposes are €5,151, which increases to €6,069 for persons over age 65 and €6,273 for persons over age 75.
Child allowances for Spanish income tax purposes are: €1,836 for the first child, €2,040 for the second child, €3,672 for the third child and €4,182 for additional children. In addition, Spain has a maternity allowance of €2,244 for each child under three years old.
Earned income above these allowances is taxed at the following rates:
|Income (above allowances)||Spain’s national tax rate||Provincial tax rate||Total tax rate|
|€0 – €17,707||15.66%||8.34%||24%|
|€17,707 – €33,007||18.27%||9.73%||28%|
|€33,007 – €53,407||24.14%||12.86%||37%|
|€53,407 and above||27.13%||15.87%||43%|
If you fit the following criteria, you will be taxed at a flat rate of 25% for all Spanish income sources, including rent and capital gains. This is great if your main source of income is renting properties, but if you want to spend any length of time living in Spain, it is a much better decision to become a resident and put up with the extra taxation.
- Expats must not have been a resident in Spain at any previous time during the 10 years before their current work or position in Spain.
- Their position must be under a legal employment contract with a Spanish company or through secondment employment, or with a non-resident company holding a permanent establishment (i.e. a branch) in Spain.
- The work must be performed in Spain, although some flexibility is allowed. Work may be partially performed outside Spain if the salary for work abroad does not exceed 15% of the total salary for the year.
- If the working contract provides that the individual performs functions in another group company, this limit goes up to 30%.
- The expat’s income must be subject to Spanish NRIT (Non-Resident Income Tax).
Citizens of EU countries are covered under a general Double Taxation treaty. The upside is that you can decide which country to be a tax resident of (your own or Spain) depending on the benefits to your bottom line. The downside is that if you are an EU-ite you will be forced to pay tax somewhere, as all information is centrally stored.
Spain also has Double Taxation treaties in place with the United Kingdom, the United States, Canada and other English-speaking countries like Jamaica, Australia and New Zealand. Regulations will vary depending on your country of origin and it is best to seek advice from a tax advisor in Spain, at least for your first tax return (see our section on Tax Advisors for English-speaking tax attorneys).
The Spanish tax office is trying to get online. Their latest initiative is PADRE: the Personal Income Tax Return Help Progamme (Programa de Ayuda a la Declaración del Impuesto sobre la Renta de las Personas Fisicas). It is not possible to use this system remotely yet, you will still need to go to a Spanish tax office to access it (the staff are supposed to go through it with you). This is done by phoning ahead for an appointment (the number is 901 223 344). Although there is information on PADRE available online in English, PADRE itself is only available in Spanish.
There may be an English-speaker at the tax office to help you, but not always. The good news is that PADRE is available at some bank branches (you don´t need to have an account to use it) and Spanish banks are far more likely to have English-speaking employees than the Spanish tax office is. Try La Caixa (http://lacaixa.es) for the highest success rate in finding an English speaker working in a bank.