Income Tax in Spain - what you need to know

Make sure you don’t fall foul of the taxman in Spain and end up paying fines for late payment

Image
1st January is not only the start of a new year, it is also the start of the Spanish tax year, which runs up to and including 31st December. Income tax levies are different in each of the Spanish autonomous regions, but there will be a 1% reduction for most people in 2016.
 

Resident or non-resident?

If you live and work in Spain for more than 183 days a year, you must complete a tax return and pay tax on your worldwide assets to the Spanish tax authorities. Since there is a dual tax agreement with the United Kingdom, you will only pay tax once if you have money or possessions in both countries. You will be considered a resident.
 
Those who spend fewer than 183 days a year in Spain are classed as non-residents and will pay tax only on Spanish held assets.
 
Property owners will need to complete a tax return – whether they receive a rental income or not – and are liable for an “imputed” income tax. Non-residents cannot benefit from deductions or allowances.
 

Tax calculations

Income tax is divided between the State and the autonomous regions. The State has recently reduced taxes and made the tax bands simpler, but this is not to say that everyone will benefit, as the regions each set their own tax rates and bands. A look at the breakdown of income taxes payable shows that people in Madrid are the best off, paying 19.5% at the lowest tax band.
 
Married couples can opt to be taxed together or separately and there is a married persons allowance currently standing at 3400€.  There is also a basic allowance for people under 65 years of 5500€ and other allowances for families with children under 25.
 
For non-residents coming from the EU, there is a flat rate of tax at 19%, but for others it is 24%.
 

Changes in inheritance and wealth tax

Non-residents from an EU country will be delighted to learn that following a European Union ruling, their tax liability will now be the same as for residents.  Previously, they were paying up to 80% more; and in some cases, they may be able to claim a refund from the tax authorities.
 
Wealth Tax is payable on assets worth more than 700,000€. This may sound a lot, but if you own a property in the UK and one in Spain, you could find yourself falling into the Wealth Tax bracket. The tax ranges from 0.2% to 2.5%. Non-residents would only pay if their net assets in Spain are greater than 700,000€ whereas residents will fall under this tax when their worldwide assets are taken into account.
 
Non-residents from an EU country will be delighted to learn that following a European Union ruling, their tax liability will now be the same as for residents
 

Autonomous regions and tax

As mentioned before, each region sets its own tax rates and tax bands. Half of all Income Tax paid goes to the State and there will be a reduction of 1% on each tax band. If you wish to see the 2015 state and regional tax rates, a useful website is www.advoco.es. Under “hot topics” you will find information relevant to your region.
 
The Spanish tax authority also gives information about everything to do with taxes in Spain. You will find them at http://www.agenciatributaria.es/AEAT.internet/en_gb/Inicio.shtml
Most of the information is in English.
 

Late payment

There are fines for late payment of tax and these can be substantial. Go to your local tax office for advice, or to a gestor or tax lawyer, to make sure you send in your tax return and payments in good time.

Further reading for Living In Spain

Image

Finding work

There are a number of ways that UK expats can fund their lifestyle in Spain.

Read more..

Image

Social life in Spain

Find out as much as you can about your new community and find new friends.

Read more...

Image

Heathcare

Arrange health insurance and locate your new local hospitals and practices.

Read more...

Image

Education in Spain

Emigrating with school-age children? Learn more about schooling in your local area.

Read more...