‘La renta’: What you need to know about filing your Spanish tax return

'La renta': What you need to know about filing your Spanish tax return
Photo: StocketeDepositphotos
The deadline for Spain's 2020/2021 annual income tax return - 'la declaración de la renta' - is on June 30th. Here's a roundup of everything you need to know about the process, from who has to file it to what taxes and deductions are applied.

What’s the name for the annual income tax return in Spain?

Personal income tax is known as IRPF in Spain (Impuesto sobre la Renta de las Personas Físicas). Commonly shortened to la renta.

The annual income tax return is called la declaración de la renta.

This is a progressive tax: in other words, the more you earn, the more you pay.

Spanish income tax returns have to be filed by June 30th for the preceding year, in this case 2020.

Who needs to file a tax return?

The basic rule applied to determine residency when it comes to tax is the 183 days rule: “if an individual spends this amount of time or more during a calendar year then he or she is tax resident,” clarifies tax consultants Advoco. 

You probably don’t need to hand in a tax return if you earn less than €22,000 a year and you pay tax on your salary and your bank interest throughout the year.

But if you fall into any of the below categories then you should.

  • You are employed and have an annual income over €22,000
  • You are self-employed or have your own business
  • Your income from yearly dividends, interest and capital gains exceeds €1,500
  • You receive rental income over €1,000 per year
  • It is the first year that you are filing a tax return in Spain

READ ALSO: Who needs to file an income tax return in Spain in 2020-2021?

Do you have to pay tax on income earned outside Spain?

The simple answer is yes. If you are classed as a tax resident in Spain (that’s the 183-day rule again) you will be subject to Spanish tax on your worldwide income, and that includes income from rental properties overseas.

For people who split their time between two countries, authorities in both countries may examine their financial affairs to decide whether they are liable to pay tax in that country. Some countries have double taxation rules:

If you are not sure, consult a tax advisor, accountant, or financial planner.

READ MORE: Do I really need to declare foreign assets to Spanish taxman by March 31st? 

If you don’t live in Spain for tax purposes, but own a house here, you may need to fill in what is known as a Form 210 (Modelo 210).

How to register as a taxpayer

You must register with the Agencia Tributaria, the Spanish tax authority, in order to pay tax in Spain regardless of whether you are a resident or non-resident.

To do this you will need your NIE, and fill out a Modelo 30 in order to register for the first time. You can also use this form if you need to change any personal details such as a change of address.

When is the Spanish tax year?

This is one thing that Spain makes simple. The tax year is the same as the calendar year which means it runs from 1st January to 31st December.

The Spanish tax year goes from January to December. Photo: Andreas Lischka / Pixabay

When do you file your annual tax return?

The filing of tax return for 2020-2021 must be done between April 7th and June 30th – although before June 25th if you want to pay by direct debit. 

How much tax will you have to pay?

In Spain, as in other countries, the percentage of tax you will have to pay is dependent on your level of income above a personal threshold of €5,550 (this means you don’t pay tax on the first €5,550 you earn annually).

These are the tax brackets for 2020:

€0 – €12,450 – 19%
€12,450 – €20,200 – 24%
€20,200 – €35,200 – 30%
€35,200 – €60,000 – 37%
€60,000 – €300,000 – 45%
above €300,000 – 47%

However, you must check the rates for your region because they can vary from the general income tax rates. 

What allowances/deductions are there?

  • Individual and Pensioner Allowances

As mentioned above, you are entitled to an Individual allowance of €5,550 tax free. That increases to €6,700 for those aged 65 and over and to €8,100 for over 75-year-olds.

  • Capital Gains Tax Rates for 2020/21

Dividends up to €1,500 are tax-free and then increase:
€0 – €6,000 – 19%
€6,000 – €50,000 – 21%
Greater than €50,000 – 23%

  • Disability Allowance

Grade 33%-65% disability – €3000
Grade 65%-100% disability – €9,000
An additional allowance of €3,000 if third-party care is needed

  • Child Allowance

In Spain, child allowance can be claimed for children up to the age of 25 who live with you and earn less than €8,000.

First child – €2,400
Second child – €2,700
Third child – €4,000
Fourth & additional children – €4,500
Additional for child under 3 – €2,800

  • Parental Allowance

Deductions are also given to those who have elderly parents living with them – either a mother or father with an income less than €8,000.

Over 65’s – €1,150
Over 75’s – €2,550

Parental allowance on Spanish tax return. Photo: Sabine van Erp / Pixabay

Other deductions and tax allowances 

You may also be able to claim deductions for the following based on your individual circumstance. 

  • Social security contributions 
  • Pension contributions
  • Subscriptions to unions and professional societies of up to €500
  • Legal defense fees up to €300
  • Allowable work expenses of up to €2,000

Tax On Property Rentals

Tax on rental income for properties in Spain is charged at a flat rate of 19% up to €12,450 for those who reside in the EU, Norway and Iceland and 24% for those residing in all other countries.

Note that rental expenditures such as mortgage interest payments, I.B.I, utility bills and community fees are tax-deductible.

Company Tax

For smaller companies (between 1 and 24 employees and turnover of less than 5 million Euros) the rates for 2020 are 25%.

Newly formed companies enjoy a reduced rate of company tax of just 15% for the first two years of business.

Couple allowances

If you are married, either in a heterosexual or same-sex marriage, you have the choice of being taxed separately or together.

The married couple’s allowance (declaración conjunta) of €3,400 for the second taxpayer, in addition to the general threshold of €5,550 granted to the first taxpayer.

But work out the rate as individuals and together before making the decision as doesn’t always pay off to declare together.

It’s easy if you are employed and taxed at the source

The system is pretty straightforward if you are a salaried worker and your tax and social security contributions are taken at the source. You should be given a certificate of taxes withheld Certificado de Retenciones which calculates your annual contributions to add to the tax return.

How To Submit Your Spanish Tax Return

The website lists four ways of filing your tax return:

  • Online
  • Using the App
  • By telephone
  • In person at the tax office

The Agencia Tributaria has streamlined the process in recent years so it should be pretty straightforward, but the online system can get pretty clogged up right at the beginning of the filing period and again as the deadline approaches.

You can either process the application online or using the dedicated App designed for Android or iOS operating systems. 

The Tax Office has prepared a YouTube tutorial to help guide you through the process.

Rather than download any sort of app you can use Renta Web – which is accessible through the website and doesn’t require any additional software.

Whichever system you choose, you will need to register with the [email protected] PIN security system to allow you to access your personal data securely online. Get one either via the Agencia Tributaria page here or by booking a cita previa (appointment) at one of the many regional Tax Agency offices.

READ ALSO: Spanish bureaucracy explained: Saving time through the online [email protected] system

If you don’t want to do it online/App then there is the option of speaking to an adviser at the Tax Office who will talk you through the process. This scheme is called Le llamamos. 

Phone: 901 22 33 44 or 91 553 00 71 Lines are operational Monday to Friday 9 am to 7pm.

Or book a Cita Previa (private appointment) at the tax office and go down there in person. Although this service is only available between May 4th and June 29th. 

What happens next? 

If you are due any overpayment of tax, it will usually be credited directly to your bank account within one month of submitting your return.

Essential Information: 

Spain’s Tax Agency website HERE

Advoco, for Spanish tax and accountancy services in English WEBSITE HERE

READ ASLO: Self-employed in Spain: Seven ways to save money on your income tax return

Please note, we are at The Local are not financial experts. What we’ve learned, we’ve learned the hard way — by getting on the phone and listening to all those frustrating automated messages. 

The information above is designed to help, but if you are unsure of what steps to get yourself in order tax-wise, seek professional advice.

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