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TAXES

La Renta: What items can you deduct on your Spanish tax return?

Find out what costs you can and can't claim back on your annual Spanish tax return or 'declaración de la renta'.

La Renta: What items can you deduct on your Spanish tax return?
What items can you deduct on Spain's annual tax return. Photo: abi ismail/ Unsplash

Spain’s annual tax return is known as the declaración de la renta and completing it or knowing what you can claim back as an expense can be quite tricky, particularly because there are many regional differences too. 

Anyone residing in Spain for more than 183 days and earning over €22,000 a year, who is self-employed (autónomo), or moved here in the last year, must complete it. 

Your Spanish income tax return has to be filed by June 30th for the preceding year, in this case for 2021.

READ ALSO – La Renta: The important income tax deadlines in Spain in 2022

There are many different allowances or deductions that can be made on your tax return such as deductions for couples, children, single parents, elderly parents, disabilities and large families, may of which we have covered in previous articles such as this one here

This article, however focuses specifically on costs that you can claim back on your tax return. For example, can you deduct rental or mortgage expenses, property tax or private health expenses? Read on to find out. 

READ ALSO: How to complete Spain’s Declaración de la Renta tax return

Spanish pension contributions

Up to €2,000 can be deducted for contributions to pension plans or up to 30 percent of the tax base (total income).

Property tax

Those who own a property in Spain will pay the yearly Impuesto Sobre Bienes Inmuebles, better known as IBI. This is similar to council tax in the UK and one of the expenses you can claim back on your annual declaration.

The costs of renovating your main home

Keep in mind, that you can’t just deduct the cost of any renovations on your home, particularly if they’re just cosmetic, but you can deduct for any renovations which reduce the demand for heating and cooling by at least seven percent. In this case, you can apply a 20 percent deduction, with a maximum of €5,000. 

Buying or rental costs of your main home

This expense can only be deducted by those who bought their property and signed the mortgage before January 1st, 2013 and must have included it in previous declarations. In the case of those who are renting, the signing of the contract must have been made before January 1st, 2015.

The tax benefit is up to 15 percent with a maximum limit of €9,040, while the maximum deduction will be €1,356.  

Some regions will also allow you to deduct further expenses if you buy a house in a rural area or habitually live in an area at risk of depopulation, such as in Andalusia, Cantabria, Castilla La-Mancha, Extremadura, Galicia, La Rioja and Valencia.  You can also deduct expenses for the cost of buying a residence for a particular group of people, be it young people in need, victims of domestic violence, disabled people or large families.

Donations

Donations of many kinds can be deducted on your annual tax declaration, whether they’re charitable donations, donations to cultural institutions, donations for scientific advancement, innovative technologies or the environment.

Generally, you can deduct 80 percent of the first €150 and 35 percent of any donations after that. If you have any doubts as to whether the donations you made last year can be included, it’s best to check with your accountant or gestor.

For educational studies and textbooks

Many times, you can deduct the cost of education and the textbooks associated with them. In general, you can deduct 15 percent of school fees; 10 percent of language courses and; five percent of the cost of purchasing clothing for exclusively school use.

However, this does not include claiming back for all courses, unless you are autónomo (self-employed) and they are designed to help improve your business. If you’ve taken a course, it’s best to check with your gestor or accountant to see if the fees can be included on your declaration as there are slight variations between regions too.

Investments in environmental installations (some regions only)

Many regions in Spain allow you to deduct costs of investing in environmental installations such as solar panels, thermal installations, and water-saving devices. This category also includes improvements made to your habitual residence due to disability or adaptation because of technical or structural issues. Some of the main regions you can deduct these expenses include Valencia, Balearic Islands, Canary Islands, Murcia and Galicia. Unfortunately, these are not included for Madrid or Catalonia.

Domestic help (some regions only)

In some regions in Spain, you can even deduct expenses for domestic help, such as cleaners, nannies or au-pairs. This is true in Madrid, Andalusia, La Rioja and Castilla y León.

Electric cars (some regions only)

Those who make an investment in buying an electric car may also be able to deduct the cost of this, depending on where they live. This is true if you live in Valencia, La Rioja and Castilla y León.

Standout regional differences

  • The Canary Islands and Cantabria are the only two regions that allow you to deduct private health insurance and other health-related expenses, but make sure you contact your gestor to find out exactly which health costs can be claimed for.
  • Andalusia is the only region where you can deduct legal expenses.
  • Public transport costs can be deducted in Aragón and Asturias.

Please note, we 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 in doubt or unsure of exactly what you can claim back, seek professional advice.

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For members

WORKING IN SPAIN

Do I have to register and pay taxes in Spain if I’m a remote worker?

With the rise of remote working, many foreigners are looking to move to Spain whilst holding on to their jobs back home. But do you have to register and pay taxes in Spain if you're working here remotely? Here's everything you need to know.

Do I have to register and pay taxes in Spain if I'm a remote worker?

Picture this – your company has decided that you no longer need to go back to the office after the Covid-19 pandemic and you can continue to work remotely from wherever you want, perhaps from another country.

You may decide to move to Spain, attracted by its good weather, great food, lower cost of living and many other perks, including the fact that already having a job resolves one of the major obstacles of living in the country.

However, this is where it gets complicated and you start asking questions – do you have to register and pay tax in Spain if you’re working remotely and is tax already deducted from your salary in the country where you previously lived and worked?

Many people are confused by this and online forums are filled with comments claiming that they don’t need to pay tax because they’re not working for a Spanish company or don’t have any Spanish clients.

So do remote workers whose work has nothing to do with Spain have to pay tax in Spain?

In short, the answer is yes. If you live in Spain for more than 183 days, you must pay tax here. Regardless of where your company or clients are based, if you are physically living in Spain and working from here, you are liable to pay tax.

On their website, the Spanish government states that if you’re resident in Spain you “must pay tax in Spain on your worldwide income, i.e. you must declare in Spain income obtained in any part of the world”.

But what if I’m already taxed on my salary back in my home country?

If you have a permanent remote job, you may already be paying tax on your salary back in your home country. Technically though, if you no longer live in that country, you shouldn’t be paying tax there. You should really only be paying tax in Spain if you decide to move here.

While Spain does have double taxation agreements with several countries, including a treaty for the avoidance of double taxation with the UK and the US, you are still expected to declare your income in Spain.

How do I register legally as a remote worker in Spain?

As Spain’s digital nomad visa is still not up and running yet, and all the details of how this will work haven’t been released by the Spanish government, there are currently limited options of how to legally register and pay taxes as a remote worker in Spain.

Below we outline the options for EU and non-EU citizens.

EU citizen

If you’re an EU citizen, you can simply move to Spain without the need for a visa. However, you will need to register your residency here within the first three months. One of the easiest ways of declaring the income you earn from your remote job is to register as self-employed or autónomo.

Ideally, your company would stop paying you a salary with the tax already deducted and you would simply invoice your company every month for your wage. You would then be responsible for declaring and paying your own taxes.

As an autónomo, you will declare and pay your taxes every three months. You will then also have to submit an annual tax declaration in June each year.

You should be aware that as an autónomo in Spain you will more than likely pay more taxes on your remote income than you did back in your home country. This is partly because of the higher social security fees you will be charged, regardless of how much you earn. Currently, it’s €294 per month (€60 for the first year and working progressively up to €294 over the course of the second year).

The income tax bands also mean that you may end up paying more personal income tax in Spain as well, particularly if you are a low to mid-earner. 

READ ALSO – Self-employed in Spain: What you should know about being ‘autónomo’

Of course, not all companies are happy to do this, so you will need to speak with them and see what your options are. You should also talk to a gestor or tax advisor in Spain for your particular situation to see if there is another option of declaring your income here.

This could include creating a subsidiary company here and being paid a salary from that company, or finding an international accounting company that could arrange for you to be paid as a Spanish employee. Again, thess options are not necessarily available to most remote workers.

READ ALSO: What does a ‘gestor’ do in Spain and why you’ll need one

Non-EU citizen

If you’re from a non-EU country, you first have the challenge of getting a visa to legally be allowed to live in Spain for longer than 90 days, even before you start thinking about how to register as a remote worker and if you need to pay tax on your income.

Unfortunately, there’s currently no visa that allows you to simply move to Spain and work remotely. As mentioned above, Spain’s digital nomad visa is still not in operation yet. Here’s everything we know about it so far.

For a working visa, you have to be offered a job in Spain and be sponsored by a company that can prove that the job can’t be filled by someone else in the EU. For an entrepreneur visa you have to set up a business in Spain with an economic interest for the country and with a student visa, you’re only allowed to work 20 hours a week.

READ ALSO – Worker, retiree or investor: What type of Spanish visa do I need?

One option is the Golden Visa, which will allow you to work in Spain and register as an autónomo like above, but the catch is that you’ll have to have a spare €500,000 to spend on a property here before you can.

Many people mistakenly believe that they can work remotely on the Non-Lucrative Visa or NVL, however as the name suggests you can’t work on this visa. As mentioned above, the Spanish government says that you have to declare tax on your worldwide income, so if you continue to work for your company or clients abroad during this time and get found out, you could incur hefty fines.

Particularly since the start of the Covid-19 pandemic and the rise in remote workers, Spanish consulates have been rejecting NVL applications from anyone they believe might be trying to continue working remotely while they’re here.

If you don’t have €500,000, one of the best options is to apply for the NVL and take a sabbatical from your job for a year or quit your job when you move here.

Then after the year is up, you can exchange your visa for a different residency permit that allows you to become self-employed (autónomo). You can then start working remotely for your company again if you’ve been on sabbatical or apply for a new remote job and start working and declaring your taxes legally in Spain. 

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