Do I have to pay taxes in Spain if I don’t work?
There are many types of residents in Spain that don't work for one reason or another, be it that they're pensioners, unemployed, or earn a passive income. Does this mean they are exempt from paying taxes in Spain?
Retirees
If you move to Spain to retire, you obviously won’t be working here, but does that mean that you’re not liable to pay taxes?
Unfortunately, not. A pension is in fact considered as income from work and is therefore not exempt. If your pension exceeds the annual tax limits, then it’s mandatory to submit an income tax return.
Spain's Personal Income Tax Law establishes that the exempt minimum is €22,000 per year. This is also for passive benefits that include “pensions and passive assets received from public Social Security schemes and others, including public benefits for situations of disability, retirement, accident, illness, widowhood, or similar”.
This means that if you receive more than €22,000 per year in pension payments, you are obliged to file a tax return and pay what you owe.
The law states that "in the event that the income comes from two or more sources, the minimum is reduced to €15,000, provided that the income from the second and subsequent payers is greater than €1,500".
Therefore, if you receive payments both from a public pension and from a private pension for example, or you receive a pension from two different countries you must submit a tax return if your payments are more than €15,000 per year.
Pensions in Spain are subject to progressive tax rates ranging from 19 up to 47 percent, depending on how much you earn from it.
Pensioners also have a slightly higher personal allowance than others in Spain. For example, those aged between 65 and 74 have an allowance of €6,700 a year, and those over 75s have an allowance of €8,100.
If you have a foreign pension you should check with an international tax advisor if you are liable to pay taxes in your home country or in Spain as it's often dependant on whether there are double taxation treaties.
According to the Spanish government website, in the event of double taxation, "as the country of residence, it will be Spain who decides on the measures", "measures normally consist of the application of a deduction, and "in certain cases, the agreement may provide for an exemption for a pension received in the country of residence (Spain), although this would be on a progressive basis, meaning that the exempted income would be added to the person’s remaining income in order to calculate the rate of tax applicable to their remaining income".
READ ALSO: What's new for Spain's 'La Renta' tax return in 2023?
Non-lucrative visa
The rules of Spain’s non-lucrative visa (NLV) are that you are not allowed to work. However, in order to be eligible you have to be receiving a certain amount of passive income or have a certain amount of savings in order to be able to support yourself to live here.
Passive income could be in the form of receiving rental payments for a property you own abroad, returns on investments or capital gains from the sale of assets for example.
Even though you are prohibited from working while on this visa, your passive income is still taxable. Spanish law states that you must pay income tax on your worldwide income and capital gains.
This means that if you’re receiving rent or investment payments from abroad you are still liable to file a tax return and pay what you owe.
In order to be eligible for the NLV, you need to prove you have 400 times the IPREM which for 2023 is €2,400 per month or savings of €28,800 for the year.
Earnings, both passive and non between €20,200 to €35,200 are taxed at a rate of 30 percent. The exact amount you will pay, however, will depend on your individual circumstances.
READ ALSO - Non-lucrative vs digital nomad visa: Which one should you choose to move to Spain?
Golden Visa
Another group of people who may or may not be working in Spain are those on the Golden Visa. The Golden Visa allows you to live in Spain if you spend €500,000 on a Spanish property (or properties), invest €1 million in shares in Spanish companies, invest €2 million in government bonds, or transfer €1 million to a Spanish bank account.
Those on the Golden Visa have the right to work in Spain, but they may choose not to if they have enough in savings to support themselves or they receive passive income from abroad.
Just like the two categories above, if you’re here on the Golden Visa, you will be taxed on worldwide income, so if you earn anything abroad, be it dividends from a company, bonds or investments, or simply interest from foreign bank accounts, you will be liable to pay tax on them.
READ ALSO: How Spain plans to toughen conditions for its golden visa
Unemployed
Being unemployed still doesn’t exempt you from paying taxes in Spain.
If you’re receiving unemployment benefits, then these are also taxable. The Spanish government states on their website “Unemployment benefits are considered a taxable income according to the tax laws”.
You may have the right to certain deductions depending on your circumstances, but you will still have to file the benefits on the annual La Renta tax return.
If you don’t receive any unemployment benefits, but simply don’t work either because you haven’t found a job yet, you’re being supported by a partner, are living off savings or other reasons, then you may still have to file and pay taxes, depending on your circumstances.
If it’s the first year that you’re living in Spain, whether you’re working or not, then you are liable to file an annual tax return.
If you don’t work in Spain but are still receiving some type of income or payments from abroad, then these will be taxable.
The same rules as for those on the non-lucrative visa apply in that you will be taxed on any passive income, interest and capital gains, if you exceed the thresholds.
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Retirees
If you move to Spain to retire, you obviously won’t be working here, but does that mean that you’re not liable to pay taxes?
Unfortunately, not. A pension is in fact considered as income from work and is therefore not exempt. If your pension exceeds the annual tax limits, then it’s mandatory to submit an income tax return.
Spain's Personal Income Tax Law establishes that the exempt minimum is €22,000 per year. This is also for passive benefits that include “pensions and passive assets received from public Social Security schemes and others, including public benefits for situations of disability, retirement, accident, illness, widowhood, or similar”.
This means that if you receive more than €22,000 per year in pension payments, you are obliged to file a tax return and pay what you owe.
The law states that "in the event that the income comes from two or more sources, the minimum is reduced to €15,000, provided that the income from the second and subsequent payers is greater than €1,500".
Therefore, if you receive payments both from a public pension and from a private pension for example, or you receive a pension from two different countries you must submit a tax return if your payments are more than €15,000 per year.
Pensions in Spain are subject to progressive tax rates ranging from 19 up to 47 percent, depending on how much you earn from it.
Pensioners also have a slightly higher personal allowance than others in Spain. For example, those aged between 65 and 74 have an allowance of €6,700 a year, and those over 75s have an allowance of €8,100.
If you have a foreign pension you should check with an international tax advisor if you are liable to pay taxes in your home country or in Spain as it's often dependant on whether there are double taxation treaties.
According to the Spanish government website, in the event of double taxation, "as the country of residence, it will be Spain who decides on the measures", "measures normally consist of the application of a deduction, and "in certain cases, the agreement may provide for an exemption for a pension received in the country of residence (Spain), although this would be on a progressive basis, meaning that the exempted income would be added to the person’s remaining income in order to calculate the rate of tax applicable to their remaining income".
READ ALSO: What's new for Spain's 'La Renta' tax return in 2023?
Non-lucrative visa
The rules of Spain’s non-lucrative visa (NLV) are that you are not allowed to work. However, in order to be eligible you have to be receiving a certain amount of passive income or have a certain amount of savings in order to be able to support yourself to live here.
Passive income could be in the form of receiving rental payments for a property you own abroad, returns on investments or capital gains from the sale of assets for example.
Even though you are prohibited from working while on this visa, your passive income is still taxable. Spanish law states that you must pay income tax on your worldwide income and capital gains.
This means that if you’re receiving rent or investment payments from abroad you are still liable to file a tax return and pay what you owe.
In order to be eligible for the NLV, you need to prove you have 400 times the IPREM which for 2023 is €2,400 per month or savings of €28,800 for the year.
Earnings, both passive and non between €20,200 to €35,200 are taxed at a rate of 30 percent. The exact amount you will pay, however, will depend on your individual circumstances.
READ ALSO - Non-lucrative vs digital nomad visa: Which one should you choose to move to Spain?
Golden Visa
Another group of people who may or may not be working in Spain are those on the Golden Visa. The Golden Visa allows you to live in Spain if you spend €500,000 on a Spanish property (or properties), invest €1 million in shares in Spanish companies, invest €2 million in government bonds, or transfer €1 million to a Spanish bank account.
Those on the Golden Visa have the right to work in Spain, but they may choose not to if they have enough in savings to support themselves or they receive passive income from abroad.
Just like the two categories above, if you’re here on the Golden Visa, you will be taxed on worldwide income, so if you earn anything abroad, be it dividends from a company, bonds or investments, or simply interest from foreign bank accounts, you will be liable to pay tax on them.
READ ALSO: How Spain plans to toughen conditions for its golden visa
Unemployed
Being unemployed still doesn’t exempt you from paying taxes in Spain.
If you’re receiving unemployment benefits, then these are also taxable. The Spanish government states on their website “Unemployment benefits are considered a taxable income according to the tax laws”.
You may have the right to certain deductions depending on your circumstances, but you will still have to file the benefits on the annual La Renta tax return.
If you don’t receive any unemployment benefits, but simply don’t work either because you haven’t found a job yet, you’re being supported by a partner, are living off savings or other reasons, then you may still have to file and pay taxes, depending on your circumstances.
If it’s the first year that you’re living in Spain, whether you’re working or not, then you are liable to file an annual tax return.
If you don’t work in Spain but are still receiving some type of income or payments from abroad, then these will be taxable.
The same rules as for those on the non-lucrative visa apply in that you will be taxed on any passive income, interest and capital gains, if you exceed the thresholds.
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