Your guide to taxes in Spain
Taxes are a complicated issue in most countries, but in Spain the laws and intricacies surrounding them can be even trickier, causing a lot of confusion and headaches.
To help you try and make sense of it all, we’ve put together our essential guide, featuring articles on everything from being self-employed and how social security works in Spain to the yearly income tax return known as "La Renta" and all property taxes you face.
Resident taxes
Sometimes it can be difficult to establish whether or not you're a tax resident in Spain, particularly if you live between two different countries, you work abroad or your family live abroad and you travel to Spain regularly for work.
To help you understand where you should be paying taxes, you can get more information in our specific guide: How does Spain know if I'm a tax resident?
But what if you live in Spain, but don't actually work here, perhaps because you are retired or earn money on rental income back home? You need to find out if you still have to pay taxes on your income.
Once you've established that you have to pay taxes in Spain, there are lots of rules and forms to be aware of, such as the Modelo 720 assets abroad declaration.
Taxes in the country can be a heavy burden, but luckily there are several ways you can legally pay less tax in Spain that are worth exploring.
Do I have to registered as self employed in Spain if I only work a few hours a week? Photo: Yan Krukau / Pexels
Declaración de la Renta
The Declaración de la Renta is Spain's annual tax declaration, which must be completed by both employees and the self-employed.
A common question among newcomers to Spain is whether or not you'll need to do an annual tax declaration if you recently arrived in the country. Much depends on your tax status of course, but we spoke to legal experts to get more information on whether new arrivals have to fill in the Declaration.
It's important to be aware of all the key details when filing the Declaration de la Renta, including what deductions can be applied and also how to actually complete the form. And you'll also need to be aware of the common pitfalls and mistakes people often make when filing the declaration, such as putting in the wrong tax address.
And once you've completed it, it may be the case you are actually owed money back on your tax return, which you can using on an online simulator.
Income tax
Spain's income tax is known as IRPF and is a personal tax that you'll pay on your income. And we don't just mean earnings from work, here's what's considered personal income in Spain.
Authorities have taken steps to make it easier to pay from a foreign bank account, but again this depends on your circumstances.
The other key question facing many foreigners is how being employed and self-employed at the same time affects the taxes you pay?
Tax breaks and deductions
Many people feel that taxes can be relatively high in Spain, but the good news is that there are many tax breaks and deductions available to help you pay less.
Many items can be deducted on your Spanish tax return and sometimes private health costs can also be tax deductible but this often depends on your employment circumstances and also where you live in Spain.
If you're self-employed, you may even be able to deduct holiday costs.
Parents in Spain should know they can get tax deductions from the moment their baby is born, and in many cases can continue enjoying fiscal perks as their offspring grow up, with the number of children, regional reductions and other conditions also playing a part.
Autónomos
Being an autónomo in Spain simply means that you're self-employed and are registered with the autónomo system. Unlike many other countries, being self-employed in Spain is not very straightforward, there's a lot you have to learn and get your head around, from knowing when exactly to register to if you should register as self-employed in Spain if you only work a few hours per week.
It's also important to know if you have to register and pay taxes as a self-employed worker in Spain if you earn below the minimum wage.
It can also be a somewhat difficult and unfair system, so there's a lot you need to consider before deciding to become 'autonomo' in Spain, not least the hefty bureaucracy and also the highest flat fee in Europe you'll have to pay.
There are also rules on your tax obligations if you do two or more different type of self-employed jobs at the same time.
As autónomo taxes must be submitted every quarter and there are so many different forms to complete and rules to stay on top of, most people find it necessary to hire a tax professional called a gestor. The role of the gestor in Spain is difficult to pin down, but it's worth finding out whether you'll actually need one. Perhaps the most important thing to know is how much you should pay a gestor to do your taxes.
Finally, if you want to give up being self-employed or you want to take a break from it for a few months, you need to know how to de-register as autonomo so that you won't still be charged.
Social security
Everyone who works in Spain is required to be registered with the social security system and pay towards it. If you're employed, it will be paid by your company and through your salary and if you're self-employed you will be in charge of paying it yourself (which is a lower flat fee at first).
Your social security payments mean that you have access to public health care, a Spanish pension, maternity and paternity pay, as well as sick pay.
If you're planning on working in Spain, one of the first things you'll need to do is to register with Spain's social security system and then add a beneficiary to it if you have a partner or children, so they too have access to healthcare.
Social security in Spain is pretty straightforward for those who are employed, but it can be very confusing and a big financial burden if you're self-employed, therefore, it's handy to be able to calculate your monthly social security fee and know how much social security you'll be paying each month.
The tax rules for buying a property from a non-resident in Spain are different. Photo: Manuel Torres Garcia/Pexels
Property taxes
There are several taxes and fees you’ll pay when buying a property in Spain. These include notary fees, land registry fees and Second-Hand Property Transfer Tax (ITP). This is typically between six to 11 percent of the purchase price. If you’re a homeowner, you’ll also have a pay a yearly IBI tax.
We have a long list of articles on property taxes to help you understand them all including What is IBI tax and how do I pay it? What is Spain’s Plusvalía tax on property sales , how to pay less Property Transfer Tax and a guide to the tax you pay when buying property in Spain from a non-resident.
Non-Resident taxes
If you don't live in Spain, but have certain assets in the country such as a property, you'll have to pay what's known as non-residents tax. This means you won't pay income tax here, but you will pay yearly taxes on you rental income or simply for owning a property here.
Read our guide on Spain's non-resident tax to understand it better and what your obligations are.
If your situation here is unusual you may also need to prove that you're not a tax resident, so that you're not taxed on your worldwide income too.
Regional taxes
In Spain, half of your taxes go to the state, while the other half goes towards the region you live in. This means that there are big differences in the amount of tax you pay in Spain, depending on where you live.
It's worth knowing that certain regions in Spain like Madrid will charge you less taxes and also that there are huge differences in inheritance tax laws and rates throughout the country.
Where you live also depends on how much IBI property tax you'll pay and this can vary greatly across the country.
Photo by Matt Bennett on Unsplash
Inheritance tax
Inheritance tax is the tax you pay on the money or property you receive from a deceased person. If you're living in Spain, it's important to be aware that you'll be obliged to pay this even if the person you're inheriting from lived abroad.
Inheritance tax is a complex issue, particularly if you're a foreign resident in Spain and you're inheriting money or property from abroad. The amount of inheritance tax you'll pay will also depend on where in Spain you live.
It's also important to ask yourself questions related to inheritance tax such as if you should pass your property on to your children or sell it to them instead.
Beckham’s Law
Spain's Beckham Law is a tax regime that enables foreigners who move here for work to pay much lower taxes than normal at a flat rate of 24 percent. It was nicknamed after the footballer David Beckham because he was the first one to take advantage of it when he moved here to play for Real Madrid.
While it can be beneficial for some, that's not always the case and not everyone is eligible for it either.
Once you have all the information you need about the Beckham tax regime you can get more information on how to actually apply for it.
Our writers at The Local Spain are not tax professionals, they have learned the hard way by reading through rules and laws, getting on the phone to talk to lawyers and doing processes themselves.
Remember, if in doubt you should always get the help of a professional for your specific situation.
By Esme Fox
Originally from the UK, Esme grew up in various countries around the world. She decided to settle in Spain in 2014 and has lived in both Granada and Barcelona. She is a regular contributor to The Local Spain.