Guide to income tax in Spain
If you're living in Spain, here's a guide to income tax in Spain to help you file your Spanish tax return as an expat.
The Personal Income Tax (Impuesto sobre la renta de las personas físicas/IRPF) is a direct tax levied on the income of individuals.
The individual's income may be obtained either from dependent work or by means of self-employment: development of a business or professional activities.
The taxable income is determined as the difference between the income earned and the expenses that are deductible according to Spanish Law.
You must file an income tax return in Spain if you:
- Earn more than EUR 22,000.00 a year.
- Changed your job within the same year and your last employer paid you more than EUR 1,500 during the year.
The tax period coincides with the calendar year.
This tax is assessed differently for residents and non-residents in Spain.
1) Non-residents' income tax liability
Non-residents are liable for this tax on any income arising in Spain, such as a money deposit with a Spanish bank, a property in Spain, or income derived from any business in Spain.
Property owners are taxed on their property income. The tax base is the property catastral value (valor catastral), which can be found on any I.B.I receipt. The tax base rate is 24% of 2% of the cadastral value.
Should you fail to pay this tax, you will be charged and penalized by the Spanish Tax Agency if you try to sell your property.
2) If you are a Spanish resident
If you are a Spanish resident you will be taxed for your worldwide income. You may deduct your income tax paid in your home country.
Double tax treaties are in place to avoid double-taxation. When there is no treaty with your country of origin, you may deduct the foreign tax paid; foreign compensation may also be applied. Your Spanish Lawyer may calculate this amount for you.
Non-residents living more than 183 days in Spain are also considered residents for tax purposes, even if they have not obtained their residence permit.
3) When should you file your income tax return?
Depending on the result of the tax return, if the taxpayer must pay, tax declarations need to be filed from May 1 to June 20. If the taxpayer is entitled to a tax refund, then this period will be extended up to June 30.
4) Where should you file your income tax return?
Income tax returns must be filed before the Tax Office of the taxpayer's address.
Taxpayers can also file their tax return before the Spanish bank where they have an account; provided that they are entitled to a tax refund or need to make a payment as a result of their tax declaration.
5) Deductable expenses
Certain deductible expenses, such as medicines, deductions for dependants, amounts paid for the purchase of a home or accounts opened for that purpose ("cuentas vivienda") may be claimed in the annual tax returns.
Employers must provide employees with a certificate of taxes withheld (Certificado de Retenciones) so that employees are able to subtract them in order to calculate their tax obligation. Payments to the Spanish Social Security System can be deducted.
6) Getting legal help
These are only general guidelines and not definitive statements of the law. All questions about the law's applications to individual cases shall be directed to a Spanish lawyer.
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