1. Get an NIE number.

This is a Spanish ID number which is essential for just about any legal, fiscal or bureaucratic transaction such as opening a resident’s bank account, filing taxes, buying property etc.

It’s not essential for a non-resident who simply stays in Spain a few weeks a year but if you want to live here longer term, find work or join the social security scheme etc, it will be obligatory.

For an EU passport holder it’s a formality but non-EU nationals will probably need to find a local “gestor” to get together all the necessary papers and forms to make the application. It can also be applied for at a Spanish Consulate in your country of residence.

In all cases it will take some weeks to be issued so if you need one, don’t leave it to the last minute!

2. Before starting a business seek independent advice.

If you want to start a business in Spain get advice on the alternatives available, advantages and disadvantages of each, tax implications on the owner and the associated costs and obligations.

The usual options open to set up a typical business are limited and not complicated but local professionals can confuse foreigners (due only in part to the language barrier) and at times sell a service that is unsuitable to the business's requirements, or even unnecessary.
 
3. If you’re running a business (limited company, sole trader or freelance), talk to an expert on what tax returns need filing.

Most business will have to file quarterly IVA (Spanish Vat), annual summaries and an annual tax return (“Impuesto Sociedades” for companies, “Renta” for individuals).

Other returns such as employee/sub-contractor income tax, rent payments or EU operations will be applicable depending on individual circumstances. The penalties for non-filing, or even late submission, can be heavy and may lead to a tax inspection.

4. As an employee of a Spanish business it may be obligatory to file an annual income tax return.

Most income from a job in Spain is taxed at source (“IRPF”). On low incomes, filing your annual income tax (“Renta”) is not obligatory.

Broadly, if you earn less than EUR 23,000 in a calendar year from one employer there is no obligation to file, though you may do so if you wish to claim a rebate.

If you earn more, or have several sources of income, filing is obligatory in June of the following year.

5. A non-resident owning a property here has to file and pay annual income tax.

If you own a property here and are considered non-resident the property always attracts income tax and the annual “Renta” will need to be filed.

The tax payable will be based on any rental income received but even if the property does not earn real income the tax will still be applied according to the property’s notional tax value (“valor catastral”).

In addition all other income arising in Spain is taxed too e.g. interest earned in a Spanish bank account.

17 March 2009

David Cook, a British qualified accountant, runs Spain Accounting (www.spainaccounting.com) offering personalised accounting, tax and advisory services to foreigners living, working or wanting to start a business in Spain.  Cook has lived near Barcelona for 25 years, after spending 10 years as a finance director in a Spanish subsidiary of a Dutch multinational. He set up Spain Accounting in 1999 designed to help foreigners cope with their Spanish fiscal obligations and to offer practical advice on starting a business.

For more information and to ask David Cook a question, visit our Ask the Expert section under the tax category.