Tax tips for expats

Expat tips: Tax and accounting advice for expats in Spain

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Tax and accounting in Spain need not be overly complicated, says Expatica's tax expert David Cook. Here are five tips for taxes and accounting in Spain.

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 and, 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 for the owner and the associated costs and obligations.

 The usual options for setting 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. They also frequently over-charge for their services!
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. For an employee of a Spanish firm it may be obligatory to file an annual income tax return.

Most income from a job in Spain is taxed at source ('IRPF') and, for low incomes, filing your annual income tax ('Renta') may not be obligatory.

Broadly, if you earn less than EUR 23,000 in a calendar year from one employer, there is no obligation to file, though to claim a rebate you will have to do so. The Spanish tax authority does not make automatic refunds!

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

5. A non-resident property owner in Spain has to file and pay annual income tax.

If you own a property here and are considered non-resident for tax, the property is always deemed to generate income and so an annual tax return is obligatory. Note that this is true even if the property is not let to tenants.

The tax payable will be based on any rental income received, but if the property does not earn real income the tax will still be applied to the property's notional income received, which is based on its tax value (the 'valor catastral').

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

David Cook / Expatica

David Cook is Expatica's tax expert. He runs Spain Accounting, offering personalised accounting, tax and advisory services to foreigners living, working or wanting to start a business in Spain. David, a British qualified accountant, has lived near Barcelona for nearly 30 years, where he set up Spain Accounting in 1999. It specialises in helping foreigners cope with their Spanish taxes and offers practical advice and solutions to starting a business.
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