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 €22,000 a year; or
- changed your job within the same year and your last employer paid you more than €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.
Non-residents’ income tax liability
Property owners are taxed on their property income. The tax base is the property cadastral value (valor catastral), which can be found on any IBI receipt. The cadastral value is calculated through the land and market value of your property, and 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.
If you are a Spanish resident
If you are a Spanish resident, you will be taxed for your worldwide income. Double tax treaties are in place to avoid double-taxation. If 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 six months (183 days) over a calendar year 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?
You will need to file your tax return for the previous calendar year during May or June, and the overall deadline for submitting your return and paying outstanding tax is 30 June.
Where should you file your income tax return?
Income tax returns must be filed with your local tax office.
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.
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.
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.
Filing US taxes from Spain
Despite the fact that every US citizen and Green Card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so. Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from Spain, contact Taxes for Expats and see our guide to taxes for American expats.