Home Finance Taxes How to file income tax in Spain
Last update on October 12, 2020

For expats living under the Iberian sun, our easy guide to income tax in Spain will help you file your Spanish tax return without any stress.

As of 2019, some 4.9 million expats and foreigners make their home in sunny Spain. Most of them will need to navigate the country’s onerous tax system, which can put a dent in the sun-and-siesta Spanish lifestyle. But with a little prep (and a little help from us), you’ll be able to file your income tax in Spain well in time for tapas hour.

This guide explains everything you need to know about Spanish tax returns, including sections on topics such as:

Income tax in Spain: an overview

Spanish income taxes represent nearly 38% of the government’s income, with both residents and non-residents being liable for tax.

Tax assessments concur with the calendar year from January to December; individuals must file their Spanish personal income tax (PIT) returns between 6 April and 30 June in the following year. It’s not possible to request an extension on filing income tax in Spain, so you’ll face a stiff penalty if you don’t send in your returns on time.

Personal income tax in Spain is called Impuesto de Renta sobre las Personas Fisicas or IRPF. The country splits income taxes between the state and each autonomous region. While the central state has reduced taxes and simplified income tax bands, this has not happened across Spain. Each region sets its own Spanish tax bands and rates of income tax, so how the total income tax you pay depends on where you live.

All income taxes in Spain are regulated by the country’s tax agency, the Agencia Tributaria, which also posts regular updates to the tax code on its website.

Firstly, you need a mandatory tax identification number, called an NIE number, which is used to track all financial and legal activities in Spain. European citizens typically need to apply for an NIE number after three months of residence in Spain, while non-EU citizens will typically receive their NIE application along with their Spanish residency.

Who pays income tax in Spain?

Whether or not you actually live in Spain throughout the year, you could be considered a resident for tax purposes, and therefore subject to a PIT rate of up to 45%. Tax residency is independent of legal residency papers. It is held for the whole of the tax year.

Anyone who meets one of the following requirements must file residential income taxes in Spain:

  • Those who spend over 183 days per calendar year within the country. Sporadic absences are considered days of presence in Spain unless you can prove your tax residence status in another country/territory;
  • People with business or economic interests that are directly or indirectly located within Spanish territory;
  • Those with a spouse or dependent children who are Spanish tax residents.

In recent years, however, authorities have begun to crack down on tax evaders, putting the proof of non-residence on the individual. Consequently, if you have a local Spanish address, a car with Spanish license plates, a Spanish mobile phone, a Spanish bank account that you use regularly, or have used the Spanish healthcare system a few times, you may be considered a tax resident.

Income tax in Spain for tax residents

Spanish resident employers are obliged to make with-holdings of taxable income paid to their employees. Such deductions are calculated according to a progressive scale based on the amount of taxable income (in both cash and kind) that is expected to be paid during the tax year. Employers make these payments on a monthly or quarterly basis depending on their turnover; authorities deduct them from individuals’ final tax bill and refund any excess paid.

income tax in spain

Tax-resident individuals also need to declare assets outside Spain to local tax authorities via Modelo 720. These payments include bank accounts in your name or where you are an authorized operator, securities, rights, insurance, and life or temporary annuities, and real estate or rights on real estate.

Beckham’s Law

Spain changed its tax rules to entice a greater number of international companies and expatriate workers into the country in 2004. In fact, this law is unofficially named for the footballer David Beckham, who switched clubs to Real Madrid just as it was enacted and was one of the first celebrities to benefit.

As a result of these special tax breaks, expats who work for Spanish firms also profit from the rules, even if they live and work in Spain all year round. In summary, expat workers can be treated as non-residents for tax purposes, and only need to pay income tax in Spain at the rate of 24.7%.

You’ll need to apply for this exemption within six months of moving to Spain and can only benefit for a period of five years. In addition, you will need to meet the following criteria:

  • you haven’t been a Spanish tax resident in the last ten years
  • relocation to Spain specifically to accept a job offer from a Spanish employer
  • your duties are carried out in Spain at least 85% of the time
  • you earn up to €600,000 a year

Spanish income taxes for freelancers

Tax residents who are freelancers or self-employed professionals, called autónomos, pay income taxes in Spain at the same rate as everyone else. Taxes due are calculated in one of two different ways, however.

Unless 70% of the people you work for are businesses that are paying retained or withheld tax on your behalf, you will have to complete Modelo 130 every quarter and pay 20% of your profits to the tax office as advance tax payments. If you are paying tax under the modular system (estimación objetiva) then you have to use Modelo 131. The form must be completed between the 1st and 20th day of each quarter: January, April, July, and October.

Freelancers may claim tax deductions on several grounds, provided they have proper invoices and receipts. These include expenses such as social security contributions, accounting and tax service costs, professional subscriptions, office expenses, phone and internet, and any vehicles used for work.

Income tax in Spain for non-residents

Non-resident individuals are also taxed on income earned in Spain. This is generally a flat rate of 24% on work income, and 19% on capital gains and other financial investment income from Spanish sources. Again, taxes are withheld at the source. Non-residents must always file their Spanish tax returns individually and never jointly with their partner or spouse.

Non-residents do not have any allowable deductions or credits, except for certain expenses for those individuals who are tax residents in another EU country/territory.

Can I claim an exemption from income tax in Spain?

Exemptions on income tax in Spain depend on an individual’s tax residency. In short, if you’re considered a tax resident in Spain, you’ll need to declare your income and pay any applicable taxes. For example, pensions received from another country are taxable if you are resident in Spain for tax purposes but non-residents aren’t required taxed on foreign pensions.

Earnings subject to income tax in Spain

Tax residents are liable to pay income tax in Spain on money from a range of different sources. There are two types of taxable income in Spain: general taxable income (renta general) and savings income (renta del ahorro), and you’ll need to take both into account when filling out your Spanish tax returns.

Taxes on income and salary

For Spanish tax residents, general taxable income includes the following elements:

  • Salaries, income allocations, in-kind benefits, or imputations as established by law;
  • Capital gains not generated from transfers of assets (such as lottery prizes);
  • School tuition reimbursements, expatriate premiums and assignment allowances, housing allowances paid in cash;
  • Interest and other income generated from capital transferred to a company when the capital exceeds three times the latter’s equity and for the part corresponding to the excess;
  • All income that is not savings taxable income.

General income is taxed according to a progressive scale. This is the sum total of the rate approved by the state and the rate approved by each autonomous community. Tax liability in Spain may, therefore, differ from one autonomous community to another.

The table below, helpfully compiled by KPMG, gives you an idea of with-holdings for income tax in Spain for the year 2019, as applicable to employment income. Note that actual tax rates depend on the autonomous community where you’re living since they’re a combination of state and regional taxes.

Spanish income tax tables

Taxable base (up to €) Gross tax payable (€) Rest of taxable base
(up to €)
Applicable rate (%)
0 0 12,450.00 19.00
12,450.00 2,365.50 7,750.00 24.00
20,200.00 4,225.50 15,000.00 30.00
35,200.00 8,725.50 24,800.00 37.00
60,000.00 17,901.50 Onwards 45.00

Some portions of employees’ income are exempt from taxation in Spain. These include:

  • reimbursement of actual expenses related to relocating an employee;
  • expenses connected with moving personal goods (backed up by invoices);
  • the grant of company shares up to €12,000 annually;
  • under certain conditions, some in-kind benefits such as meal vouchers up to a daily amount of €11, nursery vouchers, public transport vouchers within certain limits, medical insurance premiums up to a maximum annual amount of €500 per family member covered.

In addition, under certain circumstances, indemnities paid for dismissal or termination of employment contracts are exempt from taxation up to a maximum limit of €180,000. The free use of a company car is only exempt from income tax in Spain if its use is restricted to professional activities.

Taxes on savings and investments

Savings taxable income is basically composed of the following:

  • Dividends and other income generated from holding interests in companies;
  • Interest and other payments from capital transferred to third parties. As an exception, when capital transferred to a related company exceeds three times the latter’s equity, the interest corresponding to the excess is taxed as general taxable income;
  • Income generated from life and disability income insurance;
  • Capital gains from transfers of assets

In Spain, income tax on savings is levied at the following rates:

  • 19% for the first €6,000 of taxable income
  • 21% for the following €6,000–€50,000 of taxable income
  • 23% for any amounts over €50,000

Taxes on rental income

Owning a home in Spain is part of the appeal of living there. However, any income derived from such properties is subject to income tax in Spain, as with anywhere else.

If you own a property in Spain, you’re liable for tax on it whether or not you’re renting it out. Therefore, it makes sense to understand how property ownership affects income taxes when filing a Spanish tax return.

Overall, any rents received from Spanish property are liable for income tax in Spain. Tax residents and non-residents living in the EU/EFTA pay 19% of the rental income as tax but can deduct certain expenses.

Deductibles include depreciation of 3% per year of the cost of the property, as well as expenses such as house insurance, the local property tax called IBI, property repairs and management fees if these are not paid by the tenant.

income tax in spain

If your tenant is living in the property – i.e. it’s not a commercial space – you can also avail of a 60% reduction regardless of the age of the tenant before you calculate the net taxable income.

Landlords who are EU residents but don’t have a principal tax residency in Spain will need to obtain a certificate of tax residency in the corresponding member state and file that along with their tax returns.

Non-residents who own property but live in any other country must pay income tax on rental returns at 24% but are not allowed to deduct any expenses related to property maintenance or management. If you don’t rent out your property, you’re not free of the tax net: you must pay an annual non-resident imputed income tax (NRIIT) of between 1.1% and 2% before the end of the following year.

How to file your tax returns in Spain

In the first year of tax residency, everyone has to file a Spanish tax return. This can be done online at the tax authority’s website, where you will find information on how to complete and submit your Spanish tax returns as well as information on previous tax returns and payments made.

To access this service you will need your digital identification certificate.

From the second year of tax residency in Spain, you only need to fill out a return if your income as an employee is more than €22,000, as your Spanish income tax will have been deducted by your employer. This rule only applies if your job is your only source of income.

Personal income tax deductions and allowances in Spain

Resident taxpayers are granted certain deductions on income tax in Spain. A basic personal allowance for everyone under the age of 65 is set at €5,550, or €6,700 from age 65, and €8,100 from age 75.

In addition, if you have children under 25 living with you, you can claim an allowance as follows:

  • €2,400 for the first child;
  • €2,700 for the second;
  • €4,000 for the third;
  • €4,500 for the fourth;
  • An additional allowance of €2,800 for each child under three years.

If you have a parent or grandparent living with you and your total income is less than €8,000, you can claim an allowance of €1,150 if they are over 65 and €2,550 if they are over 75.

In general, you can claim tax deductions in Spain for:

Income tax in Spain for married couples

Those who are married, either in a heterosexual or same-sex marriage, can choose to be taxed separately or together. You should compare the Spanish tax rate you would pay as individuals to the tax you would pay as a couple before making your final decision about Spanish tax returns, as it is not always a better option.

There is a married couples’ allowance (declaracion conjunta) of €3,400 for the second taxpayer, in addition to a general allowance of €5,550 granted to the first taxpayer.

Income tax deadlines in Spain

Spanish income tax returns must be filed by June 30 for the preceding year. You will need to submit your tax return for the 2019 calendar year by 30 June 2020.

Forms for income tax in Spain

If you are a Spanish tax resident, consult and fill out Form 100 (Modelo 100) in order to make a Spanish income tax declaration.

To apply to pay income tax as a non-resident of Spain, use Modelo 149. You can then make your income tax declaration on Modelo 150. If you a non-resident property owner, you should make your tax declaration on Modelo 210.

Income tax returns can also be filed in person at your local tax office, or before the Spanish bank where you have an account, provided you’re entitled to a tax refund or need to make a payment as a result of such a tax declaration.

Spanish tax rates

Spain’s maximum income tax rate is 45%, but because of variations according to region, the top rate could climb to 48%. This top-rate applies to income over €120,000 for residents of Catalonia (Cataluña), Andalucia (Andalucía) and Valencia (Comunidad Valenciana).

The following table created by KPMG offers an example of an expat who needs to pay income tax in Spain. This calculation of Spanish tax returns assumes a married taxpayer resident in Spain with two children (both born in 2010) on a three-year assignment from 1 January 2017 to 31 December 2019. The taxpayer’s base salary is $100,000 and the calculation covers three years. A joint return has been assumed for this example.

  2017
($)
2018
($)
2019
($)
Salary 100,000 100,000 100,000
Bonus 20,000 20,000 20,000
Cost-of-living allowance 10,000 10,000 10,000
Housing allowance 12,000 12,000 12,000
Company car 6,000 6,000 6,000
Moving expense reimbursement 20,000 0 20,000
Home leave 0 5,000 0
Education allowance 3,000 3,000 3,000
Interest income from non-local sources 6,000 6,000 6,000

Exchange rate used for calculation: $1.00 = €0.89.

Calculation of taxable income

Year-ended 2017
(€)
2018
(€)
2019
(€)
Days in Spain during the year 365 365 365
Earned income subject to income tax      
Salary 89,000 89,000 89,000
Bonus 17,800 17,800 17,800
Cost-of-living allowance 8,900 8,900 8,900
Net housing allowance 10,680 10,680 10,680
Company car 6,230 6,230 6,230
Moving expense reimbursement 0 0 0
Home leave 0 4,450 0
Education allowance 2,670 2,670 2,670
Total earned income 135,280 135,280 135,280
Other income (Interest) 5,340 5,340 5,340
Total income 140,620 145,670 140,620
Reductions 0 0 0
Total taxable income 140,620 145,070 140,620

Calculation of tax liability

  2017
(€)
2018
(€)
2019
(€)
Taxable income as above 140,620 145,070 140,620
Mandatory Spanish Social Security employee contributions 2,858 2,875 3,101
Work income reduction 2,000 2,000 2,000
Joint return reduction 3,400 3,400 3,400
Deductions. personal and family minimums 2,042 2,024 2,024
Work Income tax 46,026 48,029 45,920
Interest income Tax 1,015 1,015 1,015
Total Spanish income tax 47,041 49,044 46,935

Online calculators for income taxes in Spain

A number of online sites offer an idea of the kind of income taxes you may be required to pay as an expat in Spain. They include:

  • Salaryaftertax.com
  • Spaintaxcalculator.com
  • Icalculator.info

Double taxation in Spain for expats

Spain has double taxation agreements with over 80 countries around the world, so expats may be exempt from certain tax liabilities in their home countries. Typically, you won’t be taxed on the same income twice, but the bilateral agreements differ from country to country, so it’s best to consult a Spanish tax law professional on queries about income tax in Spain.

If there is no treaty with your country of origin, you may deduct the foreign tax paid when filing your Spanish tax returns; foreign compensation may also be applied. Your Spanish lawyer can calculate this amount for you.

income tax in spain

As of March 2013, expats residing in Spain who own assets in excess of €50,000 outside the country have been legally obliged to declare those assets by 31 March of the tax year in order to reduce the amount of tax avoidance. Failure to do so could incur severe penalties or criminal charges. Such assets could be:

  • Assets held in any bank accounts;
  • Property;
  • Shares;
  • Life insurance policies.

Refunds on income tax in Spain

The online system for filing income tax returns in Spain allows you to find out straight away if you’ve paid too much tax; you’ll automatically be shown any refund due to you.

To claim this refund, you only need to include your bank account number in your Spanish tax returns. The tax authority will credit the amount to your account directly. No other supporting documents are necessary, but you may be asked for these at a later date.

As a result, you may have to wait for up to 18 months to receive your tax refunds in Spain, however, as authorities tend to proceed at their own pace.

Tax fines in Spain

In case you haven’t filed a return statement for income tax in Spain, you can expect to face a fine for late submission, as well as interest charges. Each case is judged individually and there are sometimes reductions for prompt payments of fines, but the numbers below serve as a general guideline of what you can expect:

Fine for late presentation of Spanish tax returns:

  • Up to 3 months from the due date: 5% of the tax due
  • Between 3-6 months: 10%
  • Between 6-12 months: 15%
  • More than a year overdue: 20%
  • Interest at 5% is charged on top for payments more than 1 year late

Fines for late submission of a nil return where no tax is due: €100 (€200 if the Tax Office has prompted the taxpayer to make a return).

Extra penalties payable in case late submissions are not made voluntarily:

  • Minor infraction: 50% of tax + fine + interest
  • Serious infraction: 50-100% of tax + fine + interest
  • Very serious infraction: 100-150% of tax + fine + interest

In general, you’ll be charged the minimum penalty if you haven’t deliberately tried to hide your income and if the total amount due in taxes and fines is less than €3,000. The penalties for serious infractions concerning Spanish tax returns apply in cases of forgeries, intentional under-declarations, or repeated violations despite warnings.

Income tax advice in Spain

These are only general guidelines and not definitive statements of the law. All questions about the law’s applications to individual cases and specifics about Spanish tax returns should be directed to a Spanish lawyer. It’s important to remember that such professionals are well-versed in the ins and outs of Spanish tax law, and can offer a number of different options to suit your own unique needs.

American expats living in Spain can get in touch with Taxes For Expats for help with filing their annual US tax returns.

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