For expats living under the Iberian sun, find plenty of tips for filing your income tax in Spain in 2023.
When moving to a new country, getting your head around the various rules and regulations can be one of the biggest challenges. But help is at hand. Below, you’ll find everything you need to know about Spanish tax returns, including advice on the following:
- Income tax in Spain
- Earnings subject to income tax in Spain
- How to file your tax return in Spain
- Income tax rates in Spain
- Income tax in Spain for foreigners
- Tax refunds in Spain
- Tax fines in Spain
- Income tax advice in Spain
- Useful resources
Take the stress out of filing your income tax return. Talenom’s team of accountants and lawyers are ready to advise you on your work, taxes, and investments. They also provide plenty of other expat-friendly services, with economists, real estate professionals, and relocation specialists on hand. Make your move a success with Talenom.
Income tax in Spain
The income tax system in Spain
Personal income tax in Spain is called Impuesto de Renta sobre las Personas Físicas or IRPF. Income tax is regulated by the country’s tax agency, the Agencia Tributaria (link in Spanish).
Spanish income taxes represent around a third of the government’s income, and both residents and non-residents are liable to pay tax on their earnings.
Income tax is split between the state and the country’s autonomous regions. Federal income tax rates range from 19% to 47%, with the rate payable broken down into six bands depending on income. Some of Spain’s autonomous states choose to set their own tax bands and rates, however, so your total income tax bill will vary depending on where in the country you live.
Before filing an income tax return, you’ll first need a mandatory tax identification number (NIE), which tracks financial and legal activities in Spain. European citizens must apply for an NIE after three months of residence in Spain. Non-EU citizens typically receive their NIE when their residency application is approved.
Who pays income tax in Spain?
Even if you don’t live in Spain for the whole year, you could still be considered a resident for tax purposes. Anyone who meets one of the following requirements must pay income taxes as a resident of Spain:
- You spend more than 183 days per calendar year in Spain. Sporadic absences are considered days of presence in Spain unless you can prove your tax residence status in another country or territory.
- You have business or economic interests directly or indirectly located within Spanish territory.
- You have a spouse or dependent children who are Spanish tax residents.
In recent years, the Spanish authorities have begun to crack down on tax evaders. This means that the burden of proof of non-residence belongs to individuals. 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, you may be considered a tax resident.
Income tax in Spain for non-residents
Non-resident taxpayers in Spain are only taxed on income earned within the country. Income is taxed at a flat rate of 24%, while capital gains and other investment income is taxed at 19%.
Non-residents aren’t allowed any deductions or credits when filing their tax returns, with the exception of some expenses permitted for tax residents of other EU countries.
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). Consequently, you’ll need to take both into account when filling out your Spanish tax return.
Taxes on income and salary in Spain
Spanish employers are obliged to make withholdings of taxable income paid to their employees. Employers make these payments on a monthly or quarterly basis depending on their turnover. Finally, the tax authorities deduct them from the individual’s final tax bill and refund any excess paid.
For Spanish tax residents, general taxable income includes salaries and any other income that isn’t from savings. This can include things like lottery wins, benefits in kind, school tuition reimbursements, and assignment allowances. If you’re considered a tax resident, you’ll also need to declare any assets you own outside of Spain.
Resident taxpayers who are married, either in a heterosexual or same-sex marriage, can choose to be taxed separately or together.
Beckham’s Law was introduced in 2004 to entice a greater number of expatriate workers and international companies to Spain.
The rule means that employees on assignment in Spain can pay a flat tax rate of 24% on income up to €600,000. Those who earn more than this amount pay 47% on additional earnings. There’s also a 3% tax rate payable on any income from dividends, interest, or capital gains over €200,000.
Beckham’s Law is available to expats who haven’t been a Spanish tax resident in the last five years (10 years until 2022), have relocated to Spain specifically for a job with a Spanish employer, and will work in Spain for at least 85% of the time. Applications must be made within six months of moving to Spain, and benefits last for a period of six years.
Taxes on employment benefits
Some portions of employment income are exempt from taxation in Spain. These include the following:
- Reimbursement of expenses related to relocating an employee.
- Expenses connected with moving personal goods.
- Company shares up to €12,000 annually, except for in major Spanish-listed corporations.
- 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, and medical insurance premiums up to a maximum annual amount of €500 per family member covered.
In addition, under some 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 if its use is restricted to professional activities.
Taxes on savings and investments
Taxable savings income in Spain includes the following:
- Dividends and other income generated from interests in companies
- Interest and other payments from capital transferred to third parties
- Income generated from life and disability income insurance
- Capital gains from transfers of assets
Income tax on savings is levied at the following rates:
- 19% for the first €6,000 of taxable savings income
- 21% for the following €6,000–€50,000
- 23% for the following €50,000–€200,000
- 27% for the following €200,000-€300,000
- 28% for any amounts over €300,000
Taxes on rental income
Any rental income received from Spanish property is liable for income tax. Tax residents and non-residents living in the EU/EFTA pay 19% of rental income as tax but can deduct certain expenses.
If your tenant is living in the property – i.e., it’s not a commercial space – you can avail of a 60% reduction before you calculate your net taxable income.
Other 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 (IBI), property repairs, and management fees if these are not paid by the tenant.
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%. Furthermore, they are not allowed to deduct any expenses related to property maintenance or management. Even if you don’t rent out your property, you’re might still need to pay an annual non-resident imputed income tax (NRIIT) of between 1.1% and 2%.
How to file your tax return in Spain
Income tax deadlines in Spain
The Spanish tax year runs from 1 January to 31 December. The period for completing income tax returns is between 11 April and 30 June the following year.
In your first year of tax residency in Spain, you’ll need to file a tax return. From the second year onwards, you’ll only need to file a return if your income from employment is greater than €22,000, as your income tax will have been calculated and deducted by your employer. This only applies if your job is your only source of income.
Income tax forms in Spain
Spanish tax residents must fill out Form 100 (Modelo 100) to make an income tax declaration. Non-residents must apply to make a declaration using Modelo 149 and make the declaration itself using Modelo 150. Non-resident property owners use Modelo 210.
Income tax returns can be filed online at the tax authority’s website. You’ll need a digital identification certificate to file. You can also submit your returns in person at your local tax office or at a Spanish bank where you’re an account holder in some circumstances.
Income tax rates in Spain
General income in Spain is taxed according to a progressive scale. This is the sum total of the rate approved by the state as well as the rate approved by each autonomous community. So while the maximum income tax rate is theoretically 47%, variations according to region mean the top rate could climb as high as 54%.
The Spanish federal income tax rates for 2022 and 2023 are as follows:
|Taxable base (up to)||Excess of taxable base (up to)||Tax rate|
A number of websites offer an idea of how much income tax you may be required to pay as an expat in Spain. Examples include the following:
Personal tax allowances and deductions in Spain
Resident taxpayers are allowed certain deductions on income tax in Spain. Firstly, a basic personal allowance for everyone under the age of 65 is set at €5,550, €6,700 from age 65, and €8,100 from age 75.
If you file your taxes as a married couple, 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.
Furthermore, 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.
Generally, you can claim tax deductions in Spain for:
- Payments into the Spanish social security system
- Spanish pension contributions
- Buying and renovating your Spanish home
- Joint filings
- Charitable donations
In 2023, deductible individual contributions to pension plans are capped at €1,500, down from €2,000 in 2022. The maximum deduction on contributions to company plans, however, has risen from €8,000 to €8,500.
Self-employed income tax allowances in Spain
Tax residents who are freelancers or self-employed professionals, called autónomos, pay income taxes in Spain at the same rate as everyone else. Unlike employed workers, most self-employed people need to file on a quarterly basis and make advanced payments to the tax office.
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, internet, and any vehicles used for work.
Income tax in Spain for foreigners
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 bilateral agreements differ from country to country. Therefore, 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. Additionally, foreign compensation may be applied. Your Spanish lawyer can also calculate this amount for you.
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. These assets include money held in bank accounts, property, shares, and life insurance policies.
Tax refunds in Spain
Spain’s online tax system allows you to find out straight away if you’ve overpaid on tax, so any refund due should be shown automatically.
To claim a refund, you’ll need to include your bank account details in your tax return. The sum will then be credited automatically.
Tax fines in Spain
If you fail to complete a tax return in Spain, you can expect to pay a fine and interest on any tax owed. If you file late, you may be charged a fee ranging from 5% of the tax due (up to three months late) to 20% (more than a year late).
Additional penalties of between 50% and 150% of the tax due can be charged if late submissions are not made voluntarily (for example if the tax office has demanded the submission). You’ll usually be charged the minimum penalty if you haven’t deliberately tried to avoid tax. The biggest penalties are generally designed for those who’ve made deliberate or repeated violations.
Income tax advice in Spain
Specific questions about Spanish tax returns and how the law applies in individual cases should be directed to a Spanish legal expert. As a starting point, you can consult our Spanish business directory to find a tax advisor.