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.
Nearly five million foreigners make their home in sunny Spain. Most of them 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:
- Spanish income tax overview
- Earnings subject to income tax in Spain
- How to file your tax return in Spain
- Spanish tax rates
- Refunds on income tax in Spain
- Tax fines in Spain
- Income tax advice in Spain
- Useful resources
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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 then file their Spanish personal income tax (PIT) returns between 6 April and 30 June in the following year. However, it’s not possible to request an extension on filing income tax in Spain. Furthermore, 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 Físicas or IRPF. The country splits income taxes between the state and each autonomous region. The central state has reduced taxes and simplified income tax bands, however, this has not happened across Spain. Each region sets its own Spanish tax bands and rates of income tax. Consequently, 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.
You first need a mandatory tax identification number, called an NIE number, which is used to track all financial as well as legal activities in Spain. European citizens generally need to apply for an NIE number after three months of residence in Spain. Non-EU citizens, however, 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. As a result, you would be subject to a PIT rate of up to 47%. Tax residency is independent of legal residency papers, in fact. Therefore, it is held for the entire tax year.
Anyone who meets one of the following requirements must file residential income taxes in Spain:
- Those who spend more than 183 days per calendar year within the country. To clarify, 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, authorities have begun to crack down on tax evaders, so proof of non-residence belongs to 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 withholdings of taxable income paid to their employees. First, 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 then these payments on a monthly or quarterly basis depending on their turnover. Finally, authorities deduct them from individuals’ final tax bill and refund any excess paid.
Furthermore, tax-resident individuals 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, as well as real estate or rights on real estate.
Spain changed its tax rules in 2004 to entice a greater number of international companies and expatriate workers into the country. This law is, in fact, 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.
The Spanish government modified this tax regime for the current tax year. As a result, employees on assignment in Spain now pay a 24% tax rate on income up to €600,000. Posted employees earning more than this will be taxed at 47% on income over that amount. Additionally, posted employees now pay a 3% tax on income above €200,000 that is generated from dividends, interest, or capital gains.
You still need to apply for this exemption within six months of moving to Spain. Then, you can benefit for a period of five years. You also 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.
First, 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. Then, you will need to pay 20% of your profits to the tax office as advance tax payments. However, if you are paying tax under the modular system (estimación objetiva), you have to use Modelo 131. Lastly, the form must be completed between the first and 20th day of each quarter: January, April, July, and October.
Meanwhile, 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 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. To repeat, taxes are withheld at the source. Non-residents must always file their Spanish tax returns individually and, therefore, never jointly with their partner or spouse.
Overall, 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. Firstly, you should be aware that 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 returns.
Taxes on income and salary
For Spanish tax residents, general taxable income includes the following elements:
- Salaries, income allocations, in-kind benefits, as well as imputations as established by law
- Capital gains not generated from transfers of assets (such as lottery prizes)
- School tuition reimbursements, expatriate premiums, assignment allowances, as well as 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 as well as the rate approved by each autonomous community. In other words, tax liability in Spain may differ from one autonomous community to another.
2021 Spanish income tax tables
|Taxable base (up to)||Tax liability||Excess of taxable base (up to)||Tax rate|
Some portions of employees’ income are exempt from taxation in Spain. These include the following:
- Reimbursement of actual expenses related to relocating an employee
- Expenses connected with moving personal goods (subsequently backed up by invoices)
- 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, 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, however.
Taxes on savings and investments
Savings taxable income is basically composed of the following:
- Dividends as well as 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 then 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 savings income
- 21% for the following €6,000–€50,000
- 23% for the following €50,000–€200,000
- 26% for any savings income even more than €200,000
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.
Above all, 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.
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.
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%. Furthermore, they are not allowed to deduct any expenses related to property maintenance or management. If you don’t rent out your property, you’re still 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 also 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 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, however.
Personal income tax deductions and allowances in Spain
Resident taxpayers are granted certain deductions on income tax in Spain. Firstly, 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.
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
As of January 2021, the maximum contribution to a Spanish pension plan for tax purposes was reduced from €8,000 to €2,000. However, the limit is set at €8,000, provided that the increase comes from company contributions and does not exceed 30% of the sum of net income from employment and economic activities received by the individual in the tax year.
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. However, it is not always a better option. You should first 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.
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 30 June for the preceding year. This means you will need to submit your tax return for the 2020 calendar year by 30 June 2021.
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. Furthermore, 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. This is provided that 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 47%, but because of variations according to region, the top rate could climb to 54%. 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 2012) whose three-year assignment begins 1 January 2018 and ends 31 December 2020.
|Moving expense reimbursement||€17,800||€0||€17,800|
|Interest income from non-local sources||€5,340||€5,340||€5,340|
Calculation of taxable income
|Net housing allowance||€10,680||€10,680||€10,680|
|Moving expense reimbursement||€0||€0||€0|
|Total earned income||€135,280||€139,730||€135,280|
|Other income (interest)||€5,340||€5,340||€5,340|
|Total taxable income||€140,620||€145,070||€140,620|
Calculation of tax liability
|Spanish social security contributions||€2,875||€3,101||€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)||€2,024||€2,024||€2,024|
|Work income tax||€46,026||€47,920||€45,920|
|Interest income tax||€1,015||€1,015||€1,015|
|Total Spanish income tax||€47,041||€48,935||€46,935|
KPMG generally assumed a joint return for the sample.
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 the following websites:
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. 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. Such assets could include the following:
- Assets held in any bank accounts
- Life insurance policies
Refunds on income tax in Spain
The online system for filing income tax returns in Spain generally allows you to find out straight away if you’ve paid too much tax. As a result, you’ll automatically be shown any refund due to you.
Firstly, to claim this refund, you only need to include your bank account number in your Spanish tax returns. The tax authority will then credit the amount to your account directly. No other supporting documents are necessary. However, you may be asked for these at a later date.
Authorities in Spain tend to proceed at their own pace, so keep in mind that you may have to wait for up to 18 months to receive your tax refunds.
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, so you can sometimes reduce your bill by promptly paying fines. Generally speaking, the numbers below serve as a rough guideline of what you can expect if you submit your Spanish tax returns late.
- Up to three 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 one year late
The fine for late submission of a nil return where no tax is due is €100. However, it increases to €200 if the Tax Office prompted the taxpayer to make a return.
Additionally, extra penalties can be applied if 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 generally apply in cases of forgeries, intentional under-declarations, or repeated violations despite warnings.
Income tax advice in Spain
In general, these are only guidelines and not definitive statements of the law. Therefore, 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 generally well-versed in the ins and outs of Spanish tax law. They can also offer a number of different options to suit your own unique needs.
American expats living in Spain can also get in touch with Taxes For Expats for help with filing their annual US tax returns.