Individual Income Tax, IRPF (as spanish fiscal resident)
Spain’s fiscal/tax year is the natural calendar year. Income taxes in Spain should be paid between May 1 and June 30 for the previous year’s income. With a DNI or NIE, you can apply for a Número de Identidad Fiscal (NIF) in order to pay your taxes in Spain.
You can download Official software for filling your tax return; program PADRE. http://www.aeat.es/AEAT.internet/renta2011/padre.shtml
Tax residents in Spain will pay income taxes in Spain for their worldwide income.
You become tax resident if:
- you live in Spain over 183 days in each calendar year
- you have their main financial interests in Spain
- your spouse/husband o underage children are resident/s in Spain.
However, in many cases you only need to file a tax return in Spain when you make more than €22,000 per year, receive a rental income of more than €1,000 and/or receive a capital gains and savings income of more than €1,600/€1.000.
Personal allowances for Spanish income tax purposes are €5,151, which increases to €6,069 for persons over age 65 and €6,273 for persons over age 75. In addition, €3.400 when your husband or wife has income for less than €8.000.
Child allowances for Spanish income tax purposes are: €1,836 for the first child, €2,040 for the second child, €3,672 for the third child and €4,182 for additional children. In addition, Spain has a maternity allowance of €2,244 for each child under three years old.
Earned income above these allowances is taxed in the range 24,75%-51%
Income in Spain is roughly defined as:
- Wages and salaries, either as a salaried employee or as a businessperson
- Pension benefits
- Dividends, yields, interest, royalties and capital gains
- Rental Income
- Capital Gains
- In-kind benefits
Special Expat Income Tax Regime in Spain
This tax rate for expats could be advantageous to avoid paying the upper levels of the rates outlined above.
The system is a flat rate of 24,75% up to €600.000 income (salaries and wages) thought a withholding tax and no payment at the end of fiscal year of a tax return.
In order to qualify, the expatriate must meet following:
- Expats must not have been a resident in Spain at any previous time during the 10 years before their current work or position in Spain.
- Their position must be under a legal employment contract with a Spanish company or through secondment employment, or with a non-resident company holiding a permanent establishment (i.e. a branch) in Spain.
- The work must be performed in Spain, although some flexibility is allowed. Work may be partially performed outside Spain if the salary for work abroad does not exceed 15% of the total salary for the year. If the working contract provides that the individual performs functions in another group company, this limit goes up to 30%.
- The expat’s income must be subject to Spanish IRNR (Non-Resident Income Tax). What means a withholding tax at 24,75%
If you qualify, this means you’ll be subject to a special flat tax rate for expatriates at 24,75%% for all Spanish income sources, and you will be taxed as a non-resident regarding all income, capital gains and wealth taxes.
Note: You’ll have to make the decision within six months from the start date of your social security registration. The period of time you can claim this expat tax rate starts from the first year when the expat has spent more than 183 days in Spain and continues for a total of five years or more.
Property/Real Estate Taxes in Spain
The average cost of property in Spain is €100,000 – €250,000. To conduct real estate transactions in Spain, you must obtain a NIE number – a foreigner identification number for tax pourposes.
When you buy property, you will pay a transfer tax of 7% (when you buy from individual a resale property), or VAT at a rate of 10% (when you buy from real estate company a new property).
The stamp duty tax is levied on the sale price declared on the public notarized deed; it varies by autonomous community between 0.1% and 1%. But is 0% when you buy a resale property.
The wealth tax rate ranges from 0.2% to 2.5% of the value of the property/wealth every year. For residents and non residents the first €700,000 is tax exempt. The tax exemption increases to the first €300,000 if it is a primary residence.
The local property tax/council tax is set by the municipal authorities, usually around 0,2%-0.5%.
The land appreciation tax is levied each time a property changes hands and increases in value; this rate is set by the municipal authorities, (approx 0.5% per year ownership).
When you sell property, the capital gains tax rate is 19%-21% (21%-27% increased crisis tax 2012-2013). However, there are tax breaks available.
Inheritance tax is not a fixed rate. It depends on a number of factors, including the wealth of the beneficiary, not just the benefactor.
The income tax on rental income as NON fiscal resident is 24.75% you will still be taxed even if you don’t rent out the home (tax return model 210 declared yearly).
Rental income should be declared quarterly (tax return model 210).