If you’re one of the many expats who has chosen to live in Spain, you might need to file a tax return with the Spanish authorities. This could be the case even if the only income you have is from a pension or is drawn from sources outside of Spain. Similarly, if you don’t live all the time in Spain but have earnings from a business or other source based in Spain, you might have to complete a Spanish tax return, and you could be liable for some tax there, too.
Luckily most people can file their taxes online - making the process relatively painless, once you know your way round the system. This guide gives an overview about the Spanish tax system, who might be liable to pay taxes in Spain, and what the current tax rates are.
Taxes in Spain are administered by Agencia Tributaria. Much of the information about tax in Spain is published in English online - but it’s important to note that not all detail is available in translation, and the Spanish version will be used in the case of any dispute.
The most up-to-date income tax rates for employment income, for resident taxpayers, are as follows:
|Income range||Spain income tax rate (%) 2017|
|up to €12,450||19%|
|€12,450 - €20,200||24%|
|€20,200 - €35,200||30%|
|€35,200 - €60,000||37%|
Non-resident taxpayers are taxed according to a different rate. There’s a flat rate of either 19% for income for employment if you’re from another EU state, or 24% if you’re from somewhere else. Other forms of income - pensions, investments and so on are taxed differently. More on this later.
It’s worth noting that some taxes in Spain are regional, and both the rates of these, and the method by which they’re paid can vary depending on where in Spain you live.
(Source 13 December 2017)
The Spanish tax year is the same as the calendar year - so it runs from 1 January to 31 December.
In general, you’ll have to submit your tax return for personal income tax by 30 June in the year following the tax year. However, there’s a full calendar available online at the tax authorities website where you can check all the relevant dates for the tax year in question.
Depending on your circumstances, if you’re self-employed you might have to submit your tax assessments more frequently. Some business people and professionals submit on a quarterly basis, and business owners where the turnover is significant - over €6,000,000 - have to file details every month.
(Source 13 December 2017)
You can file your taxes in Spain either electronically, using a paper form, or even over the phone depending on your circumstances.
If you live in Spain for more than 183 days - 6 months - in a calendar year, then you’re likely to be classed as a resident for tax purposes.
It’s worth being aware that the time you spend in Spain doesn’t necessarily have to be consecutive. Under some circumstances, it could be made up of several trips rather than a permanent relocation to Spain, so make sure you’re clear on your obligations regarding tax if you’re in Spain for a significant period of time.
If you’re a resident taxpayer, you have to submit a declaration in the first year you qualify for resident status, and then after that if:
- You earn more than €22,000 from employment
- You’re self-employed or have your own business
- You earn over €1,000 a year in rental income
- You have capital gains and savings income of over €1,600 in the tax year
If you’re classed as a tax resident in Spain, and fulfil any of the above criteria, then you’ll have to declare, and pay tax on, all your income in Spain - no matter where in the world you have earned it.
(Source 17 December 2017)
If you’re in Spain for less than half of a particular tax year, then you’ll probably be categorised as non-resident for tax purposes. In that case you still have to pay tax on earnings sourced from Spain, to the Spanish authorities.
This is paid at a flat rate of either 19% for income from employment if you’re from another EU state, or 24% if you’re from elsewhere.
Other sources of income are taxed differently:
- Capital gains are taxed at 19%
- Investment interest and dividends are taxed at 19%, but interest tax is exempt for EU citizens
- Royalties are taxed at 24%
- Pensions are taxed at progressive rates, from 8% - 40%
If you’re Spanish but live, work, or study abroad, you’ll still have to file a tax return if you have any income which originates from Spain during a particular tax year. This could be either from earnings or from other assets like savings or a rental property. You’ll likely have to complete a tax return and pay taxes to the Spanish authorities on at least some of your income.
If you’ve earned anything at all in Spain you have to declare it. In effect, this means that if you leave in the middle of a tax year you’ll almost certainly still have to make a declaration for that particular year. After that you should seek professional advice to check your obligations.
If you’re an expat living in Spain permanently, or are designated as a resident taxpayer because you live there for more than half of the tax year, you’ll need to complete a tax return there if you earn over €20,000 or fulfil any of the other criteria set out above. You’ll have to pay tax on some or all of your income to the Spanish authorities - although exactly how this works will depend on whether you’re classed as a resident or non-resident taxpayer.
Where you live matters because tax liabilities are decided by domicile (where you reside) rather than nationality. Domicile basically means the country you live in, or to which you have the strongest ties, both in terms of your residence and where your economic or professional links are. You’ll be considered a tax resident of that country in most cases.
If you’re a student in Spain you’ll still have to pay income tax on your earnings according to the same schedule as anyone else. However, you might be able to claim certain exemptions and allowances based on your study.
There’s special tax treatment for people who get a grant in Spain but go to another country to study for some or all of their course. If that’s your situation, it’s well worth reading the small print.
(Source 13 December)
If you’re self-employed, you’ll have to complete a tax declaration, and pay taxes at the same rate as employed people.
(Source 18 December 2017)
If you’re a foreigner relocating to Spain, you might need the help of a double taxation treaty to make sure you don’t have to pay too much tax.
That’s because if you leave your home country in the middle of a tax year, or if you continue to draw income from your home country from investments or a rental property for example, you could be liable to pay tax there as well as in your new home. That’s where double taxation treaties come in. You shouldn’t have to pay tax twice on the same income, though, as long as there’s a double tax treaty between your home country and Spain. The tax you pay in one country is offset against the bill in the other.
Spain has double taxation agreements with the following countries:
|Spain double taxation agreements|
|Bosnia and Herzegovina||Nigeria|
|Dominican Republic||Saudi Arabia|
|El Salvador||South Africa|
|Greece||Trinidad and Tobago|
|Indonesia||The states of the former USSR (except Russia)|
(Source 13 December 2017)
You can pay your taxes online or using a paper form. All the forms you’ll need are available on the tax authorities website.
To submit your declaration online you’ll need to have a Spanish Electronic ID, a valid electronic certificate or a Cl@ve PIN. Once you’ve logged into the system, you’ll be able to track your own tax affairs and see how they’re progressing online.
(Source 13 December 2017)
If you’re an expat and have to pay tax in Spain, you might need make a bank transfer from abroad to do so. If that’s the case, you’ll need to watch out for any charges added to the transfer and make sure that the exchange rate applied when converting your cash is fair.
If you don’t double check, paying your taxes could cost you more than they should. This is because of hidden fees added to international bank transfers, but also because banks and money exchange services often don’t use the real, mid-market rate, which you’d find on Google. Instead, they often mark up the rate by an average of 4-5% to make a profit. You lose.
If you’re making an international money transfer to pay your taxes, a great alternative is to use TransferWise. Transfers are made using using the real exchange rate, with just a fixed, upfront fee, because TransferWise works differently than banks. TransferWise doesn’t use the pricey international SWIFT bank transfer system. Instead, their smart new technology connects local banking systems all over the world. By making a series of local bank transfers, they bring down the cost, and pass that savings on to the customer.
If the Spanish authorities will accept your payment as a third party transfer, you might be able to pay your taxes directly using a TransferWise transfer. Otherwise, if you don’t already have a bank account in Spain, you could transfer the payment to a friend or family member who does, and still benefit from the savings.
If you’re an expat living abroad, or just someone who travels a lot, you might also want to check out TransferWise borderless multi-currency accounts. With this account you can hold your money in any one of dozens of different currencies, switching between them with the real exchange rate whenever you need to. This can save you time - but also money - as there’s only a small and transparent fee to switch.
It can be hard to work out your options and duties when it comes to tax. Each individual’s tax affairs are different, but it’s important you understand how the rules apply in your case. Getting it wrong can be an expensive mistake.
Nobody wants to end up paying more than necessary because of unfair fees levied on currency conversions and international money transfers. That’s where TransferWise might be able to help. See if you can get a better deal from TransferWise if you find yourself needing to pay your taxes abroad with a cross-border transaction.
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