Moving to Spain offers a vibrant lifestyle, great food, and a rich culture, but understanding the tax system is essential for financial stability. Expats are subject to Spanish tax laws based on residency status, income sources, and specific exemptions. This guide breaks down the fundamentals to help you navigate tax obligations without unnecessary confusion.
Tax Residency in Spain
Your tax liability in Spain depends on whether you are classified as a resident or non-resident for tax purposes. The Spanish tax authority, Agencia Tributaria, determines residency based on the following conditions:
- You live in Spain for more than 183 days in a calendar year.
- Your main economic interests are in Spain, such as employment or business.
- Your spouse and dependent children reside in Spain, even if you spend less than 183 days in the country.
Expats who meet these criteria are considered tax residents and must declare worldwide income, while non-residents are taxed only on Spanish-sourced income.
Types of Taxes Expats Need to Consider
Spain has several tax categories affecting individuals based on income, property, and assets.
1. Personal Income Tax (IRPF)
Residents must declare income earned both in Spain and abroad. The tax is progressive, with rates applied as follows:
| Taxable Income (€) | Tax Rate (%) |
|---|---|
| 0 – 12,450 | 19% |
| 12,451 – 20,200 | 24% |
| 20,201 – 35,200 | 30% |
| 35,201 – 60,000 | 37% |
| 60,001 – 300,000 | 45% |
| Over 300,000 | 47% |
Non-residents pay a flat rate:
- 24% for general income (employment, rental, or business income)
- 19% for EU/EEA residents
2. Wealth Tax (Impuesto sobre el Patrimonio)
Spain imposes a wealth tax on worldwide assets for residents and on Spanish assets for non-residents. The rates vary by region but generally range from 0.2% to 3.5% for assets exceeding the exemption threshold, which is €700,000 nationwide (Catalonia and Valencia have lower thresholds).
3. Capital Gains Tax
Profits from selling properties, stocks, or other assets are taxed as follows:
| Capital Gains (€) | Tax Rate (%) |
|---|---|
| 0 – 6,000 | 19% |
| 6,001 – 50,000 | 21% |
| 50,001 – 200,000 | 23% |
| Over 200,000 | 26% |
Exemptions apply for reinvestment in a primary residence or certain retirement plans.
4. Inheritance and Gift Tax
Spain taxes inheritances and gifts, but rates and exemptions vary by region. Non-residents typically face higher tax burdens than residents, with rates ranging from 7.65% to 34% based on the recipient’s relationship to the giver and the amount received.
5. Property Tax (IBI)
Homeowners in Spain must pay an annual municipal property tax known as Impuesto sobre Bienes Inmuebles (IBI). The rate, usually 0.4% to 1.3%, depends on the property’s location and assessed value.
6. VAT (IVA)
Spain’s standard Value Added Tax (IVA) rate is 21%, but reduced rates apply:
- 10% for essential goods and services, including hotels and restaurants
- 4% for basic food items and books
7. Social Security Contributions
Employees and self-employed individuals contribute to Seguridad Social, covering healthcare, pensions, and unemployment benefits. The standard employee contribution is 6.45%, while employers contribute around 30% of an employee’s salary. Self-employed workers (autónomos) pay a minimum of €230 per month, increasing based on income.
Tax Filing and Deadlines
For Residents
The IRPF tax return (Modelo 100) must be submitted between April and June for income earned in the previous year. Failure to file on time results in penalties.
For Non-Residents
Non-residents must file Modelo 210 quarterly or annually, depending on their income type.
| Tax Obligation | Form | Deadline |
|---|---|---|
| Resident Income Tax | Modelo 100 | April – June |
| Non-Resident Income Tax | Modelo 210 | Quarterly/Annually |
| Wealth Tax | Modelo 714 | April – June |
| Property Tax (IBI) | Municipality Invoice | Varies by region |
Deductions and Allowances for Expats
Expats may qualify for tax relief through deductions:
- Double Taxation Agreements (DTAs): Spain has treaties with many countries to prevent double taxation.
- Personal and Family Allowances: Tax deductions apply for dependent children, elderly relatives, and disabilities.
- Mortgage Interest Deduction: Limited to pre-2013 loans.
- Rental Income Deductions: Expenses related to renting out a property can reduce taxable income.
The Beckham Law: A Special Expat Tax Regime
Spain offers a tax incentive for highly skilled foreign professionals under Ley Beckham (Beckham Law). Eligible expats can pay a 24% flat tax on Spanish-sourced income for up to six years, instead of being taxed on worldwide income. To qualify:
- You must not have been a Spanish tax resident in the past 10 years.
- Employment must be arranged by a Spanish company.
- The application must be submitted within six months of arrival.
How to Pay Taxes in Spain
Taxes can be paid via:
- Online banking or direct debit
- At a local bank branch
- Through Agencia Tributaria’s online portal
Common Tax Mistakes Expats Make
- Failing to register as a resident: Staying beyond 183 days without registering can lead to unexpected tax liabilities.
- Ignoring worldwide income requirements: Residents must declare foreign assets exceeding €50,000 using Modelo 720.
- Missing tax deadlines: Late filings incur fines ranging from 5% to 150% of unpaid taxes.
- Not applying for the Beckham Law on time: Missing the six-month window means losing the opportunity for a lower tax rate.
Final Thoughts
Spain’s tax system can be complex, but planning ahead prevents costly mistakes. Understanding residency status, available deductions, and compliance requirements helps expats manage their obligations effectively. Seeking guidance from a local tax professional ensures accuracy, particularly for those with foreign income or business interests.