Introduction

Spain is a popular destination for people who are looking to emigrate, and they have a popular golden visa program. If you’re considering moving to Spain on an investment visa, you probably want to know more about the tax system in Spain. So, we’ve collected all the most important information right here. 

Who has to pay tax in Spain?

Anyone who lives and works in Spain has to pay tax in Spain. However, the type of income you have to pay tax on varies based on your residency status.

If you spend more than 183 days in any year in Spain, you are considered a tax resident. When you are a Spanish tax resident, you will have to pay tax on your global income, including any income you earned in Spain. 

If you spend less than 183 days of the year in Spain, you are not a tax resident, and you only have to pay Spanish taxes on any income you earned in Spain. 

There are certain exemptions and tax agreements that might change this, and we will get to those shortly. 

Tax types in Spain

There are several different kinds of tax you might have to pay in Spain. The tax system in Spain also includes national, regional, and local taxes, so you might pay different kinds of tax to different parts of the government. 

Income Tax

Income tax rates in Spain are set by the 17 autonomous regions that make up the country. These are levied on top of the general taxes that are set by the national government. So, what you pay will depend on where you choose to live. Currently, the national tax rates you will pay are:

Under €12,450: 19%

€12,450–€20,200: 24%

€20,200–€35,200: 30%

€35,200–€60,000: 37%

€60,000–€300,000: 45%

over €300,000: 47%

You will also be taxed 3% on any savings you have that exceed 200,000 Euros. 

Investment Income Tax

If you have investments that are subject to Spanish tax you will pay 21% tax on any dividends, interest, and other earnings. 

Capital Gains Tax

If you sell property, stocks or other investments and make a profit, it will be subject to capital gains tax under the tax system in Spain. The current rates for capital gains tax are:

Up to €6,000: 19%

€6,000–€50,000: 21%

€50,000–€200,000: 23%

Over €200,000: 26%

Value Added Tax

Like the rest of Europe, Spain uses the Value Added Tax or VAT system. This tax is applied to goods and services and is currently 21%. Certain things like state education, tutoring, sports and cultural services, insurance, postage stamps and the arts are VAT exempt. Other things like drinks, hotel services and cultural events are taxed at 10%, and food, medicine and books are taxed at 4%.

Corporate Tax

Under the tax system in Spain, companies must pay corporate tax on their earnings. As of 2016, the corporate tax rate is 25%. 

Social Security Taxes

Like the rest of Europe, Spain has a robust social security system including public healthcare. Both employees and employers pay taxes on every paycheck to fund this system. 

According to the tax system in Spain, you will pay 6.35% and your employer will pay 29.9% on any amount up to the maximum, which is EUR3,596.98. This amount may change, so it’s worth checking the government website in any year you are liable to pay this tax in Spain. 

Property Taxes

If you own property in Spain, you will pay tax on that property, which is set according to the region, and the size and value of the home. If you rent a property you own in Spain, you will also pay tax on your rental income. The rate for this tax is 19% for EU residents, and 24% for residents of other countries. 

Wealth Tax

Spain has a special “wealth tax” for high network individuals. There are exempt amounts of 700,000 Euros plus 300,000 for your primary residence. Anything over and above that will be subject to wealth tax, which may be up to 3.5% if your assets are valued at more than 10 million Euros. 

Spanish tax for residents

All of the taxes mentioned above apply to all earnings tax residents earn around the world – unless they are subject to a dual taxation agreement. 

Tax in Spain for non-residents

If you are not a Spanish tax resident, you will only pay the taxes listed above on the portion of your earnings that were earned in Spain. 

Dual taxation agreements

Spain has double taxation agreements with several countries, which means that if you are a citizen of one of those countries and required to pay tax there, you will not be subject to taxation on the same income in Spain. The list of countries that Spain has dual taxation agreements or treaties with include:

Like most countries, there are some expenses that can be deducted from your tax bill in Spain. These include:

Spanish Tax Exemptions and Reductions 

• Alimony that is paid to a former spouse
• Pension plan contributions
• Personal and family allowances that are based on your age and the age of your dependents
• Financial losses
• Habitual residence tax credits, which apply if you have bought a property to be your primary residence
• Tax credits for some investments in newly formed companies
• Tax credits for contributions to political parties
• Charitable donations
• Tax credits for large families

As with most countries, the tax system in Spain does change, and many amounts, credits and exemptions change on an annual basis. It’s important to check the tax regulations that apply to the year you will be paying taxes in, and to look at both the national and regional and local taxes that apply where you live. 

Frequently Asked Questions about Taxes in Spain

Do you pay taxes on foreign pension in Spain?

You will be taxed on your foreign pension in the country you are a tax resident of. So, if you spend more than half of the year in Spain, you are considered a tax resident there, and will pay taxes on your pension there. 

How do you register to pay income tax in Spain?

Taxes in Spain are administered by the Agencia Tributaria. You will need to get a tax registration form, which is either a Modelo 30 if you are a tax resident, or a Modelo 150 if you are a nonresident. You will get a Spanish tax number, and then you can file your taxes in Spain. 

How long can you live in Spain before you have to pay taxes?

If you live and work in Spain, you must pay taxes on any income you earn in the country. However, you will be taxed as a nonresident until you are present in the country for six months of the year. 

Where do I pay my taxes if my country has a dual taxation agreement with Spain?

This depends on the specifics of your situation. If your country has a dual taxation agreement with Spain, you will only pay tax in one country, depending on your tax residency. If you are not sure which country that is, speak to the tax authorities in your home country and Spain to confirm. 

What do I get if I pay Spanish social security tax?

If you pay social security tax in Spain, you are entitled to a variety of benefits. These include public healthcare, disability and sickness benefits, maternity and paternity benefits, child allowances and retirement and pension benefits. 

Will I be able to claim a Spanish pension if I am a taxpayer in Spain?

Yes, if you have contributed to Spanish social security benefits either as an employee or a self employed person, you can draw a Spanish pension. However, in order to receive full pension benefits, you must have contributed to the fund for 36 years. If you have been in the country (and contributing) for less time than that, your pension will be calculated accordingly. 

How do Spanish property taxes compare to the rest of the world?

Property taxes in Spain are actually relatively low compared to countries like the UK and the USA. 

What are the penalties for tax evasion in Spain?

Like most countries, the tax system in Spain includes penalties for tax evasion. These are usually a fine of twice the defrauded amount and up to two years in prison. 

If you would like to know more about the taxation framework in Spain contact us today to book a free and comprehensive consultation with one of our experts.