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Income and Property Taxes in Spain
If you move to Spain, you may or may not be obliged to file or pay taxes in your country of origin. Here is a rough guide by country.
- United Kingdom: Apply for certificate E101 to declare your status as a tax payer in Spain. This will negate your tax obligations in the UK.
- United States: See Internal Revenue Service (IRS) Forms and Publications. In particular, go to Publication 514: Foreign Tax Credit; Forms 2555 and 2555-EZ: Foreign Earned Exclusion; Form 1116: Foreign Tax Credit. You are exempt for up to $80,000 while you are living abroad.
- Canada: Canada and Spain have a double taxation treaty. Read it thoroughly so you understand what your tax obligations are while you are living outside of Canada. If you plan to live in Spain for longer than two years, consider declaring non-resident status in Canada in order to avoid having to pay Canadian taxes during your absence.
- Non-Europeans: You can receive a rebate on the 16% VAT/IVA tax for many items over 90 Euros. Keep all your receipts, and upon leaving Spain and the European Union, you are eligible to a reimbursement of that tax money from the government. This applies mainly to tourists, but also to medium term expats. It can be completed at the airport or at some tourist information centers.
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The natural calendar year is the basis for Spain’s fiscal/tax year. In Spain, income taxes for a given year should be paid between May 1 and June 30 of the following year. With your DNI or NIE, you can apply for the Numero de Identidad Fiscal (NIF) that is required for you to pay your taxes in Spain.
Tax residents are obliged to pay income taxes in Spain. Tax residents are generally defined as those people who reside in Spain over 183 days in each calendar year and/or have their principal financial interests in Spain. However, in some instances you may only be required to file a tax return in Spain when you earn more than 22,000 Euros a year, receive a rental income of more than 1,000 Euros, and/or receive a capital gains and savings income of more than 1,600 Euros.
Personal allowances for the purposes of income taxes in Spain 5,151 Euros. This increases to 6,069 Euros for persons over the age of 65, and 6,273 Euros for persons over the age of 75.
There is an escalating rate of child allowances for income tax purposes, depending upon the number of children. There is also a maternity allowance for children under the age of three.
Earned income that exceeds these allowances is taxed at set national rates depending upon the earner’s income bracket, and provincial rates that vary in some autonomous regions but also depend upon the earner’s income bracket.
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| Special Expat Income Tax Regime in Spain |
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Under Royal Decree 687/2005, the Spanish government now has a new tax regime for expatriates residing in Spain. There are advantages to this tax rate that allow expats to avoid paying higher levels of taxes. To be eligible, the expat must meet the following:
• Must not have lived in Spain at any time in the ten years prior to the current residency
• Must be legally contracted with a Spanish company, or through secondary employment, or with a non-resident company holding an establishment in Spain.
• The work must be performed in Spain. Under specific circumstances, a percentage of the work can be performed outside Spain.
• Income must be subject to Spain’s NRIT (Non-Resident Income Tax).
Expats who qualify are subjected to a special flat tax rate for all Spanish income sources. They are taxed as non-residents on all income, capital gains and wealth.
Please note: The expat must make the decision within six months of the start of social security registration. The time period in which the expat tax rate can be claimed starts from the first year in which the individual has spent more than 183 days in Spain and continues for a total of five years or more. Claimants are strongly advised to seek the assistance of a qualified tax advisor.
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| Property/Real Estate Taxes in Spain |
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To conduct real estate transactions in Spain, an expatriate must obtain a foreigner identification number (NIE). There is a 7% transfer tax on a real estate purchase, unless the VAT has already been paid. The VAT/IVA rate varies for publicly subsidized homes, newly built properties, and plots of land for commercial premises. A stamp duty tax is levied on the selling price declared on the public notarized deed. The rate varies depending upon the autonomous community.
The wealth tax rate ranges from 0.2% to 2.5% of the value of the property annually. For residents the first 108,182 Euros is tax exempt. If the property is a primary residence, the tax exemption extends to the first 150,253 Euros.
The municipal authorities set the rates of local property taxes and council taxes, which are usually between 0.5% and 1%. Every time a property changes hands and increases in value, a land appreciation tax is applied. The rate is set by the local municipal authorities.
When property is sold, a capital gains tax of 18% is applied. However, there are some tax breaks available on this.There is an income tax of 24% on rental income for nonresidents. Taxes will still apply if the residence is not rented out at the level set by the government. However, tax breaks are available. All rental income should be declared quarterly.
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