As an expat in Spain, understanding the local tax system is crucial to ensure you’re compliant with Spanish tax laws and to avoid any unexpected costs. Spain has a complex tax system that taxes both residents and non-residents, and the rules can vary depending on your personal situation (e.g., whether you’re working, retired, or have investments).

Here’s an overview of the tax system for expats in Spain, covering personal income tax, social security, inheritance tax, and other relevant taxes:

1. Residency and Tax Residency

Whether or not you’re considered a tax resident in Spain is a key factor in determining your tax obligations. In general, you’ll be considered a tax resident if:

• You spend 183 days or more in Spain during a calendar year.
• Your centre of economic interests (business, income, investments, etc.) is in Spain.
• If your spouse and/or children are tax residents in Spain, this can also trigger tax residency.

If you are considered a non-resident, only your Spanish-source income will be subject to Spanish tax.

Tax Residency Considerations:

• Non-Residents: Generally, non-residents are only taxed on their Spanish income (e.g., rental income, capital gains from selling Spanish property).
• Residents: Tax residents are taxed on their worldwide income (income from Spain and abroad).

2. Personal Income Tax (IRPF)

Personal income tax in Spain is progressive, meaning the more you earn, the higher the rate. Both resident and non-resident expats need to file tax returns in Spain, but the details of what income is taxable differ for each.

For Tax Residents:

Residents are taxed on their global income (income earned both in Spain and abroad). Spain uses a progressive tax scale, with different rates depending on the type of income and the region where you live, as Spain’s autonomous communities have the power to adjust the rates slightly.

• National Rates (2024):
• Up to €12,450: 19%
• €12,451 – €20,200: 24%
• €20,201 – €35,200: 30%
• €35,201 – €60,000: 37%
• Over €60,000: 47%

Some autonomous regions (e.g., Madrid, Catalonia, etc.) may have additional tax adjustments, so the rates could be slightly higher or lower depending on where you live.

• Deductions: Spanish residents are entitled to various deductions and allowances (e.g., for children, marriage, etc.), which can reduce the amount of tax you owe.

For Non-Residents:

Non-residents are taxed only on Spanish-source income, such as:

• Rental income from property in Spain.
• Capital gains from selling Spanish property or investments.
• Dividends from Spanish companies.

Non-residents typically pay a flat rate of 24% on income, although this rate is reduced to 19% for EU/EEA residents (including UK citizens post-Brexit).

3. Social Security Contributions

If you’re employed in Spain, you’ll be required to make social security contributions, which go toward healthcare, pensions, unemployment benefits, and other social services. Social security rates for employees are around 6.35% of your gross salary, while employers contribute around 29.9%.

• Freelancers/Self-employed (Autónomos): If you’re self-employed, you must register as an autónomo and make monthly social security contributions. The contribution depends on the income you declare and the minimum base set by the Spanish government, but it typically starts around €300-€350 per month for the minimum base.
• Exemption for Non-Residents: If you’re employed by a non-Spanish company, you may be exempt from contributing to Spanish social security, but this depends on the nature of your contract and whether the company is based in the EU.

4. Wealth Tax (Impuesto sobre el Patrimonio)

Spain has a wealth tax that applies to both residents and non-residents. The wealth tax is calculated on your net assets (property, savings, investments, etc.) owned as of December 31 of each year.

• Thresholds and Rates:
• Wealth tax is progressive, starting at 0.2% for assets over €700,000, and increasing to a maximum of 2.5% for assets over €10 million.
• The first €700,000 of your primary residence is exempt from wealth tax, and some regions (e.g., Madrid) offer full exemptions on the wealth tax.
• Non-residents are only taxed on their Spanish assets, not worldwide assets.

Regions with Different Wealth Tax Rules:

• Some regions (like Madrid) offer full exemptions for wealth tax, which can significantly reduce the tax burden for those living in those areas.
• Other regions (like Catalonia) may have higher rates and stricter thresholds.

5. Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones)

Spain has an inheritance tax that applies to both residents and non-residents. The tax is progressive, and the rates depend on the value of the inheritance and the relationship between the deceased and the beneficiary.

• Residents: If you’re a resident, you’ll be taxed on your global inheritance (including assets in Spain and abroad). Deductions for children, spouse, and other close relatives may apply.
• Non-Residents: If you inherit Spanish property but live abroad, you will be subject to Spanish inheritance tax on the Spanish assets. The rates vary by region, but in some areas, you can face a substantial tax bill, especially if you’re not a close relative.

There are substantial regional differences in inheritance tax, with some regions offering significant discounts or exemptions for close family members (e.g., in Madrid, direct descendants may receive large exemptions).

6. Value Added Tax (IVA)

Spain has a Value Added Tax (VAT), called IVA (Impuesto sobre el Valor Añadido), which is similar to VAT in other EU countries. The standard rate is 21%, but there are reduced rates for certain goods and services:

• 10%: For food, hospitality services, and transport.
• 4%: For basic goods like bread, books, and medicines.

If you’re an expat buying goods and services in Spain, IVA will be added to most purchases. If you are a business owner, you will also need to collect and pay IVA on sales and may be able to reclaim IVA on certain purchases.

7. Property Taxes

If you own property in Spain, you’ll need to pay several taxes related to the property:

• Property Tax (Impuesto sobre Bienes Inmuebles – IBI): A local property tax that is levied annually by the town hall (municipality) based on the cadastre value of your property. It’s similar to council tax in the UK.
• Non-Resident Income Tax: If you own property in Spain and do not rent it out, you will still be subject to imputed rental income tax, which is based on the value of the property. The rate is typically around 19% for EU/EEA residents (including the UK post-Brexit).
• Capital Gains Tax (CGT): If you sell a property in Spain, you will be subject to capital gains tax on the profits, which ranges from 19% to 23% for residents, depending on the gain amount.

8. Other Taxes and Considerations

• Capital Gains Tax: When selling assets like property or shares, the capital gains tax rate is generally 19% for gains up to €6,000, 21% for gains between €6,000 and €50,000, and 23% for gains over €50,000.
• Inheritance Tax: If you inherit assets, Spain has an inheritance tax that varies depending on the value of the inheritance and the beneficiary’s relationship to the deceased.

9. Double Taxation Treaties

Spain has double taxation agreements with many countries (including the UK, the US, and most EU countries). These treaties aim to avoid double taxation, ensuring that you don’t pay tax on the same income in both Spain and your home country. However, you may still need to report foreign income and may be eligible for certain deductions or credits under the treaty.

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Conclusion

The Spanish tax system can be complex, especially for expats, as the tax obligations depend on your residency status, source of income, and the region where you live. To ensure you’re fully compliant and optimize your tax situation, it’s highly recommended to work with a tax advisor or lawyer who is familiar with both Spanish tax laws and international taxation. This will help you navigate issues like inheritance tax, wealth tax, and residency-based tax rules, and can save you money in the long run.

In Spain, non-residents are subject to a different tax regime than residents, with a focus primarily on Spanish-sourced income. Non-residents pay tax on income derived from Spain, such as rental income, dividends, and capital gains from the sale of Spanish property. They do not pay tax on their worldwide income, as residents do, unless they have a connection to Spain (e.g., owning property or earning income from Spanish sources).

Here’s an overview of the key aspects of the Spanish non-resident tax system:

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1. Non-Resident Income Tax (Impuesto sobre la Renta de no Residentes – IRNR)

As a non-resident in Spain, you are only taxed on income earned in Spain. This includes rental income, capital gains, dividends, and other Spanish-source income.

Rates for Non-Residents:

• General Rate for EU/EEA/UK residents:
• Income from Spanish property (e.g., rental income): 19%.
• Capital gains tax (from the sale of Spanish property or investments): 19% for EU/EEA/UK residents.
• Dividends and interest from Spanish sources: 19%.
• For Non-EU/EEA residents: The rates for non-EU/EEA residents are generally 24% on most types of income. However, this rate may be reduced if there is a double taxation agreement (DTA) between Spain and your country of residence.

Key Types of Taxable Income for Non-Residents:

1. Rental Income (Income from Property in Spain):

• Non-residents who own property in Spain and rent it out must pay income tax on the rental income.
• The general rate for EU/EEA/UK residents is 19% on gross rental income.
• Deductions: Non-residents can deduct certain expenses associated with the property, such as:
  • Property management fees.
  • Repairs and maintenance costs.
  • Mortgage interest.
  • Property taxes (IBI) and insurance.
  However, the deductions are limited compared to what residents can claim. If you are non-resident, you are generally taxed on gross rental income, but the expenses you can deduct are more limited than for tax residents.

1. Capital Gains Tax (CGT):

• When selling property or other investments in Spain, non-residents are subject to capital gains tax on the profit (the difference between the sale price and the purchase price).
• For EU/EEA/UK residents, the rate is 19% on the capital gain.
• For non-EU/EEA residents, the tax rate is typically 24%.
• There are some exemptions or reductions in CGT for residents, but these do not apply to non-residents, except in certain cases related to reinvestment in Spanish property.

1. Dividends, Interest, and Royalties:

• Dividends: Non-residents receiving dividends from Spanish companies are taxed at 19% (for EU/EEA/UK residents).
• Interest: Interest income from Spanish sources is taxed at 19% for EU/EEA/UK residents, and 24% for non-EU/EEA residents.
• Royalties: Payments for intellectual property or royalties originating in Spain are also taxed at 19% for EU/EEA/UK residents, and 24% for non-EU/EEA residents.

1. Imputed Rental Income (for Non-Renters of Spanish Property):

• If you own property in Spain but do not rent it out, the Spanish tax authorities impute rental income on your property. This means that you are taxed on a hypothetical rental income, even if you don’t earn any rental income.
• For EU/EEA/UK residents, the rate on imputed rental income is typically 19%.
• This tax is calculated based on the cadastral value of the property (the value set by the Spanish government for tax purposes) and the location of the property.

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2. How to File Non-Resident Tax Returns in Spain

As a non-resident, you are required to file a non-resident income tax return (Modelo 210) for Spanish income. This includes income from property rentals, capital gains, dividends, or other Spanish-sourced income.

Steps to File a Non-Resident Tax Return:

1. Obtain an NIE (Número de Identificación de Extranjero):

• The NIE is a unique identification number required for all tax matters in Spain, including filing tax returns. If you don’t already have one, you can apply at the Spanish police station or consulate in your home country.

1. Complete the Modelo 210:

• The Modelo 210 is the official form for non-resident tax returns in Spain. This form can be filed quarterly or annually, depending on the type of income you have.
• For rental income, the Modelo 210 is filed quarterly, while for other income (such as dividends), the return is typically filed annually.

1. Payment of Tax:

• Non-residents must pay tax when filing their tax return, either quarterly or annually, depending on the type of income.
• The tax is paid directly to the Spanish Tax Agency (Agencia Tributaria).

1. Tax Representatives:

• If you are a non-resident and do not speak Spanish or are unfamiliar with the tax system, it’s advisable to appoint a tax representative in Spain. This person (usually an accountant or lawyer) will handle all tax matters on your behalf.

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3. Taxation of Property Sales

If you sell a property in Spain as a non-resident, you will be subject to capital gains tax on the profit made from the sale (i.e., the difference between the purchase price and the sale price).

• Capital Gains Tax Rates:
• EU/EEA/UK residents: 19% on the gain.
• Non-EU/EEA residents: 24% on the gain.

Important note: When selling a property in Spain, the buyer is required to withhold 3% of the sale price and pay it to the Spanish Tax Agency. This is an advance payment of the capital gains tax. As the seller, you can then offset this amount against your final tax bill when you file the Modelo 210.

Deductions for Capital Gains Tax:

Non-residents can deduct certain expenses from the sale price, such as:

• Acquisition costs (e.g., notary fees, registration fees).
• Renovation costs (if applicable).
• Selling costs (e.g., agency fees).

These deductions reduce the taxable amount of the capital gain.

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4. Double Taxation Agreements (DTAs)

Spain has Double Taxation Agreements (DTAs) with many countries to avoid double taxation, which means you will not be taxed twice on the same income.

• How DTAs Work: The DTA typically ensures that you pay tax on your Spanish-sourced income in Spain, but allows you to deduct any Spanish tax paid from your tax liability in your home country.
• Example: If you pay tax on rental income in Spain, you may be able to offset the Spanish tax paid against any taxes due on that same income in your home country.

The UK and EU countries (among others) have agreements with Spain that can reduce withholding tax rates on things like dividends, interest, and royalties.

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5. Other Considerations for Non-Residents

• Wealth Tax: Non-residents are subject to wealth tax on their Spanish assets. This includes property, savings, and investments in Spain. The thresholds and rates are the same as for residents, but exemptions (e.g., the primary residence exemption) may not apply to non-residents.
• Inheritance Tax: Non-residents are subject to Spanish inheritance tax on assets located in Spain. The rates vary depending on the value of the inheritance and the relationship to the deceased.
• Inheritance Tax Treaty: Spain has bilateral agreements with some countries that offer reductions or exemptions on inheritance tax.

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Conclusion

As a non-resident in Spain, you’ll only be taxed on Spanish-sourced income, such as rental income, capital gains, dividends, and interest. The general tax rate for non-residents from the EU/EEA/UK is 19%, and for non-EU residents, it is typically 24%. However, there are specific exemptions and deductions available, especially when selling property.

It’s advisable to consult with a tax professional in Spain to ensure you’re compliant with Spanish tax laws, understand how any Double Taxation Agreements may apply to your situation, and ensure you’re taking advantage of available deductions to minimize your tax burden.