Expat Spanish taxation is a very complicated affair and there are potentially severe fines and penalties for anybody who fails to declare and pay the correct tax in Spain. Expats that feel they are NOT tax resident can be in for a nasty shock. The Automatic Exchange of Information rules have already started to catch up with those who have either tried to be under the radar or are not aware
The penalties are substantial but can be legally avoided. We can help, so ask us for a review. We have access to native Accountants and Solicitors that are English speaking and are here to help you avoid the expat Spanish taxation pitfalls.
Given that Spain has become of the most popular destinations for expats to relocate to anywhere in the world, for expats living in Spain, understanding the many different taxes in Spain is vital. Staying abreast of tax in Spain is made harder still by the Spanish government who is regularly changing its expat Spanish taxation rules, and often those most affected are expats holding significant assets abroad.
The Spanish Tax Year:
The first thing to know is that, unlike in the UK, the Spanish tax year runs from January to December.
Spanish tax treaties with the UK:
In 2006 Spain signed a double tax treaty with the UK which means that you should not have to pay tax twice on the same income, and you should only pay tax in the UK or in Spain.
Foreign asset reporting law in Spain:
Since March 2013, if you live in Spain and own assets in excess of €50,000 outside of Spain you are required by law to declare those assets (up to the 31st December of the previous year) to the Spanish government by the 31st March each year (from 2014 onwards).
Failure to correctly declare any offshore assets could incur severe penalties or even a criminal charge (if the tax avoidance is in excess of €120,000).
The purpose of the law is to reduce the amount of tax avoidance while also maximising Spanish tax revenue, primarily from expats living in Spain.
Assets which are required to be declared include, but is not limited to:
- Assets held in any bank accounts
- Life insurance policies
However, the assets may be able to benefit from a variety of tax-efficient vehicles which could help you reduce any unnecessary tax payments.
Am I a tax resident in Spain?
Typically you would be considered a tax resident in Spain if one or more of the following apply to you:
- You have spent more than 183 days in Spain within a single calendar year regardless of whether you are formally registered
- Your primary professional activities are conducted in Spain – essentially if you are self or otherwise employed in Spain
- Your main interests (eg your spouse or children who are still dependent on you) live in Spain
These rules have been simplified for illustrative purposes, so if you are unsure you should always seek advice from us.
Income tax in Spain:
At the most basic level, Spanish tax residents are liable for to pay income tax on their worldwide income, once personal allowances have been taken into account.
However, a non-resident of Spain is only required to pay tax on any Spanish income (such as rental income from a Spanish property). The income tax for non-residents is charged at a fixed rate and there are no personal allowances or deductions.
It is therefore important to understand whether you are a tax resident in Spain or not as it will have a significant impact on the Spanish income tax you are required to pay.
Under Spanish tax rules, your income is split into two main categories: income from general activities and income from savings. The total income from each category is classed as the base, after which deductions and allowances can be made.
Expat Spanish taxation on general income:
Spanish tax residents will be taxed on all worldwide income which is not included as part of the savings income. This includes income from employment (i.e. salary), pension, rent and potentially income from gambling.
The Spanish income tax is made up of two parts, a national tax and a regional tax. Typically each figure is the same, however there may be regional variations.
Always check with the local Comunidades Autonomas before making any assumption about the regional rate. They are even different for Alicante, Murcia and Andalucia!
Request a free Spanish tax consultation:
Whether you are considering moving to Spain or you have already relocated, if you need advice on your tax situation in Spain, we can help.
Enter your details using the form provided and we will arrange for a Spanish tax specialist to contact you and organise a free initial consultation to help you understand your tax requirements for expat Spanish taxation.
It’s therefore important to remember that the information found here is a guide and before making any decisions or submitting any tax returns in Spain, you should seek independent advice, which you can do by contacting us.