Expats' taxes in Spain

When becoming a resident of Spain and approaching the topic of expats’ taxation in Spain, one should bear in mind that almost every year the fiscal legislation in Spain undergoes changes and adopts new amendments. Thus, it is recommended that you update your tax information annually, if possible, by referring to the reliable sources we will describe. One unchanging piece of advice for immigrants is to consult the Spanish tax services for the most thorough information regarding taxes. In this article, we account for the latest changes to expats’ taxes in Spain and simplify this issue to provide you with useful and accessible information.

First, an immigrant should find out whether he or she is considered a Spanish tax resident. The answer will be positive if the following conditions are met:

• You have spent more than 183 days in Spain during one calendar year, regardless of the presence of an official registration;
• Your main professional activity has been conducted in the territory of Spain (this is always the case when you are officially employed in the country);
• Your spouse or dependent children live in Spain.

Second, some key facts concerning taxes for expats in Spain are listed below:

• The Spanish fiscal year coincides with a calendar year—that is, it lasts from January to December.
• On avoiding double taxation, Spain participates in agreements with many countries, including the United States and those in the United Kingdom. This means that you do not have to pay taxes twice for the same income but can choose to pay only in the country of origin or only in Spain. As of March 2013, if an immigrant has assets outside of Spain that exceed 50,000 euros, he or she is obliged to declare the revenues. Failure to properly declare any offshore assets can result in serious penalties or even the initiation of a criminal case (especially if a sum that constitutes €120,000 or more is undeclared).
• To become a tax resident officially, it is necessary to obtain a Fiscal Identity Number, or Número de Identidad Fiscal (NIF), which is quite easy to procure if you already have the NIE.

Types of expat taxes in Spain

According to the rules of the expats’ taxation in Spain, there are three main types of taxes:

1.Income tax. On a very basic level, Spanish tax residents are responsible for paying income tax for all revenues, regardless of their place of origin. However, when it comes to non-residents, taxes are imposed only on income obtained in the territory of Spain (levied at a fixed rate).

In turn, income tax for expats in Spain can be divided into two categories:

• Tax on Income from general activity. This includes income from employment (salary), subsidies, rent, and (potentially) income from gambling. As a rule, this tax consists of national and regional portions. Often, there is no difference between these parts, although there are certain regional variations. Below is a table of income tax rates:

• Tax on Income from Savings. If you are not a Spanish resident, you will have to pay tax on all income obtained outside of Spain.

Incomes from savings include the following:

• Interests on deposits;
• Dividends;
• Insurance payments;
• Annual rent;
• Revenue received from sale or transfer of assets.

2.Wealth tax.In 2008, the Spanish government introduced the wealth tax for people who possess considerable capital all over the world. The tax amount is calculated depending on the value of the declared assets, starting at € 700,000 (tax-free allowance), regardless of whether the person is a resident of Spain. In 2015, the tax rate increased from 0.2% to 2.5% (and to 3.03% in Andalucía).

3. Expats’ taxes on capital income in Spain. The regulations of expat taxation in Spain state that the capital gains tax is not direct. As a rule, Spanish tax residents are obliged to pay a capital gains tax from the sale of any assets all over the world. Non-residents must pay it when conducting operations (primarily sale) with Spanish real estate only.