Taxes in Spain: A Complete Tax Guide for Expats

Taxes in Spain are based on your residency status and the source of your income. Tax residents are individuals who spend more than 183 days in the country or have their main financial interests in Spain, and they are taxed on their worldwide income. Non-residents only pay tax on income earned within Spain, usually at fixed rates and without access to standard deductions.

Spain also offers special tax regimes such as the Beckham Law, which allows qualifying foreign workers to pay a reduced flat tax rate on Spanish income while exempting foreign income. Regional governments may apply their own rules for certain taxes like inheritance, gift, and wealth tax.

This guide will help you understand how taxes work in Spain, including income tax, property tax, savings income, capital gains, corporate tax, VAT, inheritance tax, gift tax, and wealth tax.

• Who has to pay taxes in Spain?
• What is DTA?
• How to Register to Pay Taxes in Spain
• Spain Income Tax
• Spain Income Tax Rates
• Personal Allowances and Deductions
• Spanish Tax on Income from Savings
• Property Taxes in Spain
• Capital Gains Tax in Spain
• VAT (IVA) in Spain
• Corporate Taxes in Spain
• Wealth Taxes in Spain
• Spain Beckham Law
• Spanish Tax Year
• Filing Tax Returns in Spain

Who has to pay taxes in Spain?

Both residents and non-residents pay taxes in Spain, but the rules differ depending on tax residency status:

Tax Residents in Spain

If you have lived in Spain for over 183 days a year or have your main economic ties there, you are a tax resident and must pay tax on your worldwide income under a progressive system.

• You must file a tax return.
• If your salary exceeds €22,000.
• If you are self-employed.
• Earn over €1,000 in rental income.
• Have more than €1,600 in savings or capital gains, or if it’s your first year as a tax resident.

Deductions apply for social security, pensions, and allowances. Residents must also file Form 720 to declare foreign assets over €50,000, unless covered by the Special Tax Regime.

Non-Residents in Spain

Non-residents are only taxed on income earned from Spanish sources, such as rental, employment, or capital gains from Spanish property. This is governed by the Non-Resident Income Tax (IRNR), which applies flat rates, which are 19% for EU residents and 24% for non-EU residents.

Non-residents are not required to file Form 720, as they are not taxed on worldwide income. Non-residents who are tax residents in a country with a Double Taxation Agreement (DTA) with Spain may benefit from reduced tax rates or exemptions. Additionally, foreign non-residents must obtain a Non-Resident Identification Number (Número de Identificación de Extranjeros – NIE) to fulfill their obligations.

What is DTA?

A Double Taxation Agreement (DTA) is a bilateral agreement between two countries to eliminate or reduce the taxation of income for individuals and companies. These tax treaty agreements clarify which country has the right to tax specific types of income, preventing taxpayers from paying taxes on the same income in both countries. If your country has a DTA with Spain, it is essential to understand its provisions and how they affect your obligations.

How to Register to Pay Taxes in Spain

You must register with the Spanish tax authorities to fulfill your tax obligations in Spain. As a tax resident, you will obtain a Tax Identification Number (Número de Identificación Fiscal – NIF) by registering at the nearest Tax Agency office. You have to make an appointment with a Tax Agency office prior to your visit.

For instance, if you hold a Spain Digital Nomad Visa or a Spain Non-Lucrative Visa and spend more than 183 days in Spain during a calendar year, you are considered a tax resident and must register with the Spanish tax authorities to fulfill your tax obligations.

Foreign non-residents can obtain a Non-Resident Identification Number (Número de Identificación de Extranjeros – NIE) by applying at the local Foreigners’ Office (Oficina de Extranjería). To register your duty to pay Spanish tax for the first time, fill out Form 30 (“Modelo 30“). You will also need this form to update your information. English-language directions are also available on Form 30 to assist you in filling out the form.

Spain Income Tax

Spanish income tax, or Impuesto sobre la Renta de las Personas Físicas (IRPF), is a progressive tax applied to individuals based on their total income. Tax residents in Spain are taxed on their worldwide income after personal allowances and deductions are applied. At the same time, non-residents only pay tax on income earned within Spain, such as rental income or employment income tied to Spanish territory.

Non-residents are taxed at fixed rates and are not eligible for deductions or personal allowances. Spanish tax law divides income into two categories: general income, such as salaries, business income, and rental earnings, and savings income, such as dividends, interest, and capital gains. Each category has its own tax rates and rules, and the total from each category forms the taxable base.

Spain Income Tax Rates

The current Spanish income tax rates are as follows:

Personal Allowances and Deductions

Spain offers personal allowances that reduce taxable income for tax residents. The basic allowance is €5,550, increasing to €6,700 if you are over 65 and €8,100 if over 75. Additional allowances apply if you have dependents:
Children under 25 living with you:

• 1st child: €2,400
• 2nd child: €2,700
• 3rd child: €4,000
• 4th child: €4,500
• Each additional child under 3 years: €2,800

Elderly parents or grandparents living with you (if your income is under €8,000):

• Over 65 years: €1,150
• Over 75 years: €2,550

These allowances help lower your taxable income, but due to their complexity and regional variations, it is advisable to consult a Spanish tax expert to ensure accurate calculation.

Spanish Tax on Income from Savings

In Spain, income from savings includes earnings such as interest, dividends, and capital gains. This type of income is taxed separately from general income and follows a progressive tax scale with fixed rates.

Spanish tax rates on savings income and capital gains

As highlighted, these rates apply to savings income such as interest, dividends, and capital gains. They are set at the national level, but some regions in Spain may apply slightly different rates. If you are a non-resident, you pay a flat 19% tax on savings income earned in Spain.

Deductions for savings income

Savings income in Spain includes interest, dividends, and capital gains from the sale of assets. Spain applies a separate tax rate to savings income, distinct from the general income tax rates:

• Tax rates for savings income are applied at progressive rates, starting from 19% for income up to €6,000, 21% for income between €6,000 and €50,000, and 23% for income above €50,000 (rates as of the 2021 tax year).

Property Taxes in Spain

Spanish property taxes are primarily governed by the Impuesto sobre Bienes Inmuebles (IBI), also known as the Real Estate Tax:

• The tax rate for the IBI can vary across municipalities and is typically a percentage of the cadastral value, typically ranging from 0.4 percent to 1.1 percent.
• Property owners are responsible for paying the IBI, regardless of whether the property is occupied or vacant.
• The tax revenue generated from the IBI is primarily used to fund local public services and infrastructure in the municipality where the property is located.
• The payment of the IBI is typically made annually, and property owners receive a notification or bill from the local tax authorities indicating the amount due and the payment deadline.
• In addition to the IBI, there may be other local or regional taxes related to property ownership, such as the municipal capital gains tax (Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana – IIVTNU) or the garbage collection tax (Tasa de Recogida de Basuras). These taxes can vary depending on the specific municipality or region.

Capital Gains Tax in Spain

Capital Gains Tax in Spain applies when you sell an asset, such as real estate, shares, or other investments, for more than you paid. The profit made from the sale is considered a capital gain and is taxed as part of your savings income.

The current tax rates on capital gains in Spain are:

• Up to €6,000: 19%
• €6,001 to €50,000: 21%
• €50,001 to €200,000: 23%
• €200,001 to €300,000: 27%
• Over €300,000: 30%

If you’re a tax resident, you must report worldwide capital gains. Non-residents only pay capital gains tax on assets located in Spain, at a flat rate of 19% for EU/EEA residents and 24% for others. Exemptions or reductions may apply in cases like the sale of a primary residence by residents over age 65.

Corporate Taxes in Spain

The corporate tax, or Impuesto sobre Sociedades, is imposed on companies operating in Spain:

• The corporate tax in Spain is known as the Impuesto sobre Sociedades. It applies to companies and legal entities operating in Spain, including resident and non-resident entities.
• The standard corporate tax rate in Spain is currently set at 25 percent. However, reduced rates may be available for small and medium-sized enterprises (SMEs) or companies engaged in certain activities or industries.
• Companies are required to file an annual corporate tax return, reporting their net income, expenses, and other relevant financial information. Deductions, allowances, and exemptions specific to business activities and investment income may be available to reduce the taxable base.

VAT (IVA) in Spain

Value Added Tax (Impuesto sobre el Valor Añadido – IVA) is a consumption tax applicable to the sale of goods and services in Spain. It is similar to the sales tax in other countries. The standard VAT rate is 21 percent, but ten percent and four percent reduced rates apply to specific goods and services. Businesses are responsible for collecting and remitting VAT to the tax authorities.

Inheritance Tax and Gift Tax in Spain

Inheritance Tax and Gift Tax in Spain apply when someone receives money or assets as a gift or through inheritance. The person who receives the gift or inheritance is responsible for paying the tax.

The amount of tax depends on the relationship between the giver and the recipient, the value of the assets, and the region in Spain where the recipient lives. Close relatives such as children or spouses usually pay lower tax rates and receive higher exemptions, while distant relatives or unrelated individuals may pay more.

Tax rates range from 7.65 percent to 34 percent. However, many regions in Spain offer generous reductions or even full exemptions for close family members. Non-residents must also pay this tax, but EU and EEA citizens are entitled to the same regional benefits as Spanish residents due to a European court ruling.

Wealth Taxes in Spain

Wealth tax (Impuesto sobre el Patrimonio) is levied on individuals’ net worth. The wealth taxes apply to residents and non-residents who own significant assets in Spain. This tax rate is progressive, with higher rates applied to higher levels of net worth. Certain deductions and exemptions may apply, and it is essential to evaluate your assets and liabilities to determine your wealth tax obligations.

Spain Beckham Law

There is a Spanish special tax regime called the Beckham Law. The law allows eligible foreign workers to pay a flat 24 percent income tax rate on their Spanish-sourced income up to €600,000 per year, instead of the progressive rates that can go up to 47 percent. Income earned outside Spain is not taxed under this regime, making it especially attractive for expats with international income.

To qualify for this regime, applicants must:

• Be a Spanish tax resident (spending more than 183 days a year in Spain) and not having been a resident in Spain within the minimum period of the last five years.
• At least 85 percent of your work duties must be performed in Spain.
• The maximum annual income eligible for this regime is €600,000.

Spanish Tax Year

The Spanish tax year runs from January 1 to December 31, following the standard calendar year.

For individuals, the annual income tax return (IRPF) is usually filed between early April and late June of the following year. During this time, residents must declare their income, including employment earnings, rental income, savings, and any relevant deductions or allowances.

Non-residents must also file tax returns on Spanish-sourced income, but deadlines can vary depending on the type of income and frequency of payments (monthly or quarterly).

Filing Tax Returns in Spain

In the first year of becoming a tax resident in Spain, it is mandatory for everyone to file a personal income tax return. However, after the initial tax year only, certain conditions determine whether an individual must file a tax return. Here are the key points:

• If your income from all sources is below €8,000 and your bank interest or investment income is less than €1,600, you are not required to file a tax return.
• Similarly, if your rental income is below €1,000 or your employment income is below €22,000, you are exempt from filing a tax return. This is because your employer would have already deducted your Spanish income tax rates in such cases.

If you need to file a tax return, use “Modelo 100,” the specific form for income tax declaration in Spain.

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Frequently Asked Questions about Taxes in Spain

Are taxes high in Spain?

Spanish taxes can vary depending on the type of tax and individual circumstances, but overall, Spain’s tax rates are generally in line with other European countries.

Do you pay house tax in Spain?

Yes, property owners in Spain are required to pay the annual property tax known as Impuesto sobre Bienes Inmuebles (IBI).

What is the tax rate for non-residents in Spain?

The tax rate for non-residents in Spain varies depending on the type of income earned but generally ranges from 19 percent to 24 percent.

Do foreigners pay taxes in Spain?

Yes, foreigners living and working in Spain and their income are subject to Spanish tax laws and are required to pay income taxes on their Spanish-sourced income.

Can I live in Spain without paying taxes?

If you are a tax resident in Spain, you are generally obligated to pay taxes on your worldwide income. However, tax treaties and exemptions may apply depending on your specific circumstances.

Do US retirees pay taxes in Spain?

US retirees living in Spain may be taxed on their worldwide income. It is recommended to consult with a tax professional to understand the specific obligations and potential tax agreements between the US and Spain.

How much is sales tax in Spain?

The standard Value Added Tax (VAT) rate in Spain is 21 percent. However, ten percent and four lowered rates apply to certain goods and services.

What is the personal tax allowance in Spain?

As of the latest information available, the personal tax allowance in Spain is €5,550 for individuals under 65. Higher allowances apply to individuals over 65 or with disabilities.

How much is the tourist tax in Spain?

Spain does not currently impose a nationwide tourist tax. However, some regions or municipalities may have local taxes or fees that apply to tourists, such as the “tourist tax” in the Balearic Islands or Catalonia’s tourist tax on overnight stays.

How does Spain handle 'double taxation' for its residents?

Double taxation in Spain affects those with income taxed in both Spain and another country. To mitigate this, Spanish tax residents can use foreign tax credit and avoid double taxation agreements, relevant for individuals with foreign financial assets.

What are the tax obligations of a 'tax resident in Spain'?

Being a tax resident in Spain entails the responsibility to pay tax on worldwide income. This includes adherence to the tax year in Spain, which runs from January 1st to December 31st, covering all income sources.

How does Spain approach 'tax avoidance'?

To combat tax avoidance, Spain enforces strict regulations for tax purposes, including mandatory reporting of income derived from various sources and penalties for non-compliance.

How does the Spanish income tax system work?

The Spanish income tax system is progressive, with rates ranging from 19 percent to 47 percent depending on income level. Residents are taxed on their worldwide income, while non-residents pay flat rates only on income earned in Spain. Income is split into general income and savings income, each taxed under different brackets.

What are the main types of taxes in Spain?

The main types of taxes in Spain include income tax (for residents and non-residents), corporate tax, value-added tax (VAT), capital gains tax, and savings income tax. Other important taxes include property, inheritance, gift, and wealth taxes, which may vary by region.

Who oversees the banking system in Spain?

The banking system in Spain sees regulation by both national and European authorities. The Banco de España, the National Securities Market Commission (CNMV), and the Ministry of Economy and Business are the primary national regulators.