Spanish Tax for Expats: 7 Types of Tax You Need to Understand

There are numerous types of taxes in Spain, and it’s important to know what they are. In this post, we provide an up-to-date overview of 7 of the most common taxes in Spain, including when and how they will apply to you as an expat.

1. Income Tax

If you are a Spanish resident, you need to pay income tax in Spain on all of your worldwide income. The Spanish income tax rate for residents is progressive, meaning it increases as your income does. Here are the annual rates and earnings thresholds as of 2020:

• Below €12,450 = 19%
• Between €12,450 – €20,200 = 24%
• Between €20,200 – €35,200 = 30%
• Between €35,200 – €60,000 = 37%
• Above €60,000 = 45%

For residents, there is a basic annual personal tax allowance of €5,550. For people over 65, this allowance is €6,700, and for people who are 75 or older, this rate is €8,100.

Non-residents only pay income tax on earnings in Spain but do not have a personal tax allowance here. This tax rate is fixed at 24% on earnings up to €600,000, and for income that exceeds that figure, the fixed tax rate is 45%.

Important information: If you’re self-employed in Spain, you will need to register as Autónomo and pay your taxes quarterly.

2. Wealth Tax

Wealth tax is based on the value of assets owned by a person, such as property, bank deposits, cash, insurance and pension plans, stocks, etc.

If you are a non-resident, this will only be on assets owned in Spain. However, if you are a resident, this will be on all assets owned worldwide.

This tax only applies to assets with a value above €700,000 (or €500,000 in Catalonia) – for both residents and non-residents. There is an extra tax allowance of €300,000 given to residents for their main residence in Spain. These tax allowances can vary depending on the region.

The tax rates on net wealth also vary, ranging anywhere between 0.2% up to 3.75%. For example, in Catalonia, the range is from 0.21% – 2.75%.

Always check what has been published by the tax authorities in your local area.

3. Capital Gains Tax

Capital gains are defined as profits earned from the sale of any capital assets, including real estate or stocks. The gain is the difference between the purchase price and sale price of the asset.

Residents in Spain are liable for tax on their worldwide capital gains. Non-residents are only required to pay capital gains tax in Spain concerning gains in Spanish territory, which is either a flat rate of 24% or 19%, depending on where you’re from.

Non-residents will need to pay local taxes for capital gains abroad. For Spanish residents, the tax rates on annual capital gains are as follows:

• Below €6,000 = 19%
• Between €6,000 – €50,000 = 21%
• Above €50,000 = 23%

Important information: These same tax rates also apply for interest on savings in Spain, income from annuities, life assurance policies, and dividend payments.

4. Succession Tax

This is payable in Spain by the beneficiary of an inheritance, which can include cash or assets.

When the beneficiary is a resident in Spain, this tax would be due on inherited assets that are held both in Spain and abroad. If the beneficiary isn’t a Spanish resident, this tax will need to be paid in Spain on the inherited assets that are within Spain only.

Inheritance tax rates are progressive and can vary significantly, depending on the region of Spain and your circumstances, and range from 7.65% to 34%.

5. Property Tax

Council Tax in Spain is called IBI and is paid by everyone who owns the property. The annual rate varies depending on the region and can range between 0.4% and 1.3% of the valor catastral of the property, which means the rateable value.

Another tax is the Property Transfer Tax. If you buy a secondhand property in Spain, this tax will be owed and ranges from 8% – 10% of the price. For house purchases from developers, you would need to pay IVA (VAT) at a rate of 10%, plus stamp duty, which typically ranges between 0.5% and 1.5%.

6. IVA

IVA is the Spanish equivalent of VAT (Value Added Tax), and there are three different rates, as follows:

• Standard – 21%
• Reduced Rate – 10%
• Super-Reduced Rate – 4%

The standard rate is paid on the sale of general goods, services, and commercial properties. The reduced rate of 10% is paid on things like food, residential property, and cultural events. And the special rate of 4% is reserved for the likes of drinks, medicine, and books.

7. Non-Resident Tax

If you have lived in Spain for more than 183 days, your primary professional activities happen in Spain, or your primary interests live here – i.e. your children or spouse – then you’ll be considered a tax resident.

If you’re a non-resident, then you’ll need to pay tax on any income generated from properties or other assets owned in Spain. If you don’t have any income but own property that is not leased, then you will need to pay a tax that is based on 2% of the rateable value of that property.

Non-resident tax is typically fixed at a rate of 24% if you’re from outside the European Union, or 19% if you’re from within the EU, Norway, or Iceland.

Additional factors to consider

Here are some other important factors to consider if you’re an ex-pat in Spain:

• Residents need to pay Social Security – typically at a rate of 6.35% of wages
• The tax year runs from January 1 to December 31
• If you earn €22,000 or more annually you will need to submit a tax declaration
• The Beckham Law is a special tax regime for ex-pats and can help you pay less tax
• Double taxation treaties can help new residents avoid paying taxes twice