We’re big fans of Spain at Remitly, but the Spanish tax authorities don’t make things simple, especially for expatriates. The Spanish tax system in place for paying impuestos is so complex that there is a unique profession—the gestoría—dedicated to dealing with people’s economic activity.
Types of taxation in Spain
Income tax in Spain is not only split between the national government and the autonomous communities. It’s also divided between general income and savings income.
The tax systems change from one Spanish territory to another; the basic tax rate in Madrid might not be the same as in Valencia, for example. Tax liabilities also depend on whether you’re a European Union citizen, and whether you’re married, single, or in a civil partnership, for example.
Who can claim tax deductions in Spain?
It depends, but there are some fundamentals. You’re considered a tax resident if:
- You’ve spent 183 or more days in total out of the last year in Spain,
- Your family or business interests are in the country.
As a general rule, the basic personal allowances for taxpayers who are resident in Spain are:
- €5,550 for everyone under 65,
- €6,700 from 65,
- €8,100 from 75.
If your income is under €8,000 and your children are living with you (up to 25 years old), you can also claim an allowance of;
- €2,400 for the first child,
- €2,700 for the second,
- €4,000 for the third,
- €4,500 for the fourth,
- and another €2,800 for each child under three years of age.
If an older parent or grandparent lives with you, you can claim some extra allowances, assuming again that you earn under €8,000;
- €1,250 if they are over 65 years old,
- €2,550 if they’re over 75.
Other common tax deductions available in Spain
If you’re residing in Spain for tax purposes, there are some other deductions you can claim from your personal and/or business taxes:
- pension contributions;
- property renovation;
- charitable donations;
- and professional expenses, if you’re self-employed.
There are other personal deductions—such as some very specific work-related expenses for employees or VAT deductions for leasing vehicles for work—but these will change a lot from person to person. Plus, Spain has double taxation agreements with many countries, so you shouldn’t pay tax twice on the same income.
How to claim tax deductions in Spain
Before you do anything, you must apply for a NIE—like a social security number for foreign Spanish residence permit holders. You do this at:
- your home country’s Consular Office before you move,
- the local police station,
- the foreign exchange office in Spain,
within 30 days of your arrival.
Even this can be complicated, with different forms, or modelos, to fill in and required documents, depending on:
- whether you’re from the EU or not,
- whether you’re employed or studying in Spain,
- whether you want to stay for more or less than six months.
Consider using a lawyer or third-party service provider to get your NIE.
What is a gestoría and what do they do?
The gestoría is pretty much unique to Spain. In every town or city, you’ll find offices where highly qualified professionals help people handle all their personal administration, like taxes, buying property, getting a NIE or opening a bank account.
Many expats, freelancers and digital nomad visa holders use a gestoría to handle their income tax return, so this is definitely worth considering.
Self-assessment of tax in Spain
If you decide to submit it yourself, the annual income tax return is known as the Renta. You can file your Renta online with the Spanish tax agency, but you will need a digital identification certificate first to prevent identity fraud.
Key tax deadlines in Spain
Personal income tax in Spain is called IRPF, and the tax year follows the calendar year. As a general rule, income tax returns should be filed and paid between April 11 and June 30 of the following year.
Tips for maximizing tax deductions
To maximize tax deductions in Spain, a gestoría or a tax-specialist lawyer will know their way around the laws, tax benefits and deductions.
Entrepreneurs who have established an innovative startup, for example, can benefit from reduced corporate tax rates for the first four years, depending on the type of activity it’s involved in.
Common mistakes to avoid in Spanish taxation
One mistake an expat can make as a taxpayer in Spain is presenting late, especially if they handle their tax obligations themselves. Another mistake is not submitting a tax return at all. All Spanish residents must file a tax return in the first year of residency. Even if your tax liability is zero, you have to submit. Late submission and not submitting at all can both result in fines. If you do make a mistake, there’s a page on what to do on the Spanish government’s website.
Conclusion? Go for it, but get professional help.
Don’t be put off living and working in Spain by the complicated tax regime. A gestoría, or a tax lawyer, many of whom speak English, can advise on tax law. They will provide expertise on property tax, inheritance tax, capital gains tax, wealth tax and even corporate taxes if you set up a Spanish company.
The tax authorities in Spain are known as the Agencia Tributaria, and there’s a lot of information available on their website, with a page dedicated to non-resident income tax matters. You can also find a local gestoría wherever you are in Spain in the central register here.
FAQs
What are the eligibility criteria for tax deductions in Spain?
This depends on your personal circumstances and is different for residents and non-residents. Your gestoría can advise you on your specific eligibility for tax deductions.
Can I file my Spanish taxes in English?
The Spanish tax office, the Agencia Tributaria, has all its important pages available in English. So if you have an NIE and a digital ID certificate, yes.
Do I have to report income I’ve earned in other countries?
Yes, but Spain has double taxation treaties with many countries to avoid taxing you on the same income twice. You do, though, at least have to tell the tax authorities if you own real estate abroad.
What’s the deadline for filing tax returns in Spain?
This is called the Renta. The important filing and payment dates are generally between April 11 and June 30, and there are penalties for late submission.
Can I claim home office expenses on my taxes in Spain?
Generally speaking, yes. For self-employed workers, some work-from-home expenses can be claimed on items that are exclusively for professional use.
I’ve heard about Beckham’s Law in Spain. What is it?
Named after the famous soccer player, it’s a special tax regime that aims to attract skilled foreign workers to Spain. It allows workers from overseas to be taxed as if they’re a non-resident for six years, charging a flat rate on Spanish income and a progressive tax rate on worldwide income.