A person is liable for income tax in Spain if they are considered to be a resident of the country. A tax resident is one who spends more than 183 days each tax year there. The tax year runs from the 1st January to the 31st December. They can also be considered to be tax resident if they run a business in Spain or if their spouse and/or children are living in the country and there is no legal separation.

A Spanish resident is liable for tax on all their income that is earned worldwide, while a non-resident is liable to pay income tax only on monies that are earned within Spain. A non-resident will not normally qualify for any deductions or allowances.

For the tax year 2011 rates for income tax range between 24% and 45%, but this is divided – usually evenly – between the national income tax rate and the community tax rate. Those who earn up to €17,707.20 will pay 12% national rate and 12% community rate. Those who earn above this amount but below €33,007.20 will pay 14% for each rate, a total of 28%. Those who earn more than this but less than €53,407.20 pay a rate of 18.5% to each and those who earn more than this but less than €120,000 will pay a rate to each of 21.5%. If you earn below €175,000.20 you will pay a rate of 22.5% national rate and 21.5% community rate, to give a total of 44%. Any earnings over this amount will be taxed at a rate of 23.5% national rate and 21.5% community rate to give a total of 45%. The final two tax bands were created for 2011. In some areas the total tax may be more as the community tax rate can be calculated differently depending upon the region.

Income falls into two categories in Spain. There is general income (renta general) and income from savings (renta del ahorro). These are then combined into the ‘imponible’ base. This is the equivalent of the gross income. Deductions and allowances take this down to the ‘liquidable’ base, which is the net taxable income. There is a tax free allowance (minimo personal y familiar) for every person of €5151. If a couple file a joint tax return they are allowed a total of €8551 as a basic tax free allowance. There are extras for single parents and for the over 65s and the over 75s. This allowance is used as a tax credit when the total tax bill is taken into consideration.

A person living in Spain who is claiming a UK pension will only pay tax on it in Spain. There is a form issued by the tax office in Spain which can be sent to HM Revenue and Customs to ensure that tax is not deducted in both countries. The form is known as a ‘certificado de residencia fiscal NEN – Espana Convenio’.

Many people will not need to file a tax return if they earn below a certain amount and they are a salaried worker, as the employer is obliged to deduct income tax at source. However, it is important to keep records of all earnings and consult with an account as you may still have to make some kind of declaration. It is the responsibility of the worker to ensure that they obtain a form and submit it as these are not automatically issued by the authorities.

In Spain there are different types of tax forms. A person can submit an abbreviated declaration (declaracion abreviada) which is used for declaring earning on which tax has already been paid, such as a pension. The second type is the simple declaration (declaracion simplificada) which is for those who have an income from rental property, businesses or capital gains. The third type is an ordinary declaration (declaracion ordinaria) which covers every other type of income. All declarations must be submitted to the tax office between the 1st May and the 20th June the year after the monies were earned. Late payments incur extra fees, usually in the region of 205 of the total amount due.

Spain has a number of double taxation agreements in place with other countries. These include the UK and most other European nations, the US, Japan and Australia. The tax office in Spain can provide detailed information on the agreements that are in place.

Useful Resources

Agencia Tributaria
Spanish tax office
http://www.aeat.es/AEAT.internet/Inicio.shtml
Tel: 901 33 55 33