Income tax returns in Spain

spanish income tax guide

The income tax return in Spain, known as Personal Income Tax (IRPF or Declaración de la Renta), is an important tax that can become complicated for expatriates residing in Spain. 

However, specific regulations have been put in place to avoid double taxation for expatriates. Article 80 of the Personal Income Tax regulation in Spain states that taxpayers have the right to apply for a deduction on International Taxation depending on the type of income received from abroad. The taxation of this income will fall into one of the following categories:

  1. Shared taxation between both countries 
  2. Exclusive taxation in the country of residence 
  3. Taxation where the income is sourced

Both the first and third category allow the taxpayer to apply for a double taxation deduction. However, each case is different, and so it is recommended that a clear understanding of the double taxation agreement be carried out before filing an application.

Here are the most common questions about Spanish Personal Income Tax for expatriates with the latest information. 

How do I know if I need to submit a tax return in Spain?

For expatriates, Spanish tax returns are necessary if you are considered a permanent resident of Spain (article 9 of IRPF). This is determined by the following requirements:

  • If you reside in Spanish territory for 183 days or longer in a year
  • If your main economic activities/interests are in Spanish territory
  • If your spouse and/or minor children who depend on you, habitually reside in Spain (This can be proven otherwise)

If these requirements have been met, then the expatriate must pay tax in Spain for all of their worldwide income.

If you would like to learn more about Spanish residency, the permit process and obligations, read the following article on how to get a Spanish residency permit for more information.

What would I have to pay Spanish Income tax on?

Generally, once the expatriate is considered a permanent resident of Spain, they would have to declare Spanish Income Tax on the following:

  • Income from work (as an employee, or pensions received both in Spain and abroad) exceeding the limit of 22,000 euros per year
  • Income that comes from more than one payer, exceeding 14,000 euros (there are exceptions; however, these are complex)
  • Rental income exceeding 1,000 euros per year
  • Dividend income, interest and capital gains exceeding 1,600 euros, subject to withholding in Spain

You must declare the above if you would like to benefit from the international double taxation deductions.

What are my personal allowances when it comes to Spanish Income tax?

  • Individual: €5,550 per year 
  • Taxpayers over 65 years old: €6,700 per year 
  • Taxpayers over 75 years old: €8,100 per year 
  • For joint tax cases, couples who are legally married have the additional option for a tax reduction of 3,400 euros.

What are the double taxation deductions between the UK and Spain?

There are many deductions available – the following are considered the most important by Tejada Solicitors:

  • A general reduction of 2,000 euros for income from work or pensions for all expatriates
  • Up to a 60% reduction to income from rental housing, as long as the property is considered by the tenant as their permanent residence (this is also applicable to any income from rental properties abroad)
  • Pension plans 
  • Working mothers with children under the age of 3 can receive a dedication of 1,300 euros a year, or receive a 100 euro monthly allowance
  • Contributions made to charities and political parties 
  • The profit from the selling of your habitual residence is exempt from taxation if you are over the age of 65 years

What are the Spanish Tax Rates for 2020?

Spanish tax rates vary depending on where you live in Spain. Here, you can find the 2020 Spanish tax rates for Andalusia as an example.

When is the Spanish tax return deadline?

Unlike the UK, the Spanish tax year spans from 1 January to 31 December.

This means that expatriates of Spain, along with Spanish residents, must complete their 2020 tax return between April 1 and June 30, 2021

There is also the opportunity to split your payment for your Spanish Personal Income Tax into two parts, with no interest. 60% of the payment can be made during the time your declaration is filed, and the further 40% can be paid as a direct debit on the 5 November. 

If you do not file your tax return by the deadline, you may incur surcharges between 5%-20% (depending on how late you file your tax return). For special cases, those who are tax residents in Spain and do not declare their taxes on time and receive a request by the Treasury, you may receive a penalty of up to 150% on top of your original payment. 

Is there any other information I should know about the double taxation agreement?

There are specific aspects of the taxation agreement that may apply to some expatriates but not others, such as expatriates with Government Service Pensions.

You can find out more information about this and other types of incomes using the Double Taxation Agreement between Spain, the United Kingdom and Northern Ireland document.

Alternatively, you can get in contact with Tejada Solicitors to find out all of the information specific to you by visiting the website www.tejadasolicitors.com, or by sending an email to info@tejadasolicitors.com.

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