Taxes in Spain

Taxes in Spain

The Spanish tax system establishes that certain powers are assumed by the State and others by the Autonomous Communities, which may raise them, lower them or even eliminate them. This power means that, depending on the Autonomous Community, some taxes may vary significantly. The main taxes in Spain are Personal Income Tax (IRPF), Wealth Tax (IP) and Corporate Income Tax (IS) for legal entities. The most common municipal tax is the Real Estate Tax (IBI).

When and how should I pay my taxes?

  • In Spain, unlike other countries, the fiscal year runs from January to December, coinciding with the calendar year. This means that all your tax obligations from January 1 to December 31 accumulate and you will have to declare and pay them the following year.

Income Tax (IRPF)

The most common tax, which is levied progressively on the income you generate in the country. The procedure that you will have to carry out each time with the Tax Agency is called income tax return. Here are the basics about this tax:

  • To start with, you will need to know if you are resident in Spain for tax purposes. Generally, you will be if you are resident for more than 183 days (it does not have to be consecutive) or if you have your economic interests in Spain (e.g. your work).
  • Exception: If you earn less than 22,000 euros a year from a single payer (e.g. from a company) you are NOT obliged to file a tax return. Although you can do it, since many times it comes out "to return" this means that you have overpaid and the Tax Agency refunds you the difference.
  • If you are considered a tax resident in Spain, remember that you will have to pay the IRPF on the income for all your income and gains that you have generated worldwide.
  • The most common case is that the company where you work deducts the IRPF withholdings from your gross salary, therefore, when you make your tax return you may not have to pay because of the withholdings.
  • As mentioned above, in Spain the tax regime depends on the Autonomous Communities. Although the IRPF tax brackets are statewide, depending on the area where you live the brackets vary and what you will have to pay will be different depending on your age and other personal factors.

The Real Estate Tax (IBI)

This tax is managed by the municipality where you have a real estate property, and varies according to the cadastral value of the property and the tax rates of each municipality.

  • You will have to pay it only if you are the owner of a real estate property or if it has been agreed in your lease contract if you live in a rented apartment (it is not very common).
  • Although in each city council it changes, the average in urban properties the coefficient oscillates between 0.4% and 1.3%.

Wealth Tax (IP)

It is the tax levied on the wealth of individuals (assets and rights in Spanish territory) although in the end, the people actually obliged to pay it are very few (about 200,000 people in Spain).

  • You will only have to pay it if your taxable income exceeds 700,000 euros, excluding up to 300,000 euros of the value of your main residence. Although the limit may vary from one Community to another.

How much do I have to pay?

  • As we have seen before, if you come to work and live in Spain, the most common tax that you will probably have to pay is the IRPF. Although we have seen that normally the company will deduct it from your gross salary, here is a simple calculator to give you an idea.

Do I have to pay taxes if I receive a grant?

Legally, a grant is considered as a fixed amount given as aid and there is generally no reimbursement required. These grants are not subject to taxation in Switzerland. Certain subsidies, commonly called "grants" in Switzerland, are not grants in the legal sense of the term.

  • Grants whose purpose is to pursue regulated studies in the education system both in Spain and abroad are exempt from income tax if they are:
    • Public scholarships
    • Scholarships granted by non-profit entities under Law 49/2002.
    • Scholarships granted by banking foundations regulated by Law 26/2013.
  • Research grants. They are exempt if the granting program is part of the General Register of Research Assistance Programs and the grantee is a university graduate.
  • Scholarships for curricular internships are usually exempted because they are essential to obtain your university degree and the salary is generally not very high (the limit of 22,000 euros mentioned above).

Links

  • The Agencia Tributaria is the Spanish state tax agency, in its website you can find more detailed information.