Becoming an expat is one of those experiences that generate different feelings to each person who either decides to do it, or is forced by external factors (usually an unfavorable situation in her/his home country). And one of the most prevalent ones, is a sense of uncertainty due to the taxes one has to pay.
The taxation system for expats in Spain is well defined, and leaves it very clear to identify who have to pay what taxes, which is convenient in order to avoid misunderstandings, and to make sure that investing in properties in Spain is the right option for you.
Whether you are looking to invest in Spain to get a Golden Visa, or you want to relocate to Spain to work or study in the country; it’s vital for you to determine if you qualify as a resident (for tax purposes), or not, and determine how much you must pay from there.
Spanish tax system for expats
The first thing you must identify is whether you are a tax resident in Spain or not. You are considered a tax resident if you meet any of the following conditions:
- You have lived for more than 183 days in Spain in a single calendar year (don’t have to be continuous), regardless if you are formally registered or no
- Your main professional activities are based in Spain, that is, being employed or self-employed in Spain
- Your main vital interests are in Spain (your family or your business)
Before considering the taxes expats in Spain must pay, it’s worth noticing that there exists a double tax treaty with the UK, and therefore, you don’t have to pay for your taxes twice, and you can pay only in either the UK or Spain.
The tax year in Spain comprises the entire year, from January 1st to December 31st, and you should pay between May 1st and June 30th.
If you don’t qualify as a tax resident, then you must only pay what is called the Income Tax, this means that you will have to pay a fixed tax rate for only the income you have generated in Spain, which is a 25% of your gross income.
On the other hand, if you are a tax resident, the income tax will be charge form your worldwide income, and the tax rate is progressive, including slight variations depending on the region or autonomous community you reside in or generate income at.
These tax rates will depend on the range of your income, and it starts from an income of €12,450 at a rate of 19% up to an income of over €60,0000 at a rate of 45%.
Tax residents will also have to pay for their worldwide income from savings.
There is also a personal allowance for tax residents for the Spanish income tax. For people under 65 years old, this allowance is of €5,550. For those over 65, the allowance is of €6,700; and from those of 75 years old or more, this rises to €8,100.
Another tax, called the Spanish wealth tax applies for tax residents, with a tax-free allowance of €700,000 for both residents and non-residents of Spain. For residents however, there is an extra tax-free allowance of €300,000; that is, residents will have to pay a wealth tax if their worldwide assets are over 1 million euros, and more than €700,000 for non-residents (but tax residents).
There are other taxes, such as the Spanish capital gains tax, which are not as straightforward, and it’s therefore worth it requesting advice with a professional Spanish tax expert or lawyer; as well as if there’s any doubt in regards to which of these taxes you must pay.