Sorting Out Your Spanish Tax
By Spencer Williams
We all hate paying tax, but it is a fact of life in every country including Spain,
Tax in Spain can be a complicated issue because if you fail to make a declaration or don’t pay the correct amount, you can end up with a severe fine.
The Spanish government frequently change their tax regulations, which can make it very difficult for non-residents and residents to keep completely up to date.
It is recommended that you seek independent advice when it comes to any legal matter in Spain.
The key points are:-
- The Spanish tax year runs from January to December.
- In Spain both residents and non-residents are obliged to pay taxes.
- Every non-resident must make their annual non-resident tax declaration by December 31st.
AM I A TAX RESIDENT IN SPAIN?
You are a resident for tax purposes in Spain if:
- You spend more than 183 days in Spain in any calendar year, regardless of whether you are formally registered.
- You are self-employed or otherwise employed in Spain.
- Your spouse or children live in Spain and you are not legally separated even though you may spend less than 183 days per year in Spain.
This is a basic guideline, and it is recommended every individual to seek independent advice before submitting taxes, which is of course where we come in to help.
Spanish tax residents are liable to pay income tax on their worldwide income, which is split into two categories:
- Income from general activities – this includes income from employment, pension, and rental income
2.Income from savings – this includes interest from savings, dividend payments, income from life insurance policies and gains made from the disposal or transfer of assets.
Tax Allowances – As a resident you will receive a personal allowance for your Spanish income tax (from both savings and general income). These allowances include age allowance, married couple allowance and disability allowance.
Since 2013, If you are a tax resident in Spain and own assets in excess of 50,000 Euros outside of Spain, you are required to declare these assets under Spanish Law.
An example of these assets include:
- Assets held in any bank account.
- Life insurance policies.
NON RESIDENTS TAX
If you own a property in Spain, you have to pay two taxes:
- IBI or council tax – This is a council tax that is based on the rateable value of your property (the open market annual rental value).
- National income tax or rental income tax. Income tax is paid by non-residents who own a property whether rented out or not.
NOTE – the Spanish tax office does not send notifications of IBI tax addresses outside Spain. It is therefore advisable for a non-resident who has a property in Spain, to appoint a Fiscal Representative.
POINTS TO KEEP IN MIND
- You will not necessarily be reminded that you owe tax.
- It is your responsibility to make sure all your taxes are paid.
- Any overdue taxes must be settled before you sell or inherit a property.
- Failure to pay taxes on time can result in late payment interests and sanctions.
At Sun Lawyers we appoint one of our fiscal experts to deal with all your tax related needs, who then:
- Make sure all your taxes are paid on time.
- Represent you to the Spanish Tax Authority.
- Receive all of your tax notifications.
- Alert you to any changes in the tax law.
- Is always on hand to answer any questions you may have throughout the year.