Determining your status as a resident or nonresidents is vital for determining your tax accountability. If you live in Spain for more than 182 days per year, you are automatically considered a Spanish resident for tax purposes. Residents in Spain pay taxes on their income worldwide (Impuestos sobre la renta de las personal físicas/IRPF), but nonresidents are taxed only on their income within Spain.

Taxes are levied by governments at three levels:
• Nationally
• Regional
• Locally

National taxes are levied by the Spanish central government tax agency, the Agencia Estatal de Administración Tributaria. The headquarters are in Madrid, but assessment and tax collection takes place in provincial capital cities. Regional taxes levied by autonomous community governments and local taxes by municipal authorities.

Income Tax

The IRPF, or income tax, applies to:

• Income from employment
• Income from economic activities (business profits)
• Income from current assets (interest, dividends, etc)
• Income from property (rentals)
• Capital gains
• Deemed income (on the benefits derived from certain assets)

Contributions

Employees's income tax is deducted at the source by employers in a "pay-as-you-earn" system . Residents are taxed at a maximum of 18 percent on certain types of income (savings income and capital gains). On the remaining sources of income, the minimum tax rate is 24 percent and the maximum is 43 percent.

The tax contribution should be accurately withdrawn throughout the year, so there is nothing to pay at the time to declare. The national tax agency calculates what you owe or what's due to you and sends you a form (105) to check, sign and return; any refunds due to you are made before the end of April.

Self-employed workers pay income tax quarterly (pago fraccionado).

Deductions

Resident taxpayers are entitled to a minimum personal allowance of 5,150 euro. This amount increases after the taxpayer reaches the age of 65. Further allowances can be claimed for dependant's.

Another deduction is the amount paid for the purchase of your main residence amounting to 15 percent of the amount invested up to a limit of 9,015 euro per year. This also applies to the amounts paid in relation to the mortgage obtained when acquiring the house.

Property/Real Estate Tax

Impuesto sobre bienes inmuebles urbano (IBI) is paid by all property owners (resident or non-resident). This pays for street cleaning, education, council administration, local sports amenities, etc. IBI is calculated according to the fiscal value of your property of rates between 0.4 and 1.3 percent.

VAT

Value-added tax is at 18 percent. This tax is charged on most supplies, though some items have a reduced rate of 8 (newly built properties, hotels and restaurants, health products, and entertainment and sports activities) or 4 percent (basic necessities like certain food and reading material).

Reporting

The Spanish tax year runs from 1 January to 31 December. A declaration (Declaración de la Renta) is required between the lst of May and the 20th June the following year of employment. Assessment and tax collection centers offer information (oficina de información al contribuyente), but won't process the request for you. Forms can be obtained at the tax office or from a tobacconists (estanco) for just a few cents.

Types of Declaration:
• Abbreviated Declaration (declaración abreviada) - Form 103 is used for declaring earnings from pensions or investments that have already been subject to withholding tax
• Simple Declaration (declaración simplificada) - Form 101 is used for income from letting, certain business and agricultural income or capital gains from the sale of a permanent home where the total gain is to be reinvested in another property in Spain.
• Ordinary Declaration (declaración ordinaria) - Form 100 is the most common declaration. Used for all sources of income other than the above and covers all business and professional activities and capital gains.

Keep copies of tax returns for at least five years. This is the maximum period that returns are liable to be audited by the tax authorities. After five years, any unpaid tax cannot be collected.

Expat Taxes

There are also special federal tax benefits for expatriates. Most cantons give expats preferred tax treatment. Expatriates are either assessed by due process of law, or they are subject to withholding tax, which the employer deducts directly from their paycheck. The tax rates include certain tax-free allowances for work-related expenses, insurance premiums and family upkeep. Expenses such as moving costs or tuition for international schools are also deductible.

Reciprocal Tax Agreements

Double tax treaties exist that may provide tax relief where a tax resident also pays income tax in another Spain. Spain has signed comprehensive double taxation agreements with over 65 countries. The general effect of the treaties for non-residents from treaty countries is that they can obtain a partial or total refund of tax withheld.

Some of the major countries with a double taxation agreements:
• Australia
• Austria
• Belgium
• Canada
• Chile
• China
• Czech Republic
• Denmark
• Egypt
• Finland
• France
• Germany
• Greece
• India
• Indonesia
• Ireland
• Israel
• Italy
• Japan
• Luxembourg
• Mexico
• Netherlands
• New Zealand
• Norway
• Pakistan
• Russia
• South Africa
• South Korea
• Spain
• Sweden
• United Kingdom
• United States of America

Consult with your embassy to find out if your Spain has an agreement and for further information.

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