Paying Taxes in Spain

Velasco Lawyers in Almuñécar explain how IRPF works for residents in Spain, if they spend over 183 days in a calendar year.

TSPN Paying IRPFax on Personal Income or Impuesto sobre la Renta de las Personas Físicas (IRPF) is a personal, progressive and direct tax on income during a calendar year for individuals residing in Spain, taking into consideration their personal family circumstances.

The general criteria is to physically be in Spain for over 183 days in a calendar year. Temporary trips abroad are not counted and for any absence from Spain to be made effective, the taxpayer must provide a residence certificate from another country.

Components of the Taxable Income:
Employment income (wages, salaries, pensions …)
B) Income from movable capital (dividends shares, interest on accounts …) and real estate (property rentals…).
C) Business Income (entrepreneurs, professionals …).
D) Gains and losses (on the transfer of goods, certain prizes …).
E) Charges of statutory income (derived from the ownership of certain properties other than the usual non-leased housing…).

What are the taxation rules if I am British national receiving income from UK?
You can read about the Agreement to avoid double taxation between Spain and UK at CDI RU inglés 

Pensions: (article 18 CDI): understood as “remunerations that have their cause in a previously exercised job,” they have different treatment depending on whether they are public or private.

• Public pensions: a public pension is understood to be that which is received by reason of a previous public employment; that is, that which is received by reason of services rendered to a State, to one of its political subdivisions or to a local entity, for example, the pension received by a civil servant.

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Their treatment is:
1. In general, public pensions will only be taxed in UK. In Spain they would be exempt, but if the taxpayer were obliged to file income tax return for obtaining other income, the amount of the exempt pension would be taken into account to calculate the tax applicable to the remaining income.
2. However, if the beneficiary of the public pension residing in Spain had Spanish nationality, without at the same time having British nationality, the aforementioned pensions would only be taxed in Spain.

• Private pensions: a private pension is understood as any other type of pension received by reason of a previous private job, as opposed to what has been identified as public employment, for example, the pension received from social security by a private sector worker. Private pensions will only be taxed in Spain.

Capital gains:
1. On real estate transactions (article 13.1.a CDI): the gains obtained by the sales of real estate located in the UK, may be subject to tax both in Spain and in UK. The taxpayer has the right to apply in Spain in his income tax return for the deduction for international double taxation.

2. On the sale of shares, in many cases the gains may be subject to tax in Spain and in the UK, in which case deductions can be applied for international double taxation.
Who must file tax returns?

All individuals, whose habitual residence is in Spain, must submit a tax return, with some exceptions:

1. Annual income from employment is less than 22,000 €, (if you are an employee working for one company. This limit also applies, if received from various persons/companies when:

* The sum of the amounts received by the second or third source does not exceed the amount of 1,500 €/year.

* Your only income is from Social Security pensions and other benefits and that the withholding tax has been calculate according to the established regulations.

2. The limit is set at 14,000 € per year, if:

* When the income is from more than one source, provided that the sum of the amounts of the second and other payers exceed 1,500€ per year.
* Earnings from capital gain and savings less than 1600 € per year.
* Received rental incomes for less than 1,000€ per year.

The limitation is the same if you received benefits derived from ERTE (common in activities affected by covid-19 pandemic).

Deductions in Andalusia:
For the amounts donated to the Andalusian Health Service for the fight against the advance of Covid-19, for birth or adoption of children, for single-parent families and, families taking care of relatives over 75 years of age. Taxpayers with a disability. Due to disability of the spouse or common-law partner, for assistance to people with disabilities, for domestic help, by beneficiaries of subsidies for protected housing, By leasing of habitual residence by young people.

Other deductions: Deduction for business savings account, for international double taxation, reductions in the tax base for contributions to different social systems.

1) Compensation for redundancy or dismissal, or termination of work, will be exempt up to the amount that the Workers’ Statute set as mandatory.
2) Compensation due to personal liability.
3) Social security benefits for incapacity.
4) Literary artistic and scientific awards.

When do you have to file your tax return?
The taxes can be filed between 6th April and 30th June.

Where do you send the tax return?
Depending on the case, (eg : a pensioner receiving a pension from Spain or employees receiving income you only need to confirm the draft prepared by the tax office via sms or in “renta web”, with digital certificate, or reference number. When the tax return has an amount to either pay in or refund, the tax return can be electronically filed on the Tax Office application via digital certificate (yours or your accountant’s one) or via «Cl@ve PIN» or at your Bank if you withdraw the tax from your account.

What are the tax rates?
Up to €12,450: 19%
€12,450–€20,200: 24%
€20,200–€35,200: 30%
€35,200–€60,000: 37%
€60,000–€300,000: 45%
More than €300,000: 47%

Income tax on savings is levied at the following rates:
19% for the first €6,000 of taxable savings income
21% for the following €6,000–€50,000
23% for the following €50,000–€200,000

(Feature/Legal: Taxes)

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