Do you live or work in Spain and are concerned about your obligations to file an income tax return?
Are you unsure of how to submit a personal income tax return in Spain or indeed whether you even need to?
If so, this guide is for you.
In the following article, you’ll find all you need to know including:-
Read on and let’s find out more.
As they say, there are only two things that you can guarantee in life, one being death and the other being taxes. Sorry to say, if you live and work here in Spain, this also applies to you. Although we can't tell you when your time is up, we can offer you some simple advice and information on the tax system here in Spain.
If you speak some Spanish, filing taxes as well as many other bureaucratic tasks here in Spain will be 10 times easier. You could also ask other expats living in Spain how they go about filing their taxes or if it is all just a little bit too much for the old grey matter, then you could always pay a few Euro's and get an accountant to do it for you. There are many here in Spain who speak English and will no doubt be happy to assist.
Whether you will be filing your income tax return (IRPF - Impuesto de Renta Sobre las Personas Fisicas) yourself or whether you will be leaving it to an accountant, it's a good idea to become familiar with the process and at least get a rudimentary understanding of how things work.
How Do I Know If I Have to File a Tax Return in Spain?
The tax residency rules for Spain are quite clear. According to the tax authorities (Agencia Tributaria) if you are a permanent resident or if you spend more than 183 days of the year in Spain you will usually need to file a tax return although there are a few exceptions (See list below). If you work in Gibraltar and live in Spain or if your earnings are from income earned abroad, you will still need to do a tax return in Spain as it is based on your worldwide income.
In most cases, you will need to file a tax return if:
When Is the Spanish Tax Year?
This is quite a simple one to answer. The tax year in Spain runs from the 1st January to 31st December, unlike in the UK where it generally runs from the 6th April to the 5th April. So for example, income for 1st January to 31st December 2020 will be paid in arrears in June 2021.
When Do You Have to File a Return Each Year?
The filing of your tax return for those living in Spain for the year ending 2020 will need to be done between the 6th April 2021 until the 30th of June 2021. These dates can vary slightly from year to year, but in general, you need to be filing your tax return between April and June for the previous years income (January to December).
For previous years, the PADRE tax return software could be used to submit your tax return, but in 2016 a new system called 'RENTA WEB' was introduced by the Agencia Tributaria tax authorities. Renta Web is a secure part of the agencies website where you can directly create a draft tax return and then submit once ready. This means that there is no longer a need to download extra software. The new system is also compatible with mobile devices and there is even an app you can download to your phone, which can be used to receive security codes to access the system.
Further information about RENTA WEB can found here.
Note, if you are self-employed (Autonomo) you will also have to file a quarterly tax return and pay your national insurance each month. (See the self-employed section below)
When Must I Pay the Tax By?
Any tax that is due has to be paid by the end of June for the previous years income. If you do not pay your taxes on time, yes you guessed it, you will receive a penalty fine!
It is also worth noting that any outstanding tax cannot be taken from you after 4 years. (5 years 3 months in real terms)
What Happens If You're Late Filing Your Tax Return in Spain?
All income tax returns have to be filed within a set period. You can still pay your taxes after the tax filing deadline has passed, however, you will be liable to pay a surcharge or ‘recargo’.
The surcharge penalty charge will be a percentage of any outstanding taxes due, with the percentage rate dependent on how late you are with payment. The current rates for 2021 are:-
If you forget to submit your tax return before the filing window and NO tax is due, the fine is €100 or €200 if the Agencia Tributaria has previously requested you to file a return.
Further penalty fines are possible and can be up to 150% of tax due, plus a fine and interest.
How Much Tax Will I Have to Pay?
This will depend of course on your level of income. Like in the UK and other countries, there are tax brackets and thresholds that need to be applied to any income.
Income Tax Calculator For Spain
You can use the following Spanish income tax calculator to find out how much you may owe.
Income Tax Rates for 2021
€0 - €12,450 - 19.0%
€12,450 - €20,200 - 24.0%
€20,200 - €35,200 - 30.0%
€35,200 - €60,000 - 37.0%
€60,000 or more - 45.0%
€300,000 or more - 47.0%
Source: Spain Accountants
Spanish Tax Allowances
Note that there is a personal tax allowance/threshold of €5,550. This means that you do not pay tax of 19% on the first €5,550 of income.
There are also income tax thresholds for pensioners, for the disabled and for those with children. These are outlined below.
Individual and Pensioner Allowances
Individual - €5,550
65 years and over - €6,700
75 years and over - €8,100
Capital Gains Tax Rates for 2021
(Dividends up to €1,500 are tax-free)
€0 - €6,000 - 19%
€6,000 - €50,000 - 21%
€50,000 - €200,000 - 23%
Greater than €200,000 - 26%
Non-residents - 19%
Grade 33%-65% disability - €3000
Grade 33%-65% disability and third-party care required - €6,000
Grade 65%-100% disability - €12,000
Child Allowance (less than 25, living in and income less than €8,000)
First child - €2,400
Second child - €2,700
Third child - €4,000
Fourth & additional children - €4,500
Additional for a child under 3 - €2,800
Parental Allowance (mother or father living in with income less than €8.000)
Over 65's - €1,150
Over 75's - €2,550
Tax On Property Rental Income
Tax on rental income in Spain is charged at a flat rate of 19% for those who reside in the EU, Norway and Iceland and 24% for those residing in all other countries.
Note that rental expenditures such as mortgage interest payments, I.B.I, utility bills and community fees are tax-deductible.
For smaller companies (between 1 and 24 employees and turnover of less than 5 million Euros) the corporate tax rates for 2020/21 are 25%.
Newly formed companies enjoy a reduced rate of company tax of just 15% for the first two years of business.
Filing a Joint Tax Declaration - Declaración Conjunta
Spain like the UK and other countries also try to encourage marriage and it is possible to declare a joint tax return, which is referred to as a Declaración Conjunta. This means that you are awarded a further allowance of €3,400 for a spouse which can be added to the thresholds listed above.
You do not have to submit a joint declaration as in some cases, if both partners work and have an income, it could be more tax-efficient to do two separate tax declarations. As a simple rule, if only one of you is working, it will be better to do a joint tax return.
How To Submit Your Spanish Tax Return
How To File An Electronic Tax Return Using Renta Web
Renta Web is used directly via the website so there is no requirement to download any additional software in order to file your return.
You can view the main Renta Web page here
To access the Renta Web system, you will need to first register within the new 'Cl@ave PIN' security system, which allows you to access your personal data securely online.
The two ways to register with the Cl@ve PIN system are
The ‘Cl@ve’ is a four-digit code that you choose and the ‘PIN’ is a code that is sent to your mobile device.
This will then enable you to undertake specific tasks such as creating a draft return, making modifications, submitting your return or finding out the status of any possible tax returns that may be due.
The PIN, which is sent to your phone can be requested either via the Agencia Tributaria website or via the agencies official Android or IOS apps. Search for ‘ClavePin’ via either platforms app stores.
Once you have applied, you will receive your codes via post to your address. The code can then be used on the Agencia Tributaria website and a number of other government department sites.
Further details on the Cl@ve PIN system can be found here.
You may also register for a digital certificate from the FNMT. Read our guide to getting a digital certificate for Spain.
Note that if you are due any overpayment of tax, it will usually be credited within 1 month of submitting your return.
How Do I Get My Tax Refund?
All tax refunds are processed manually. The tax office has six months in which to pay out any refunds due from the closing date of the RENTA income tax campaign. So in 2021, that would be six months from the filing deadline date of June 30.
You can find out if you are due for a refund via the RENTA website. You will need your Cl@ve/Pin to do this. For instructions on how to do this, see the following page here.
Self-Employed - Autonomo Quarterly Income Tax
In Spain, if you are self-employed or "Autonomo" you will need to file your tax returns quarterly. Any tax due is then taken automatically from your bank account during the middle of the following month.
At the end of the year, as stated above, you will also have to declare a yearly return which will also take into account things such as interest on bank accounts.
The self-employed also have to pay their social security payment (National Insurance), which is €288.98 per month.
As of 2021, the social security rate for the self-employed increased from 30% to 30.6% of the minimum contribution base. This rate currently ranges from €944.40 to €4,070.10.
This payment can be used as a business expense so is, therefore, tax-deductible.
In November 2016 the Spanish government announced big discounts for self-employed social security payments. This means that for those who have not registered as self-employed in the past 5 years, will pay €50 per month for the first 12 months of self-employment.
You can find out more about current self-employment tax rates and social security payments by reading our page Registering For Self Employed Autonomo In Spain.
Declaring Foreign Assets
In early 2013, new laws were introduced to combat fraud and tax evasion. The new law 7/2012 or "Declaracion Informativa Sobre Bienes y Derechos Situados en el Extranjero", means that anyone living in Spain for more than 183 days per year, must disclose overseas assets of more than 50,000 Euros to the Spanish taxman.
The categories that must be declared are:-
You only have to declare these assets once, unless the value of each asset rises by more than 20,000 Euros. If any of the assets do increase in value by more than 20,000 Euros, you will have to declare it and pay any potential capital gains tax.
The form that needs to be completed is tax form 720 or Modelo 720 as it is known in Spanish. This form can be completed online at via the Agencia Tributaria website at https://www.agenciatributaria.es/AEAT.internet/en_gb/Modelos_formularios/modelo_720.shtml
Fines for not disclosing overseas assets can be severe and start at a minimum of 5,000 Euros.
You can read more about the wealth tax here.
Private Health Insurance for Expats
If you want the security of knowing that you and your loved ones are covered against any unforeseen circumstances in Spain, please consider one of our excellent value, low-cost Sanitas health insurance policies. All of our policies are in English and are underwritten by Bupa.
You can get a quick policy quote here - https://www.healthplanspain.com/sanitas/sanitas-health-plans.html
December 12, 2018
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