Since Spain is a popular destination for expats, one topic that comes up frequently is whether or not foreigners must pay taxes in Spain.
Let’s explore what constitutes a tax resident in Spain, which types of taxes are due by foreigners, and how to deal with the tax system.
Do Foreigners Pay Taxes in Spain?
- Who Is Considered a Tax Resident in Spain?
It is necessary to figure out whether you qualify as a tax resident to decide whether you have to pay taxes in Spain.
A person is categorized as a tax resident if they,
More than 183 days a year are spent in Spain.
Have your primary place of business or financial pursuits in Spain.
Your dependent children or spouse are residents of Spain.
While non-residents only pay taxes on income earned in Spain, tax residents must pay Spanish taxes on their worldwide income.
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What Taxes Do Foreigners Pay in Spain?
Foreign citizens who are considered tax residents must pay some taxes like,
Income tax: Residents pay income tax on all income, whether earned in Spain or abroad.
Wealth tax: Applies to individuals with high-value assets such as property and investments.
Capital gains tax: Imposed on profits from selling property or investments.
Non-resident income tax: Non-residents are taxed only on income earned from Spanish sources.
It is best to know which taxes apply to you so that there are no surprises.
Read: How do I qualify for a student visa for Spain?
Income Tax for Foreigners in Spain
- Foreign citizens who spend more than 183 days a year in Spain are subject to worldwide income tax.
- Spain has a progressive tax system, meaning that taxes vary based on income levels, from 19% to 45%.
- Since Spain has tax treaties in place to avoid double taxation, this still applies to residents’ income from foreign sources.
- You may be able to claim a tax deduction for taxes paid to another country if you receive income from outside.
Special Tax Regime – The Beckham Law
- The Beckham Law, a unique tax structure, is available to international professionals who relocate to Spain and make significant incomes.
- For a maximum of six years, this allows qualified expats to pay a flat tax rate of 24% on income generated from Spain as opposed to the customary progressive tax rates.
- You must relocate to Spain to be eligible, and you must have been a tax resident of Spain for the last ten years.
Taxes for Non-Residents
You only have to pay taxes on income earned in Spain if you are a non-resident.
The following taxes are the most typical for non-residents,
Rental income tax: In Spain, non-residents who rent out real estate are required to pay 24% tax on rental revenue (19% for residents of the EU).
Capital gains tax: Property sales by non-residents are liable to capital gains tax.
Maintaining current knowledge of non-resident tax regulations is necessary for avoiding fines.
Double Taxation Treaties
- Spain has agreements in place with other countries to prevent double taxation on the same income.
- These treaties can lessen your tax liability if you pay taxes in your own country on income received from outside sources.
- The United States, the United Kingdom, and many European countries are among those that have treaties.
Filing Taxes in Spain
- Foreigners need to pay their taxes in Spain on time and with the right documents.
- Typically, tax returns for the prior tax year are filed between April and June.
- If a person receives money from Spanish sources, both citizens and non-residents are required to submit. Engaging a tax professional may enable a seamless process of navigation.
Bottom Line
It is necessary to learn about taxes in Spain, whether you live there or not, to avoid penalties and maintain compliance.
Read: Can a digital nomad visa lead to permanent residency in Spain?
