The relaxed way of life, reliable weather and Mediterranean diet make for a blissful time. Whilst youre getting ready to enjoy the sangria filled siestas, one thing to get sorted is your tax – the Spanish are known for their relaxed attitude but were not sure this extends to the Agencia Tributaria (tax authorities) so make sure you are proactive with registering for tax once youve bought your property in Spain. Weve explained how to become a tax paying expat in Spain below.
If you stay in Spain for longer than 6 months (183 days), your financial interests are based there or you have a spouse or young children living in Spain then you most likely are. Tax works differently for resident and non-resident taxpayers. Weve detailed the rates that income tax is billed at for both below:
Once you are considered domiciled in Spain you are required to pay tax on all income earned throughout the world. If you are considered as non-resident then youll only pay tax on the money you earn in Spain.
|Yearly Wage||Tax %|
|€0 – €12,450.00||9.5%|
|€12,450.00 – €20,200||12%|
|€20,200 – €35,200||15%|
|€35,200 – €60,000||18.5%|
Member of an EU state: 19%
Non EU state member: 24%
If you are non-resident, you only pay tax on the money that you earn in Spain, such as wages or income from a rental property. Youre required to fill in a tax return and contribute to social security and income tax on any wealth earned or brought into Spain.
Everyone needs to complete a tax return during the first year you are tax resident. Once you have done this for the first time you dont need to continue doing so, as long as you earn less than €8,000 collectively and no more than €1,600 of bank interest or investment income.
If you own a property in Spain and receive rental income, this needs to be declared and the tax paid by the end of the financial quarter you received the funds. This is the case even if you dont live at your property, or in Spain at all! Regardless, you need to pay a percentage of the cadastral value (the value of your property as decided by the town hall) each year. If you happen to rent your property to a Spanish company, they will deduct the tax due to the Government from their payment to you and make the payment directly.
Spain is broken up into 17 regions for taxation purposes; all regions are autonomous and decide on their own spending so the rate of tax can vary from region to region, meaning that the rate of tax differs from one region to another.
The UK has set up tax treaties with approximately 120 countries to reduce the risk of tax avoidance with international citizens. There is a treaty set up with Spain which came into effect on the 12th of April 2014, any earnings made after this time either in the UK or Spain are subject to the terms of the treaty. There are some countries, (like the UK) who tax their citizens on all the income and gains that come into the UK, regardless of where the funds have come from. This can mean that you can end up paying 2 lots of tax on the same income, depending on where you made the money.
If youre moving to Spain on a permanent basis, you can apply for UK tax exemption to avoid being taxed twice on the same income. The form you need to complete is a D9 Spain Individual Form. This can be obtained from the UK tax office or online on the Gov.uk website.
If you live in the UK but are not domiciled, which means the UK isnt your main home, there is a term called the remittance basis of taxation, which essentially means that if the UK isnt your main home, you can pay a (fairly hefty) fee which allows you to just pay tax on the funds you either earn in or bring to the UK. This can help those who pay tax on wealth earned outside of the UK to the country its earned in to not have to pay it twice. There is a substantial fee to pay for the privilege though and it only really benefits those with large sums they dont want to pay UK tax on as the fee is between £30,000.00 and £60,000.00. If you do go for this option, this needs to be paid as well as any UK earned money, or funds you decide to bring to the UK.
Social Security is required of everyone working in Spain and makes you eligible for free healthcare amongst other public services. The majority of this is paid from by your employer. Those who work in Spain on a self-employed basis need to pay the full amount of tax themselves, though the overall percentage paid is less. To register for Social Security youll need your NIE number
So now you know who you need to pay, you need to know how to pay.
First things first, before you can pay tax you need have an NIE (Non-native identity number) number. Weve covered how to get hold of one of these in our checklist when moving to Spain. Once you have one of these you need to register with the tax authority, or Agencia Tributaria.
The Spanish tax year runs in line with the calendar year, so from the 1st of January to the 31st of December. You need to have completed your tax return by the 30th of June for all earnings from the previous tax year.
You can complete your tax form either online or by completing a form and sending it in the post. All the forms you need can be found on the Agencia Tributaria website. To complete your return online, you need to get a digital ID (called a DNIe) which enables you to sign electronic documents online and is obtained from the National Police Body.
It can also be used as travel document as it holds all of the required information, as long as the port youre travelling through has the capabilities of reading it, how handy!
If you’d like more information on the different aspects involved when buying a property in Spain, you can download our Essential moving to Spain Guide which covers topics from finding your property to driving in Spain.
Do you intend to open a bank account in Spain? This might be because you’re planning to emigrate to the Iberian peninsula with your family, to start a new life in Marbella or the Costa Blanca. Alternatively, this could be because you want to buy a Spanish holiday home, to enjoy year-round escapes to sun, […]
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