If you spend more than 183 days of the year in Spain you are officially classed as a tax resident and liable to pay tax on your world wide income. If you are not a tax resident you will only be taxed on income arising in Spain.
Documents about tax in Spain can appear to give conflicting information. We strongly advise that you engage the services of a professional to help you to pay your taxes and complete your end of year tax returns. Completion of an end of year tax return is obligatory in Spain unless you earn less than €22,000 per year in which case your income will have been taxed correctly at source.
Tax fraud in Spain was once common place, however, it may be in your best interest to pay Spanish taxes as income tax is below the European average and social security payments are reasonable. The double taxation treaties which Spain has with 45 other countries, ensures that income that has already been taxed in one treaty country isn’t taxed again in another treaty country. Being a tax resident in Spain could save you money. If you are in a position to choose your country of tax residence we can arrange for an expert to discuss this with you, to ensure that you receive all the facts.
Income tax is payable on both earned and unearned income. Taxable income includes salaries, pensions, capital gains, property, investment and income from professional, business or agricultural activities. If you are a non resident or the owner of a second property in Spain, two per cent of its fiscal value will be added to your taxable income. Principal residences are exempt from this.
If you are a pensioner and your worldwide income from pensions and investments is less than €8000 and €1600 respectively, you aren’t required to make a tax declaration or pay Spanish income tax. The taxation of pensions in Spain becomes more complex depending on the type of pension you have. A professional will ensure that you receive the help you need to pay the correct taxes.
Non resident property owners in Spain are liable to pay 25% tax on any income received in Spain, including income arising from rental of their property. A professional will ensure that your property is registered for rental purposes and the correct forms relating to tax are completed. Different forms are available depending on many factors.
Numerous other Spanish taxes may apply depending on your circumstances. Your lawyer will help you to pay all taxes with regard to buying and selling property and you should be aware of the taxes you need to pay when purchasing a car. If you own a Spanish business you will need advice about the payment of business taxes.
The Spanish tax system is complicated and even experts have difficulty agreeing with the tax authorities. If in doubt always seek the help of a professional accountant or lawyer. For a simple query you can contact your local tax office. Penalties for non payment of taxes can be stiff so ensure you are paying all that you should be by asking an expert.