As little as twenty years ago, tax evasion was a way of life in Spain and almost encouraged. Not any more! During the the last decade, Spanish taxes have increased dramatically, particularly income tax.

Althugh overall taxation remains reasonably low and is still less than the EU average, the gap is closing fast. Before you decide to settle in Spain permanently, you should obtain expert advice regarding Spanish taxes. This will ensure that you take optimum advantage of your current tax status and also ensure that you don't make mistakes that you may later regret.

These days it's far more difficult to avoid paying taxes in Spain and penalties are stiff. However, despite the efforts of the authorities to curb tax dodgers, tax evasion is still in evidence and many non-resident home owners are among the worse offenders, being paid 'cash in hand' thus avoiding value added tax (IVA) and income tax. Cash is also preferred by many Spaniards for payment, rather than cheque or credit card, even when large sums are involved. The Spanish tax system is complicated and even the experts have difficulty agreeing with the tax authorities. In short, taxes are levied by three tiers of governemnt : the central government, autonomous regional governments and local municipalities.

Government taxes are administered by the Ministry of Economy and Taxation which has its headquarters in Madrid and assessment and tax collection centres in provincial capital towns. There's a five year assessment and tax collection centres in provincial capital towns. There's a five year statute of limitations on the collection of back taxes in Spain which means that if no action has been taken during this period to collect unpaid tax, it can't be collected. At last count there were around 15 different taxes for which individuals are liable.

The most important are listed hereafter.

Residents Income Tax. Payable on worldwide income Business Tax. Paid by the self-employed once a year.

Company Tax. Paid at a percentage of profits by partnerships and registered companies.

Property Tax. Paid by all property owners. Wealth Tax. Payable on capital assets, including property.

Capital Gains Tax. Payable on the profits made on th esale of property and other assets located in Spain. Inheritance and

Gift Tax. Payable on worldwide assets. Rubbish Collection. Annual tax payable by all residents and non resident property owners.

Offshore Company Tax. Annual tax on offshore companies that don't declare the individual owner of property in Spain or the source of investment.

Social Security. Isn't strictly a tax but is payable by employees and the self employed Motor Vehicle Tax. Paid annually by all vehicle owners.

Value Added Tax. Payable on a wide range of goods and services at varying rates.

Non Resident Property Owners are responsible for: Income Tax, Capital Gains Tax, Wealth Tax, Inheritence and Gift Tax