A simple guide to income tax for residents in Spain.
Written by El Cid.
This information relates to tax declarations submitted in 2024 for the earnings year 2023.
Who is tax resident?
Anyone who spends 183 days or more in Spain in a calendar year.
It will be assumed, unless proven to the contrary, that you are tax resident, if your spouse and children are tax resident even if you spend less than 183 days in Spain, unless you are legally separated.
Anyone who has their centre of economic activities in Spain.
Your country of tax residency is not optional – it is a matter of fact based on the above criteria.
Who has to make a tax declaration?
If you are in legal employment you will normally pay the Spanish equivalent of PAYE. If your income is under €22000 and from only one source you are not required to declare but it may be advantageous to do so.
If your income is less than €15000 you do not need to declare unless you have more than one source of income and the second and subsequent incomes exceed €1500. Two pensions would count as two sources of income even though you would add them together on your declaration.
If you have investment income of more than €1600 you must declare.
If you have rental income of €1000+ you must declare
If your total income from all sources is less than €1000 you do not need to declare.
If you are self employed or running a business you will have to declare no matter what your income is.
These figures apply to the income of the family unit. You cannot decide on separate taxation and each get this exemption.
You can see from this that apart from some wage earners almost everyone else is obliged to make a tax declaration.
Note that you can be fined up to €200 for not submitting a tax declaration even if no tax is due.
When do you declare?
Tax in Spain is paid in arrears (except for PAYE) so you declare your tax for the past year in May or June of the following year. You can pay in 2 instalments, one (60%) at the time of declaration and a second (40%) in November.
How do you declare?
You make a declaration on the official tax declaration form. If you choose to use a Gestor or financial advisor then they will fill in the forms on their computer using the PADRE program provided by Hacienda (the Spanish equivalent of the UK HMRC). You can expect to pay between €80 and €200 for this service – fees vary a lot. If you are a couple taxed separately you will pay for each declaration. You have a choice between being taxed jointly or separately. The computer program will work out which is cheaper for you.
If your tax affairs are fairly simple you can make an appointment with your local tax office and they will fill the forms out online for you using the PADRE program. There is no charge for this service.
You have to make an appointment by calling a central number 901 22 33 44 and they will tell you which office to go to. This service starts on May 4th.
You can also do it yourself on your own PC which will print out the completed form for you to take to your bank for payment or it can also be submitted online.
What paperwork do you need.
If you are using a Gestor he will normally ask you to provide proof of income etc and copies of your bank statement for any savings accounts that have earned interest and any dividend certificates. Most Gestors will give you a simple form to list your income and personal details. You will also need these if you visit the tax office.
Sterling income is converted to Euros using a conversion factor for the previous year’s income. The exchange rate for 2023 is 1£= €1.1495 It is based on the average rate over the year. It is also possible to convert using the actual rates at the time the income was generated/paid.
If you do it yourself using PADRE you will just have to fill in the relevant details, you do not have to submit the evidence.
All savings income including personal annuities are taxed at a flat rate of 19% up to €6000. From €6000 to €50000 the rate is 21% and any income above that is taxed at up to 28 %. Savings accounts will have had the tax withheld (at 19%) If your income was over €6000 then there will be an extra amount extra to pay.
Personal pension plans.
If you have purchased an annuity from a personally contributed pension plan (as opposed to an employers scheme) then you will get significant tax advantages. The amount of the payment is reduced by a percentage depending on the age that you first took payments from the annuity.
If you first took payments at age :-
39 or less – 40%
40 to 49 – 35%
50 to 59 – 28%
60 to 65 – 24%
66 to 69 – 20%
Over 69 – 8%.
This means that you only declare that percentage of your annuity income. For example an annuity of €10000 per annum first taken at 65 would be declared as an income of only €2400. As from 2007 this is declared as savings income and it is only taxed at 19.5%. Earned income relief is not allowed against this part of your income.
It is essential that you work out the discounted amount and only declare that figure. The tax program that is used does not (strangely) work it out for you. For the current forms that figure should go in Box 028.
These are pensions paid in the UK to retired civil servants. It also can apply to teachers and some NHS workers and other similar employees.
Under the double taxation agreement between Spain and the UK these pensions will always be liable to UK income tax and, as from this year, need to be declared in Spain, as exempt income. They are not directly taxed in Spain , but they may affect the tax you pay on the other, non exempt, income that you declare in Spain such as the UK state pension or any other worldwide income.
It is an advantageous situation because some of your income is taxed in the UK, and although you are no longer UK tax resident, you can still claim the UK personal allowances and pay tax at the lower UK tax bands.
The UK Revenue and Customs will advise you as to whether your pension is a Crown pension.
Rates and allowances for 2016 declaration (applicable to earnings in 2015)
Up to 65 5550
Over 65 6700
Over 75 8100
1St Child 2400
2nd Child 2700
3rd Child 4000
4th and subsequent 4500
Plus, for any child under 3, an additional 2800
Low income allowance
For the 2023 tax year, the allowances are
Taxpayers with net income from economic activities equal to or less than 14,047.50 euros : 6,498 euros per year.
Taxpayers with net income from economic activities between 14,047.50 and 19,747.50 euros : 6,498 euros minus the result of multiplying by 1.14 the difference between work income and 14,047.50 euros per year.
Andalucia tax rates (inc national rates)
0 - 12450 19%
12450 - 20200 24%
20200- 35200 30%
35200- 60000 36.5%
60000 - 120000 45%
Over 300000 47%
There are a number of other allowances relating to elderly relatives living with you and for people with relatives with disabilities
Joint or Separate declaration.
You can choose whether to declare jointly or separately. In most cases a joint declaration will produce much the same tax as a separate declaration. With a joint declaration you add both incomes together and claim the allowances for each of you. However you do not both get the personal allowance. Instead you get a family allowance of €3400 for the second person. You both get the appropriate age allowances. The wage earners allowance can only be claimed once.
It should also be noted that all these allowance are calculated at the standard 19.5% rate so if you are paying tax at the higher rates you do not get additional benefit.
Double Taxation Agreements
The UK and Spain have a double taxation agreement which allows for ex-pats who are now resident in Spain to have their UK income paid free of UK tax. It used to be possible to get a form FD9 from UK HMRC which set out your UK income that you wanted to be paid free of UK tax and this was submitted to the Spanish tax office who returned it to UK HMRC. It now seems that, in some local tax offices, this is no longer processed by the Spanish tax office and it will be necessary to get a certificate of tax residency from them to submit to HMRC. This will probably not be issued until after you have paid Spanish tax for the first time. This means paying the tax twice but as soon as the certificate is submitted to HMRC they will issue a rebate of the UK tax paid.
This is a deliberately simple description of Spanish income tax. It is a very complicated subject and the tax manual that accompanies the PADRE tax program is 720 pages long. However, for many retired ex-pats, what has been covered above should be an adequate guide.
If your income and circumstances appear more complicated then you should seek professional advice
Edit 29 Dec 2023. The average exchange rate for 2023 is 1.1495
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