Spanish Tax system
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 government: 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 are tax offices centres in provincial capital towns and other some larger towns such as Marbella. It is possible to go down to your local tax office where the staff are usually quite helpful with simple queries. There is a freephone number for Agencia Tributaria 900 333 555 or try 901 200 345.
A fundamental difference in Spanish Tax application is whether the person is a Spanish resident or a non-Resident.
Spanish residents with income or assets abroad 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.
Foreign governments in UK, Europe and Scandinavia share information with Hacienda, the common name for "Agencia Estatal de Administracion Tributaria" also called Agencia Tributaria for short.
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.
The most important taxes that are relevant to foreign nationals in Spain are listed here.
Taxes relating to Spanish residents
- Income Tax: Payable on worldwide income of residents.
- Wealth Tax: Payable on capital assets, including property.
- Inheritance and Gift Tax: Payable on worldwide assets.
Taxes relating to Property Ownership
- IBI: The IBI is the Impuesto sobre Bienes Inmuebles, which could be translated as "property tax". This is a municipally levied tax and varies widely from one municipality to another and from one type of property to another. You might for instance, pay as little as 50 euros per year for a simple propertyin a rural area, 500 to 1000€ a year for an apartment in a coastal resort. While a luxury home on a prime lot in an expensive urban neighbourhood might cost as much as 1,500 to 2,000 year.
- Capital Gains Tax: Payable on the profits made on the sale of property and other assets.
- Basura: (Rubbish Collection Tax) Annual tax payable by all property owners to the local town hall.
- Transfer Tax (ITP): Payable by the buyer for the purchase of any Real Estate (villas, flats, land, commercial premises, garages), provided the vendor is NOT a developer. 8 to 10%
- IVA: Payable by the buyer for the purchase of any Real Estate where the vendor IS a developer, promoter or habitual trader for brand-new properties. 10%
- Stamp Duty: Payable by the buyer for the purchase of any Real Estate 1.5%
- Notary and Property Registry Fees: Not a tax but still has to be paid by the buyer. The cost increases according to the number of pages or complexity of the title deed, and value of the property.
Taxes relating to Property Sale
- Capital Gains Tax: Paid on the capital gains from the sale of a property.
- Plus Valia A tax on the increase in value of a property paid at time of sale, usually by the seller but it sometimes assigned to the purchaser by agreement.
Taxes relating to Business
- Company Tax: Paid at a percentage of profits by partnerships and registered companies.
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, employers and the self employed.
- Value Added Tax: Payable on a wide range of goods and services at varying rates. Self employed and businesses pay the IVA to Hacienda. IVA is the difference between the sum of IVA collected from Sales invoices and the sum of IVA paid on purchase invoices. Calculations relate to each calendar quarter. Payment must be made by the 20th of the following month. (30Jan, 20April, 20July, 20 October)
- Business Tax: IAE or Impuesto sobre Actividades Economicas. Paid by the self-employed and companies annually. This tax was discontinued in 2003.
Taxes relating to Motorists
- Motor Vehicle Tax: Paid annually by all vehicle owners to the local town hall.
Taxes relating Non-residents
- Property Taxes : (as above) Taxes relating to Property, purchase, ownership and sale.
- Rental Tax : If you rent out your property, rental tax is paid by a non-resident on a property in Spain. This is collected quarterly. Some expenses can be deducted.
- Imputed income tax : A government tax that is payable by non-residents if they do not rent out their property. Paid on form Modelo 210 at end of year.
- Capital Gains Tax: Paid on the capital gains from the sale of a property by a non-resident. A witholding sum is paid by the buyer on behalf of the seller at the time of sale. The non-resident sell should submit a Capital gains Tax form and apply for a part refund of the witholding sum.
- Inheritance and Gift Tax: Payable by a non-resident on assets in Spain.