Spanish personal tax
How can a lawyer help me?
Taxes are complicated all over the world. However, Spanish tax Authorities are famous for being harsh and picky. The access, preparation and submission of the Spanish Personal Income Tax Returns can be complicated. In case you have different sources of income, or income from outside of Spain, it is convenient to request professional tax advice
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The implications of not filing the tax return usually are receiving a penalty than can go from 50% to 150% of the unpaid tax liability, plus the payment of the tax liability.
Note that Spanish tax Authorities and other countries’ tax authorities have signed International Tax Treaties that include an exchange of information between both Tax Authorities. Hence, trying to hide income or assets from the Spanish Tax Authorities is not recommended.
How am I going to be taxed?
Personal Income Taxation depends on Tax Residency Status.
You will be considered as a Spanish Tax Resident for a specific tax year, in general terms, if you stay physically in Spain more than 183 days during the tax year (that goes from January 1st to December 31st), including sporadic absences, such as holidays and work travels.
If you are in Spain more than 183 days in the tax year, you will be considered as a tax resident for the whole tax year.
Also, you will be deemed as a Spanish Tax Resident if your spouse and dependent children are considered as Spanish Tax Residents. However, to avoid this consideration, you should prove that you have been a Tax resident somewhere else.
If you are considered a Spanish Tax Resident, you will be taxed on your worldwide income. Your employment income, freelancing income and property income (rental income and sole ownership income) will be taxed at a progressive rate which can go up to a 50% in certain regions, such as Catalonia. Progressive means that, the higher the income you perceive, the higher the tax rate will be. Savings income (interest, dividends and capital gains, among others) will be taxed at a progressive rate that goes from 19% to 26%.
On the other hand, A Spanish Non-Tax Resident is taxed only on its Spanish Sourced income at a flat tax rate. This rate is 19% for EU tax residents and 24% for non EU tax residents. This would apply to employment income from work performed in Spain, rental income from properties in Spain, interests from Spanish Bank accounts, dividends from shares in Spanish companies, and capital gains from Spanish assets, among others. No expenses would be deductible in case you are a non EU tax resident.
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Frequently Asked Questions
Personal Income Taxation depends on Tax Residency Status. A person is considered as a Spanish Tax Resident for a specific tax year, in general terms, if stays physically in Spain more than 183 days during the natural year (that goes from January 1st to December 31st), including sporadic absences, including holidays and work travels.
If you are considered a Spanish Tax Resident, you will be taxed on your worldwide income, independently on the source of the income and where is located the bank account where you perceive the income.
Also, please note that the consideration of the movement of the company income into your pocket can be considered as employment income or as dividends, depending on the structure of your foreign company.
– In case you incorporate a LLP in the UK, or a Partnership or S-Corp in the US, or a similar entity, the income from the company to yourself will be considered as employment income and, therefore, subject to the progressive tax rates that can go up to 50% in certain regions.
– In case you incorporate a LTD in the UK, or a C-Corp in the US, the income from the company to yourself will be considered as dividends, and therefore, subject to the progressive tax rates that can go from 19% to 26%.
In case you perceive any income from abroad that is being taxed abroad too, we may have the possibility to apply the mechanism in the corresponding Double Tax Treaty to avoid being taxed twice. This means that, from the amount of taxes you have to pay in Spain on your foreign income, we will deduct the amount of taxes already paid abroad on this income, with the limit stated in the Double Tax Treaty between Spain and the origin country of the income.
In case you want to stay in Spain 180 days, but avoid being considered as a Spanish Tax Resident, you would have to claim before Spanish Tax Authorities, when they ask, that you are a Tax Resident elsewhere, as nobody can not be a tax resident anywhere. For that purpose, you should be able to provide Spanish Tax Authorities a certificate of tax residency in the referred country, based on the Double Tax Treaty between Spain and such country, for the tax year that is being checked.