Who pays income tax in Spain?
Whether or not you actually live in Spain throughout the year, you could be considered a resident for tax purposes, and therefore subject to a PIT rate of up to 45%. Tax residency is independent of legal residency papers. It is held for the whole of the tax year.
Anyone who meets one of the following requirements must file residential income taxes in Spain:
- Those who spend over 183 days per calendar year within the country. Sporadic absences are considered days of presence in Spain unless you can prove your tax residence status in another country/territory;
- People with business or economic interests that are directly or indirectly located within Spanish territory;
- Those with a spouse or dependent children who are Spanish tax residents.
In recent years, however, authorities have begun to crack down on tax evaders, putting the proof of non-residence on the individual. Consequently, if you have a local Spanish address, a car with Spanish license plates, a Spanish mobile phone, a Spanish bank account that you use regularly or have used the Spanish healthcare system a few times, you may be considered a tax resident.
Income tax in Spain for tax residents
Spanish resident employers are obliged to make with-holdings of taxable income paid to their employees. Such deductions are calculated according to a progressive scale based on the amount of taxable income (in both cash and kind) that is expected to be paid during the tax year.
Employers make these payments on a monthly or quarterly basis depending on their turnover; authorities will deduct them from individuals’ final tax bill and refund any excess paid.
Income tax in Spain for non-residents
Non-resident individuals are also taxed on income earned in Spain. This is generally a flat rate of 24% on work income, and 19% on capital gains and other financial investment income from Spanish sources.
Again, taxes are withheld at the source. Non-residents must always file their Spanish tax returns individually and never jointly with their partner or spouse.
Non-residents do not have any allowable deductions or credits, except for certain expenses for those individuals who are tax residents in another EU country/territory.
Can I claim an exemption from income tax in Spain?
Exemptions on income tax in Spain depend on an individual’s tax residency. In short, if you’re considered a tax resident in Spain, you’ll need to declare your income and pay any applicable taxes.
For example, pensions received from another country are taxable if you are resident in Spain for tax purposes but non-residents aren’t required taxed on foreign pensions.
Personal income tax deductions and allowances in Spain
Resident taxpayers are granted certain deductions on income tax in Spain. A basic personal allowance for everyone under the age of 65 is set at €5,550, or €6,700 from age 65, and €8,100 from age 75.
In addition, if you have children under 25 living with you, you can claim an allowance as follows:
- €2,400 for the first child;
- €2,700 for the second;
- €4,000 for the third;
- €4,500 for the fourth;
- An additional allowance of €2,800 for each child under three years.
If you have a parent or grandparent living with you and your total income is less than €8,000, you can claim an allowance of €1,150 if they are over 65 and €2,550 if they are over 75.
