What Spanish taxes must residents pay?

Income tax and IBI for residents

Taxes Tuesday, February 12, 2019
Resident taxes

If you live in Spain for more than 183 days in a calendar year (and these need not be sequential) then you are a resident. This is not a matter of choice as it is sometimes presented in the forums. The days do not have to be sequential, so it is not sufficient to claim that you left the country for a while and then returned so erasing all the time you’d already spent in your Spanish home.

So, if you are a resident in Spain what taxes should you be paying? First of all, everyone with a property in Spain must pay IBI – Council Tax. This tax goes towards local services and the infrastructure provided by the Town Hall. The amount to pay in Spain is often less than similar taxes that you might have paid in your home country.

The other tax, again as you might expect, is income tax. This is often what worries people most if they are considering moving to Spain to live.

Income tax in Spain

The majority of residents in Spain are required to complete a resident tax declaration annually, before the end of June. Payment of taxes in Spain is retrospective so when you make your declaration before the 24th June 2019 it will cover the period from January 2018 to December 2018.

Not everyone has to make a resident tax declaration. If you only have one pension that is less than 12,000€ then it is not required unless you have other income as well such as interest from savings or rental income. However, we still advise that it is beneficial to make a declaration, even if you don’t have to, as it records formally that you are a fiscal resident in Spain.

On your declaration you will need to declare all your world-wide income including any rental income, interest from savings, income from the sale of a house or any other asset. If you are working in Spain then you must also declare your income from your work. However, if you are on a contract then you will have a ‘retention’ deducted monthly from your salary.

The self-employed (autonomos) pay their tax quarterly but must still make a tax declaration at which point it is calculated whether they have paid too much or too little across the course of the year.

For many people who come to live in Spain, it is the issue of taxation on their pensions that is of most interest. If you have a civil service pension you will already have had your tax on this deducted at source and you will not be taxed twice. You should be aware, however, that the income from this pension is taken into consideration when working out your tax band.

Tax bands and allowances

You don’t pay tax on all your income but have an ‘allowance’ below which you don’t pay tax. Everyone has a basic personal allowance of 5,550€ and this is increased in certain circumstances. For example, if you are over the age of 65 you have an additional allowance of 1,150€ and this increases when you are over 75 to 1,400€.

Allowances

 

Tax year 2018

Personal allowance

5,550€

Over the age of 65

+ 1,150€

Over the age of 75

+ 1,400€

Incapacity allowance

+ 3,000€

Incapacity allowance  > 65%

+ 9,000€

Married persons allowance joint tax

3,400€

Deduction for other work related expenses

2,000€

Tax bands

Tax year 2018

Up to 12,450€

20%

From 12,450€ to 20,200€

24%

From 20,200€ to 35,200€

30%

From 35,200€ to 60,000€

37%

Upwards 60,000€

45%

The calculation of your allowance can be quite complicated and it is advisable to have a fiscal expert to calculate exactly how much you have to pay. However, the example below can give you a rough idea of how the tax is calculated. 

Example: single person of 76 years old; annual income 24,000€ (three separate pensions)

Tax calculation for the tax year 2018

Personal allowance:

5,550€

Over the age of 75:

1,400€

Total:

6,950€

 

Up to 6,950€

tax free

5,500€  taxed at (20%)

1,100€

7,750€  taxed at (24%)

1,860€

3,800€  taxed at (30%)

1,140€

Total to pay:

4,100€

Making your resident tax declaration

Fiscal representatives in Spain submit tax declarations annually on behalf of their clients. You will be advised of the documents you need to bring to the appointment and should allocate around an hour for this. At Ábaco we are able to tell you immediately how much your tax will be. In some cases there is even a reimbursement which will be paid directly into your bank account.

Whatever the end result of the calculation, you should feel relieved that you are compliant with the tax laws in Spain.

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Comments

If you own a house in Spain and only spend 30 days a year there what taxes or other contributions do I have to pay

Hi James

You must pay IBI council tax and imputed income tax/ rental tax depending on whether you rent out your property or not. 

My wife and i have now been in spain over the time threshhold , We have ben trying to get residency app since December with no luck , my question is , do we need to pay residence tax ? i have 2 small private pensions that equate to £14500 my wife has no income we own only our spanish home now with no savings

Hi Martin

If you were in Spain in 2018 for more than 183 days then yes. If not, then 2019 will be your first year as residents. 

Thank you for the information, particularly about civil service and government pensions. As stated mine are taxed at source but I am confused about the later information that I would still be given a tax band and taxed on the pension income. If I can't be taxed twice, what does this mean, please?
Many thanks.

Hi Madeleine

Your Civil Service pension, although not taxable here in Spain does influence the tax paid on your taxable income such as old age pension or private pension. This is because it is included in your income total here even though you are not taxed on that part of it. 

Am I right in thinking you get your personal tax allowance and the married couples allowance(regardless of age?), also I am in receipt of a personal pension, but my wife does not receive an income, so can this pension be divided between two people and the personal allowance applies for both people?

Regards Andrew

Hi Andrew

There is an allowance of 5,550€ and if you complete a joint declaration you can have a further €3,400 

I have a rental property in Spain and also own a property we live in I only earn €3000 from the rental property after all bills paid if my allowance is €5000 do I have to pay tax I don’t have a pension as to young

Hi Paul

Yes, you do have to declare the income

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