The legislation of private law in Spain is a complex subject. It can affect the amount of taxes that must be paid. Wills and inheritance management, succession regimes, residence tax, inheritance tax, real estate purchases and reform proposals must all be taken into account when considering private law. If you would like a complete list of jurisdictional questions and answers, do not hesitate to contact us.
Personal income tax
- When does the official tax year start and end, and what are the deadlines for paying taxes?
Tax payment deadlines change each year, but they are normally scheduled between 1 May and 30 June.
Non-residents must pay income tax when they earn and accrue the income. Payments must be made within the first twenty days after the end of each quarter. For income derived from the sale of real estate, payments must be made within three months of the month following the transfer.
Inheritance taxes are calculated at the time of death and must be paid within the next six months. Donation taxes are accumulated at the time the donation is made and must be paid within a month of the date of donation. The wealth tax is recorded on 31 December, and the payment term coincides with that of personal income tax.
Domicile and residence in Spain
- What is your tax liability based on your domicile and residence? How do they influence the payment of taxes in Spain?
Tax liability in Spain is determined by permanent residence. A person is considered a permanent resident of Spain if any of the following are true:
- He or she spends more than 183 days a year in Spain. Temporary absences are considered residence time in Spain unless a residence certificate issued by another country is provided.
- The main centre of his or her activities or commercial interests is located directly or indirectly in Spanish territory.
- His or her spouse and minor children reside permanently in Spain.
These residence criteria are applied for personal income tax, wealth tax, inheritance tax and gift tax, although some exceptions may apply for inheritance and gift tax. If you would like to receive more information on this subject, please do not hesitate to contact us.
Even if an individual is not a permanent resident of Spain, he or she may still have tax obligations there. For example, any income obtained in Spain or assets or rights exercised or fulfilled in Spain qualify an individual to pay taxes in Spain.
- Are taxes imposed when a person leaves Spain? Are there other consequences of leaving the country (particularly for people domiciled in Spain)?
On 1 January 2015, Spain introduced an exit tax. Individuals who have been permanent Spanish residents for at least ten years during the past fifteen years and cease to be residents are subject to taxes on any capital benefits derived from shares or participation in any type of entity. This tax is only mandatory in the following cases:
- The total value of these assets exceeds €4 million.
- The individual owns at least 25% of one entity, and its value exceeds €1 million. In this case, taxes are paid for the benefit that is considered to be derived from this participation.
- If the change of residence is temporary and some requirements are met, the tax owed can be deferred for five years if the appropriate guarantee is submitted (preferably a bank guarantee or an endorsement on some of the securities held by the individual). If a tax deferment is not requested, upon acquiring residency again in Spain, the individual will be entitled to claim a refund of the tax owed.
If you move to a country within the EU or the European Economic Area (EEA), with which Spain has an effective exchange of information, no tax is applied unless:
- The assets are transferred among other people.
- You change residence again to a country that does not belong to the EU or the EEA before a period of ten years has elapsed since your departure from Spain.
To benefit from the EU or EEA deferral regime, an individual must communicate his or her new address (and subsequent changes of address) to the Spanish Tax Administration using the form for that purpose.
In addition to the exit tax, people who stop being residents must include in their tax return any taxable income that has been produced.
- In Spain are there special tax rules that may affect temporary residents?
People who acquire residence in Spain for employment reasons can choose to pay taxes for the fiscal year in which they move to Spain and during the following five fiscal years as non-residents if specific requirements are met. There are some exceptions, such as professional athletes, in which case this is not applicable.
- What happens if I have outstanding taxes that I do not pay?
If you stop paying one or both non-resident taxes:
- You may have to pay late payment interest and penalties.
- You can be caught through one of the tax fraud campaigns.
- Your bank account can be seized, which may also lead to the non-fulfilment of payments of public utility bills.
The Spanish Tax Administration increasingly investigates irregularities by monitoring electricity consumption and checking your data at the Land Registry.
- Can I have a tax problem and not be informed?
The public administration usually sends a letter to your postal address. If you are not there to receive it, this can be a problem. In this case, the letter is returned to the Spanish Tax Authority, and a notification is sent to the BOE (Official State Gazette). At this point, it is considered that you have been informed. If you do not respond to the notification, your bank account could be subject to embargo.
- What should you do to make sure you don’t owe outstanding taxes?
- Make sure your non-resident taxes are paid on time.
- Consult your account statement with the Spanish Tax Authority.
- Check that the Spanish Tax Authority has your correct postal address so that you are receiving your notifications.
- Contact our experts in Marbella!
- What is IBI?
Real estate tax (IBI) is a municipal tax that each owner of a property must pay. IBI corresponds to the municipality where the property is located. It is paid annually, and the date of payment depends on the municipality and province where the property is located. The value of the IBI is based on the property’s cadastral value.
- When must you pay taxes on rental properties?
If you are a non-resident and rent out your property, you must pay rental taxes in Spain. This is done quarterly, on 20 April, 20 July, 20 October, and 20 January.
We recommend that non-residents have a fiscal representative in Spain. At Welex, we would be happy to assist you.