All Taxes. Foreigners' Assistance in Spain.
There are various taxes which must be dealt with by both of those who are resident in Spain and those who are not. Taxes levied on the Personal Income of Residents and Non-Residents (in the latter case for monies received in Spain), Transfers of Assets, Provision of Services, Inheritances and Donations, Earnings of Resident and Non-Resident Companies, etc., make up just a part of all the tax obligations in place here in Spain. A brief summary of which is presented below.
At CYCLO we always examine the individual situation of each person to offer the optimum solution.
Personal Income Tax (IRPF)
Anyone living in Spain at least 183 days per year is obliged to file a return for this tax.
However, this obligation does not apply to those who meet all the following conditions:
- They have not received any earnings from work, including retirement PENSIONS and compensation or subsistence payments, of more than 22,000 euros per year. This limit is reduced to 11,200 euros in the case of more than one payer or if earnings from work have not been subject to withholding tax, or if a fixed rate has been applied. In other words, for example, a foreign citizen receiving pensions which have not had tax deducted in Spain would be obliged to file a tax return if the sum received was more than 11,200 euros (even if tax had been deducted from the pension in the country of origin).
- No earnings have been received from movable capital (interest on bank accounts or deposits, share dividends, etc.) or capital gains of more than 1600 euros per year.
The tax likewise does not apply to those who, although engaged in economic activity, earned no more than 1000 euros during the year.
It does apply to those wishing to exercise their right to a tax deduction for the acquisition of their primary residence. In order to clarify what is understood as a primary residence, it should be pointed out that the Tax Office requires that it must be lived in for at least three years in order to be considered as such. For example, primary residence status would not apply to a home bought by a foreign citizen more than three years ago if that individual had not filed an income tax return for the past three years or had done so without declaring the property as the primary residence.
The main forms of income which would be covered by Personal Income Tax (IRPF) are:
- Earnings from work
- Earnings from economic activities
- Earnings on real estate capital
- Attribution of property revenue
- Earnings on movable capital
- Capital Gains and Losses
IRPF is a Progressive Tax, meaning that you pay more the more you earn, with a series of bands at different tax rates depending on the taxpayer's Taxable Base Sum, in other words, the sum total of all earnings once the corresponding adjustments and reductions have been applied.
For further information about the general rate we would recommend that you follow the link featured on the Tax Office website, or contact CYCLO directly to examine your individual case.
Non-Resident Income Tax (INR)
Individuals not resident in Spain are subject to Non-Resident Income Tax if they receive any of the following earnings in Spain:
- Revenue through economic activities
- Earnings from work
- Pensions and other similar provisions
- Remuneration of company directors and members of Boards of Directors, the General Assemblies fulfilling this function or representative bodies
- Earnings on movable capital
- Real estate revenue
- Revenue attributed to individual taxpayers registered as owners of urban real estate property not involved in economic activities
- Capital gains
The rate for this tax is 24%.
Property Transfer Tax and Stamp Duty (ITP/AJD)
The transfer of any type of asset or right is subject in Spain to Property Transfer Tax (ITP), wherever the transfer is not subject to Value Added Tax (IVA). For example, transfers of formerly occupied property, second-hand vehicle sales between private individuals, transfers between private individuals of rights to a property under construction, etc.
The rates in the Autonomous Region of Andalusia are, in general, 1% for corporate dealings (constitution, dissolution, capital increase, etc. of companies), 4% for the transfer of movable assets and 7% for real estate transfers.
Mention should meanwhile be made here of the existence of another tax, Stamp Duty (AJD), connected with the above, which is levied on notarial documents, mortgages, loans, the constitution of guarantees, etc. The rate is 1%.
The two taxes, ITP and AJD, are incompatible.
Property Tax payments have been abolished in Spain since 2008.
Estate, Gift and Succession Tax (ISD)
This tax establishes the payments to be made both by heirs inheriting the assets of the deceased and any donations which a living person may make to another. The tax will depend on the degree of relationship, the pre-existing assets of the beneficiary, the sum of the assets or rights received, etc.
Given the complexity of this tax no more detailed explanation can be given here, although we would suggest that you contact CYCLO to explain in your particular circumstances. Planning to ensure that heirs or beneficiaries are required to make the minimum possible tax payments is the joint task of the owner of the property and a sound adviser who will indicate the best way to optimise an inheritance or donation from the tax perspective.
Corporation Tax (IS)
This tax is paid on the profits made by Spanish commercial companies both in Spain and abroad. The general rate of tax is 30%, although there are certain companies which pay a higher rate, such as hydrocarbon operators (35%), or a lower rate, such as Small Scale Businesses (25%).
This rate is applied to the Taxable Base Sum, comprising the Accounting Result based on the Company's accounting records after application of the so-called off-balance-sheet adjustments established for the tax.
At CYCLO we are experts in this tax, with more than 13 years' experience advising our corporate clients as to how to optimise their tax bills by integrating our knowledge of accounting with our experience in the preparation of this specific tax.