Spanish fiscal residents, whether Spanish or non-Spanish, are generally taxed on their worldwide income, which means that careful advice and planning should take place before moving to Spain especially for wealthier individuals. It should also be noted that through a combination of the ongoing economic crisis in Spain and pressure from the EU to reform the economy the traditionally passive Tax Authority, the Agencia Española de Administración Tributaria (AEAT), is now adopting the more advanced collection methods of its northern European neighbours.
|Fiscal Resident||Non-Fiscal Resident|
|Income Tax||Worldwide 'Income'||Spanish 'income' only|
|CGT||Main Home +
Resident = 0
2nd Homes = 15%
|Directly Owned = 35%
Spanish company/Branch = 15%
Offshore Company = 0%
|Wealth Tax||Worldwide with deductions||Spanish assets no deductions unless owned by a company or branch|
|Heirship/Inheritance Taxes||Worldwide subject to Tax Treaties||Spanish assets only if directly owned|
Fiscal Residence: If an individual is in Spain for over 183 Days in any Fiscal Year (This correlates with the Calendar Year in Spain) he or she will be automatically deemed resident in Spain for tax purposes. There can also be an automatic inference of tax residence on the basis that family members live in Spain (i.e. that children are in school), that one has the intention to permanently reside in Spain or, if a business has been established in Spain that it is the centre of economic interest. Of course, in the case of the tax residence automatically being ascribed despite not having been in Spain for a period greater than 183 days it is possible to rebut the inference/presumption especially if protection is being sought under the UK or Irish Tax Treaties. For example, within the Tax Treaty signed between the UK and Spain on the 21st of November 1975 there are a number of Tie Breaker' clauses used to determine fiscal residence. Thus, where local rules infer tax liability in both countries then the fiscal residence will be deemed to exist in the country where there is a permanent home, if there is a permanent home available in both countries then fiscal residence will be deemed to exist in the country which can be shown to be the centre of vital economic interests. If even the last test is unclear then fiscal residence will be ascribed to the country of which one is a national.
Fiscal Identification Numbers: A Foreigners Identification Number or NIE (Numero de Identificacion de Extranjerosl or, or in some areas a Fiscal Identification Number or NIF (Numero de Identificacion Fiscal), is required by all individuals fiscally resident in Spain. In addition, such identification numbers are also required where non-fiscally resident foreigners directly own property in Spain. Where companies own the Spanish properties of non-fiscally resident individuals it is not necessary to obtain a personal identification number. However, the companies themselves will have their own identification number/code known as a CIF (Codigo de Identificacion Fiscal) or Financial Identification Code.
Income Tax: Individuals deemed to be fiscally resident in Spain are taxed on their worldwide income, individuals not fiscally resident in Spain will - subject to applicable double taxation treaties - be only subject to income tax on their Spanish income such as income derived from property rental. * It should be noted that Spanish income taxes are not incremental but employ what is known as a tiered "Claw Back" system which means that once one has reached a new threshold one will be subject to that rate on all income. The Tax Year runs from the 1st of January to the 31st of December with the Tax Return due date being 30th of June of the subsequent year. It is not possible to extend the tax return date in
2013 Income Tax Rates
Taxable Income Band € National Income Tax Rates
|0 – 17,707.19||24.75%|
|17,707.20 – 33,007.19||30%|
|33,007.20 – 53,407.19||40%|
|53,407.20 – 120,000.19||47%|
|120,000.20 – 175,000.19||49%|
|175,000.20 – 300,000.19||51%|
Fixed 24.75% Tax Rate for Expatriates
On the 10th of June 2005, the Spanish government approved Regulation 687/2005, which modified the Spanish personal income tax regime for expatriates. Under this an employee working in Spain (subject to certain criteria) may elect to be taxed under the non-resident taxpayer rules, namely:
- The individual must not have been a Spanish tax resident in the 10 years preceding their arrival in Spain;
- The assignment in Spain must be based on a Spanish local contract ;
- The employment must be physically executed in Spain and for the benefit of a Spanish company;
- The individual concerned must apply for this special regime within 6 months their arrival in Spain;
- The expected remuneration must not exceed €600,000.00 per year.
Capital Gains Tax (CGT)
Capital gains are calculated as the difference between the transfer price of an asset and its acquisition price. Acquisition prices of real estate are indexed by applying coefficients determined by the authorities. Capital gains are taxed at a rate of 21% on the first €5,999.99, and at a rate of 25% from €6,000 to €23,999.99 and at 27% on amounts over €24,000. Capital gains received by tax non-residents are taxed at a rate of 21% whilst for Spanish tax residents capital losses incurred on sales of assets may be offset against capital gains.
Inheritance & Gift Taxes
A Spanish fiscal individual is taxed on assets acquired by inheritance or gift, regardless of where the assets or rights where located. If the recipient is not fiscally resident in Spain, estate and gift tax applies only to assets located in Spain or to rights that may be executed in Spain. Estate tax must be paid by the inheritor whilst Gift Tax must be paid by the Donating Party. The taxable amount for estate tax purposes is determined by deducting certain amounts based on age, relationship, type of asset etc. These taxes may also vary depending on which region an individual resides.
Corporate Tax Rates
The Standard Corporate Tax Rate in Spain is 30% but there are dispensations where a company has a turnover of less than €5m per annum, in which case the first €300,000.00 of profit will only be taxed at 20% and the remaining profits (if any) at 25%. Where a company has a turnover of less than €10m per annum, the first €300,000.00 of profit will only be taxed at 25% and the remaining profits (if any) at the full 30% but certain qualifying criteria apply.
For more information on the Spanish Tax System please contact one of our tax planning consultants.