Accountancy and Tax Issues
Updated: Oct 20, 2022
Once you have set up your Autonomo correctly you then have responsibilities to adhere too,
The tax year in Spain corresponds to the calendar year, from January to December. In that sense, every self-employed worker must file quarterly tax returns, every 3 months. this means filing taxes on January, April, July, and October. Besides, the freelance must also do extra tax declarations once per year.
I can assist with just the declarations needed or if you prefer, a monthly accounting package in which you send me all your income and expense and let me sort out the rest!
See my other blog on Autonomo
If you are living and working in Spain, you are liable to pay income taxes in Spain on your income and assets and need to file a Spanish tax return. Whether you pay Spanish taxes on your worldwide income, or Spanish-based income only depends on your residency status.
Register to pay Spanish tax: residents and non-residents
You will need to register to pay tax in Spain with the Agencia Tributaria, the Spanish tax authority, whether you are a resident or non-resident. First, you’ll need your Foreigner’s Identity Card (NIE) number, which you can get through the local Foreigner’s Office (Oficina de Extranjeros) or the local polic station but you must make a CITA PREVIA online first and you will be able to see which offices are available in your area.
Fill out Modelo 30 to register your obligation to pay Spanish tax as a resident or non-resident for the first time, or to change your details
Spanish tax for residents
If you have been living in Spain for six months (183 days) or more of the calendar year (not necessarily consecutively) or you have your main vital interests in Spain (for example, your family or business is in Spain), then you are classed as a Spanish resident for tax purposes.
As a Spanish resident, you must submit a Spanish tax return and pay Spanish income tax on your worldwide income in the following cases:
your annual income from employment is more than €22,000;
you’re self-employed in Spain or run your own business;( see above)
you receive rental income of more than €1,000 a year;
you have capital gains and savings income of more than €1,600 a year;
it is your first year declaring tax residency in Spain.
Filing your Spanish tax return
Everyone has to file a Spanish tax return in the first year of tax residency. After the first year, you don’t have to file a Spanish tax return if your income from all sources is less than €8,000 and you have less than €1,600 of bank interest or investment income. The same applies if your rental income is less than €1,000 or you earn less than €22,000 as an employee, as your Spanish income tax will have been deducted by your employer.
To make a Spanish income tax declaration, see Modelo 100. The tax year in Spain runs from 1 January to 31 December. Eligible residents must file tax returns with the Agencia Tributaria between 6 April and 30 June of the year following the tax year. There are no extensions on filing tax returns in Spain.
You can find information on how to complete and submit your Spanish tax return, information of previous tax returns and payments made. To access this service, you need your digital identification certificate.In addition, you must declare all your assets abroad worth more than €50,000 (using Modelo 720, or Form 720). Your taxable income is the income left after deductions for contributions to social security in Spain, pension, personal allowance, and professional costs. Spanish tax rates are progressive.
Tax in Spain for non-residents
If you live in Spain for less than six months (183 days) in a calendar year, you are a non-resident and only pay taxes on the income from Spain. Taxes apply to your income at flat rates with no allowances or deductions. If you are a non-resident and own a property in Spain, whether or not you rent it out, you will need to submit a tax return and pay Spanish property taxes for non-residents (or imputed income tax on your property) as well as local Spanish property taxes.
The general flat income tax rate for non-residents is 24%, or 19% if you are a citizen of an EU/EEA state.
Other income is subject to Spanish non-resident taxes at the following rates:
Capital gains resulting from transferred assets are taxed at a rate of 19%.
Investment interest and dividends are taxed at 19%, although are typically lower through double taxation agreements. Interest tax is exempt for EU citizens.
Royalties are taxed at 24%.
Pensions are taxed at progressive rates, from 8% to 40%.
To apply to pay income tax as a non-resident of Spain, first obtain Modelo 149. Next, use the Modelo 150 form to make your income tax declaration. If you a non-resident property owner, you should make your tax declaration on Modelo 210.
Filing US taxes from Spain
Despite the fact that every US citizen and Green Card holder must file a tax return with the IRS even when living abroad, many expatriates still fail to do so. Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US; as a matter of fact, you do!
Special Spanish tax for foreigners working on assignment
There is a special tax regime for foreigners coming to work in Spain on an employment contract with a Spanish company. This is sometimes known as Beckham’s Law, as it was allegedly set up so that footballer David Beckham did not have to pay tax on his worldwide image rights when he joined Real Madrid in 2003. The Spanish government modified this tax regime for the 2021 tax year.
Employees on assignment in Spain pay a 24% tax rate on income up to €600,000. Under the new tax bill for 2021, the government has increased the tax rate on income that exceeds €600,000 to 47%. Additionally, posted employees now pay a 3% tax on income above €200,000 that is generated from dividends, interest, or capital gains.
If you are a Spanish tax resident (spending more than 183 days a year in Spain) and have not been resident in Spain in the last 10 years, you can apply to be taxed under this regime within six months of arriving in Spain. Consequently, you can reduce your taxation level for up to five years.
Spanish tax deductions and allowances
Resident taxpayers in Spain receive certain tax deductions. The basic personal allowance for everyone under the age of 65 is €5,550, or €6,700 from age 65, and €8,100 from age 75.
If you have children under 25 living with you, you can claim an additional allowance of:
€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.
There is an additional allowance of 2000 and regional allowances, so its not a one for all.
In general, you can claim tax deductions in Spain for:
payments into the Spanish social security system;
Spanish pension contributions;
the costs of buying and renovating your main home;
Beginning in January 2021, new tax reforms reduced taxpayers’ pension contributions for tax purposes to €2,000 from €8,000. However, this limit is €8,000, as long as the increase comes from company contributions. Additionally, the increase cannot exceed 30% of the sum of net income from employment and economic activities received by the individual in the tax year.
Tax in Spain for married couples
If you are married, either in a heterosexual or same-sex marriage, you can choose to be taxed separately or together. You should compare the Spanish tax rate you would pay as individuals to the tax you would pay as a couple before your final decision, as it is not always a better option. There is a married couple’s allowance (declaración conjunta) of €3,400 for the second taxpayer, in addition to a general allowance of €5,550 granted to the first taxpayer.
Spanish property tax
If you own a property in Spain and are living in it on 1 January in any given year, you must pay a local property tax or Impuesto sobre Bienes Inmuebles (IBI). The amount is the rental value multiplied by a tax rate set by the local authorities. This applies to non-residents and residents. There is also basura, a rubbish collection tax. Non-resident property owners may also need to pay imputed income tax at flat rates on potential rental income on Spanish property.
If you sell a property in Spain, you have to pay a property transfer tax, Impuesto Transmisiones Patrimoniales (ITP). When a property is sold, the local authority charges a tax on the increase in the value of the land, the plus valia.
Capital gains tax in Spain
Spain’s capital gains tax (the tax on profits from selling property or other investments) is as follows:
First €6,000: 19%
more than €200,000: 26%
If you bought a property before 1994, you may be liable to pay more tax than before as taper tax on capital gains tax has been abolished. You might be eligible for an exemption if you are over age 65 and selling your main home or if you are under 65 and selling your main home to buy another main home in Spain.
Spanish wealth tax
Wealth tax in Spain is payable on the value of your assets on 31 December each year. From the 2021 tax year, the government increased the highest tax band rate by 1% in autonomous communities that haven’t approved their own rates. This means that assets valued at more than €10 million can be taxed up to 3.5%, depending on the region.
As well as the €700,000 tax-free allowance, homeowners are allowed a further €300,000 against the value of their main residence.
Inheritance and gift tax in Spain
Since 2015, non-residents from within the EU/EEA have been treated the same as residents when it comes to inheritance and gift tax in Spain (also called succession tax). The rate is around 1–7% for all, depending on the region. Before the change, non-residents paid around 80% more than residents. The Spanish Supreme court ruled that non-residents who paid the higher rate in the past are entitled to a refund.
In 2017, some regions such as Andalucía updated their inheritance and gift tax policies. This resulted in many families not having to pay inheritance tax. Check your specific region’s laws for more information. You should seek specialist advice on these taxes as the Spanish tax system is complex.