- Venetia House
ARE TAXES DUE AS A RESIDENT/NON RESIDENT
Fiscal "TAX" Responsibilities as a Resident.
Individuals are resident in Spain for tax purposes if they meet at least one of the following criteria:
Spend more than 183 days in Spain during a calendar year. In determining the period of stay, temporary absences are included in the count, except when the tax residence in another country can be proven, such as living in their home country and paying tax already, using Spain as their Holiday destination.
Special anti-avoidance rules are established for tax havens. Temporary visits to Spain to comply with contractual obligations under cultural and humanitarian collaboration agreements with the Spanish authorities which are not remunerated are not included when calculating the 183-day residence period.
Have Spain as their main base or centre of activities or economic interests. Living and or working in Spain, It is presumed, unless proven otherwise, that a taxpayer’s habitual place of residence is Spain when, on the basis of the foregoing criteria, the spouse (not legally separated) and underage dependent children permanently reside in Spain. Spanish PIT law contains specific anti-avoidance rules regarding this matter.
Persons who do not meet any of the foregoing criteria are not resident in Spain for tax purposes. In such cases, Spanish-source income and capital gains in Spain are subject to NRIT.
Under Spanish law, the concept of part-year resident does not exist. An individual is either resident or non-resident and is taxed as such for the entire tax year.
However, in certain situations, a person may be resident for tax purposes in two different countries. This could be the case, for instance, of expatriates working in Spain who are resident in both Spain and their home country. A person who is resident in another country may qualify for a relief or exemption of Spanish tax under DTTs between the home country and Spain.
In such situations, the relevant DTT should be consulted to determine the country where the person is resident
Most DTTs signed by Spain consider the following to be relevant when determining place of residence:
Personal and economic relations (centre of vital interests).
TAXPAYERS REQUIRED TO DECLARE (art. 96 Law)
In general, IRPF taxpayers are obliged to present and sign a declaration for this Tax, with the limits and conditions established by regulation.
However, taxpayers who obtain income exclusively from the following sources, in individual or joint taxation, do not have the obligation to declare:
Comprehensive income from work (including, among others, pensions and passive assets, as well as compensatory pensions and annuities for food) that do not exceed the following amounts:
22,000 euros per year if they come from a single payer. This same limit also applies when the work income comes from more than one payer, if the sum of the amounts received from the second and remaining payers, in order of amount, does not altogether exceed the amount of 1,500 euros per year. The limit will also be 22,000 euros, in the case of taxpayers whose only income from work consists of the passive benefits referred to in article 17.2.a) and the determination of the applicable withholding rate would have been made in accordance with the special procedure. established by law. For this, the pensioner with two or more payers must have requested the determination of the type of withholding through model 146.
12,000 euros per year in the following cases:
When they come from more than one payer (except for the exception provided in the previous point).
When receiving compensatory pensions from the spouse.
When annuities for alimony are received that are not exempt (annuities for alimony received from the parents by virtue of a court decision are exempt).
When the payer of work income is not obliged to withhold in accordance with the regulations (see art. 76 Rgl. IRPF).
When full income from work is received at a fixed rate of withholding of article 80.1. 3rd and 4th of the tax regulations.
Full income from movable capital (share dividends, interest on accounts, deposits or fixed-income securities, etc.) and capital gains (gains derived from redemption of shares in Investment Funds, prizes for participation in contests or games, etc.), subject to withholding or payment on account, with the joint limit of 1,600 euros per year.When the withholding base has not been determined based on the amount to be included in the tax base, the capital gain obtained from transfers or redemption of shares or participation in collective investment institutions may not be imputed as capital gain subject to withholding or income to account for the purposes of the exclusionary limits of the obligation to declare.
Imputed real estate income, full income from movable capital not subject to withholding derived from Treasury Bills and subsidies for the acquisition of officially protected or appraised price housing, with a joint limit of 1,000 euros per year.When the taxpayer had not been the owner of the properties that generated imputed real estate income during the entire year 2017 (for having acquired or transferred it in said year), the cadastral value (or, failing that, the acquisition value) will be prorated to these effects based on the number of days of the fiscal year during which the taxpayer has been the holder thereof.
Exception to the obligation to declare
In no case will taxpayers who exclusively obtain full income from work, capital or economic activities, as well as capital gains, be obliged to declare (except for the purposes of the following section), with the joint limit of 1,000 euros per year and property losses of less than 500 euros.
Obligation to declare if certain deductions or reductions are made
Taxpayers who are entitled to apply the following deductions or reductions are obliged to declare in any case, when they exercise such right:
Contributions to protected assets of people with disabilities, pension plans, insured pension plans or social security mutuals, corporate social security plans and dependency insurance that reduce the tax base.
Deduction for housing investment (transitory regime)
Deduction for international double taxation.
New for 2023
One consequence of the extension of the reduction for earned income is that the minimum tax rate for a single taxpayer without children rises from 14,000 euros to 15,000 euros . This is relevant and guarantees, for example, that a worker who today earns the SMI, set at 14,000 euros, will not pay personal income tax when the Government increases the Minimum Interprofessional Wage in 2023. It also means that a worker who today earns 14,500 euros and pays taxes for personal income tax will stop paying the tax.
In the case of an employee with two children who files the joint return, the minimum tax rate increases from 18,000 euros to 19,000 euros due to the increase in the reduction in work income.Obtaining other types of income:Taxpayers who receive any other type of income or that exceed the amounts or maximum limits indicated are obliged to declare in any case.
According to CaixaBank, in this way, a worker without descendants who earns 18,000 euros would pay 40% less tax and would save 746 euros per year. A pensioner over the age of 65 who receives a pension of 16,500 euros would save 47%, that is, a total of 689 euros, and a single-parent worker with two children and a salary of 18,500 euros would save 516 euros in tax.
¿What is classed as Income?
*Not including Lease Income or Business Income, see separate articles
For the purposes of PIT, all remunerations, regardless of their name or nature, whether they are in cash or in kind, generated directly or indirectly from personal work or from an employment or statutory relationship, and which are not business earnings, are employment income.
Amongst others, the following income is regarded as gross employment income:
Salaries or wages.
Remunerations in kind (e.g. schooling and rent-free housing).
Amounts paid to deputies, senators, councillors and the like for the performance of their work.
Remunerations of directors and members of boards of directors.
Income from literary, artistic, or scientific works when the trading rights for such works have been transferred.
Income generated from providing courses, conferences, seminars, etc.
Income from involvement in humanitarian or welfare activities organised by non-profit organisations.
Alimony received from an ex-spouse and non-exempt annuities for food.
PIT is levied on severance pays awarded for dismissals over the limit established in Spanish employment law. The part of the awarded severance pay under the limit that exceeds EUR 180,000 is also subject to and not exempt from PIT.
Employment income is included in the PIT general base and taxed at progressive tax rates, which vary depending on the autonomous community where the taxpayer is situated.
Withholdings and advance tax payments are payable on salaries and wages and on benefits.
Non-residents obtaining employment income in Spain are taxed at the general NRIT rate of 24%. For residents of other EU member states or EEA countries with which there is an effective exchange of tax information, the rate is 19%.
Pensions are taxed at special rates.
Dividends and other income generated from holding interests in companies are included in PIT savings income and taxed at a 19% tax rate up to the first EUR 6,000 of income, a 21% tax rate for the following EUR 6,000 to EUR 50,000 of income, a 23% tax rate for the following EUR 50,000 to EUR 200,000, and a 26% tax rate on any remaining income.
Dividend income obtained by Spanish non-resident persons without a PE is taxed by Spanish withholding tax (WHT) at the flat rate of 19% (DTTs normally establish lower rates).
Interest and other income generated from transferring a person’s own capital to third parties are included in PIT savings income and taxed at a 19% tax rate up to the first EUR 6,000 of income, a 21% tax rate for the following EUR 6,000 to EUR 50,000 of income, a 23% tax rate for the following EUR 50,000 to EUR 200,000, and a 26% tax rate on any remaining income.
As an exception, when capital transferred to a related company exceeds three times the latter company’s equity, the interest corresponding to the excess will be included in general taxable income and taxed at the progressive tax rates, which are different for each autonomous community
Interest income received by non-residents without a PE is taxed by Spanish WHT at a flat rate of 19%. An exemption is applicable for EU residents. DTTs normally establish lower rates.
The following incomes are specifically exempt from PIT (usually subject to certain limits on the amounts involved):
Certain literary, artistic and scientific awards.
Severance pay for dismissals, up to the limit established in Spanish employment law. The tax exemption is limited to EUR 180,000.
Social security benefits or benefits from any other authorities replacing the social security authorities due to total permanent incapacity for work or sever invalidity.
Child support received by a parent following a court judgement.
Employment income earned for work carried out abroad if this income is subject to an identical or similar tax to Spanish PIT, subject to certain limits and conditions
The following, amongst others, can be deducted from gross employment income for PIT purposes:
Social security contributions (employee contributions).
Mandatory contributions to mutual benefit societies, providing for widows/widowers and orphans upon the death of the participant.
Dues to unions and compulsory contributions to professional colleges, up to a maximum of EUR 500.
Legal defence expenses, up to a maximum of EUR 300.
'Other expenses' deduction of EUR 2,000. This deduction is higher for workers who accept a work post in another town/city or for disabled workers.
Most of the above does come clear on the Tax return modelo 100 La Renta
The Tax returns usually starts for Spain around the 5th April and lasts until the 30th June, i will put up reminders for when its due, remember its for the previous year after spending 183 days in Spain as a Resident
NON RESIDENT TAX RETURN, NON WORKERS
210 Tax Return This tax return is for non residents who have no permanent establishment in Spain (effectively non residents with no trading activity), but with other type of Spanish income such as imputed rental income or actual rental income.
If the Spanish property in question is owned by multiple owners separate returns must be submitted by each owner, as each owner is a separate taxpayer.
Imputed income of Spanish Property - Property for own use The Spanish tax authorities apply an imputed income for non residents owning a Spanish property for their personal use.
Imputed income is based on 1.1% of the “valor catastral” (cadastral value of the property) or 2% of the “valor catastral” if no re-valuation has taken place in the last 10 taxable periods.
This is due by the 31st December again for the previous year.
See my face book posts for updates.