Income Tax Spain for Expats

22 October 2018

In this post, we have a brief guide to income tax in Spain for expats, both resident and nonresident in Spain. 

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Whether you come to Spain to retire, work, start operating your own business, or just to buy real estate for rental income, paying income tax is something that you may have to plan for. What you are taxed on and what your income tax rate in Spain is will be determined by your residency status, the type of income and the amount of income. In this post, we have a brief guide to income tax in Spain for expats, both resident and nonresident in Spain. For more detailed information tailored to your particular circumstances, you may wish to consult an attorney.

Income tax in Spain for expats: residency for tax purposes

Both residents and nonresidents are responsible for paying taxes on the money they earn, but there are different rules for each. But first, you need to determine whether you are considered “resident for tax purposes” in Spain. If you spend at least 183 calendar days in Spain per year, or if your “vital interests” (e.g. businesses, family, etc.) are here, you are considered to be a resident when it comes to income tax. Practically speaking, that means that you will be required to pay income tax in Spain on all of your income, regardless of the country in which you earned it. Nonresidents, on the other hand, must only pay Spanish income tax on the money they earn in Spain.

Residents’ worldwide income is taxed on a progressive scale ranging from about 19% to 45%, depending on the amount. Nonresidents pay a flat rate on their Spanish income, 19% for EU or EEA citizens and 24% for everyone else. These rates are applied to taxable income after any applicable deductions and allowances. For example, income tax in Spain is subject to a personal allowance of about €5500 to €8000 depending on the person’s age, as well as additional allowances for children living with you who are younger than 25, and sometimes for a parent or grandparent.

Corporate income tax and rental income tax in Spain

The corporate income tax rate in Spain is currently set at 25%, which is relevant if you are running a company in this country. Just like with natural persons, companies’ taxable income depends on whether they are considered a resident company or a non-resident permanent establishment, with resident companies being subject to Spain’s corporate income tax on all of their worldwide income. New companies may be eligible for reduced corporate tax rates in their first years of operation.

If you own a property here and are earning rental income on it, the amount of rental income tax you pay in Spain will, again, depend on your residency status. Rental income is taxed at a rate of 19% if the landlord is a resident of an EU or EEA country, and certain deductions for maintenance and administrative expenses are also available. For landlords who are residents of a country that is not a member of the EU or EEA, the rental income tax rate is 24%, and these tax deductions are not accessible.