Tax Refund in Spain for Business Owners, Workers and Tourists
Keeping your taxes in order can be tricky enough without having to worry about income in multiple countries with forms in foreign languages and possibly different currencies. Particularly if you own a business, having a lawyer to help understand your tax refund in Spain is essential. To get you on your way, though, this article offers a brief overview of how Spain’s tax refunds work.
Tax return in Spanish
Your typical annual tax return in Spanish is called “declaración de impuestos” or “declaración de la renta”. Who needs to file a Spanish tax return? In general, nonresidents must declare the income earned in Spain, while residents must declare their worldwide income. Note that you are considered a Spanish resident for tax purposes if you spend more than 183 days a year in the country or have most of your “compelling interests” here (e.g. a business, your family, etc.).
For those who are tax resident in Spain, there are five main conditions which obligate you to file a Spanish tax return:
- Self-employed or business owner
- Worker earning more than €22,000 a year from a single source or more than €11,200 if you have more than one source of income
- Capital gains income of more than €1600 a year
- Rental income of more than €1000 a year
- Your first year declaring tax residency in Spain
Spanish residents are also entitled to any exemptions and deductions that they qualify for and pay on a progressive scale with different tax rates depending on their income, unlike nonresidents who pay a flat rate and cannot claim any sort of deduction.
Tax refund in Spain on earned income
For residents paying personal income tax (Impuesto de Renta sobre las Personas Físicas), earned income is taxed at rates ranging from 19% to 45% depending on the income earned that tax year, which is calculated from January 1 to December 31. You can take a €5500 personal exemption, plus additional exemptions if you are married filing jointly, have dependent children or parents, or are disabled. Corporate tax is currently set at 25% in general, although this may vary as a function of the type of business.
Note that this is standard income tax, and social security is a separate thing taken out of your income, usually automatically for employees or paid quarterly if self-employed. Later, when you file your tax return in April-June of the following year, if you overpaid, you will be given a tax refund in Spain.
How tourists can get a VAT tax refund in Spain
If you live outside the EU and are doing a substantial amount of shopping in Spain, and you intend to bring those goods back home with you, you may be able to get a VAT tax refund in Spain (or whatever EU country you are leaving from if you are visiting more than one). Many shops in tourist areas participate in the VAT refund program, but it is a lengthy process that may or may not be worth the time and effort.
The usual way is to request a VAT refund form from the shop at checkout, where the shop assistant will fill it out and stamp it (make sure you have your passport while shopping). Then, before going through security in your last EU stop, track down the customs office. If you are able to find the right people, you will present the forms and the purchased goods to customs, and they will stamp your form so that you can turn it in at an airport refund kiosk (e.g. Global Blue, Premier Tax Free) or mail it into a different refund service to save the service fee these kiosks charge. Be warned that, even if you do everything perfectly, there is no guarantee you will get your VAT tax refund in Spain, but you can save some money if you spent a good deal shopping and luck is on your side.