How to Determine Your Tax Residency in Spain Understanding Spanish tax residency status is crucial for avoiding penalties and complying with tax laws. Being a Spanish tax resident has essential benefits, and our comprehensive guide provides valuable guidance. As a tax resident in Spain, you can keep more money to yourself. What are the basics of Spanish tax residency? As a landlord and ex-pat with property in Spain, I understand that the subject of Spanish tax residency can seem daunting and confusing. The first element to consider is the concept of tax residency in Spain. This has nothing to do with residence in Spain for the purpose of foreigners or residence permits. Spanish tax residency is the condition according to the Spanish Tax Agency that a foreigner gains when living for a prolonged period of time during the year in Spain. This also includes if an individual has economic interests in the country. Being classed as a tax resident in Spain has important consequences. In many cases, you will pay less tax and lower percentages if you are a tax resident in Spain in comparison to being a non-resident. A person is considered a tax resident if they stay more than 183 days a year in Spain, if their core economic interests are directly or indirectly in Spain, or if their spouse or child lives habitually in Spain. Tax obligations are different depending on whether you are a resident for tax purposes in Spain or overseas. Taxpayers who are tax residents in Spain pay tax on their worldwide income. Taxpayers who are residents overseas are only taxed in Spain on the income considered to be obtained in Spanish territory. In both cases, taxation must take into account the provisions of any double taxation agreement that is in place. Visit here to read my article on the UK-Spanish Tax Treaty. Natural persons who are residents for tax purposes in Spain must pay personal income tax, called Impuesto sobre la Renta de las Personas Fisicas (IRPF). The Spanish tax year coincides with the calendar year. A natural resident is either a resident or non-resident for the whole tax year. Natural persons and entities who are not residents in Spain but who earn an income there must pay non-resident income tax, called Impuesto sobre la Renta de no Residentes (IRNR). It is critical to establish if you are a tax resident in Spain. Are you paying too much tax in Spain? I understand as an ex-pat living in Spain that you do not want to pay more tax than you need to. It is important to get the right advice and ensure that your Spanish tax residency accurately reflects your situation and financial needs. There is a specific type of proof that allows you to justify yourself before the Spanish Tax Agency and avoid being considered a resident for tax purposes. This will help you to avoid the payment of many taxes in Spain. Proof issued by your country of origin or country in which you have your main economic interest will highlight that you are a resident there. This will mean that you will not be taxed as a fiscal resident in Spain. This certificate works according to the agreement’s regulations between Spain and the third country. That is usually generated through a double taxation agreement or a tax treaty. It is valid only for one year, and that means the year in which it is requested. Most European countries have the same tax criteria as Spain. If you live in Spain for more than 183 days per year it is unlikely you will be granted a certificate. Certificates from EU countries or the USA are always accepted by the Spanish Tax Agency. Having a Spanish tax residency brings many economic benefits, and I am certainly paying less tax as a result of being a tax resident in Spain. Do I pay less tax as a Spanish tax resident? In the case of Spanish tax residents, the tax situation becomes an interesting one. Residents have to pay income tax in Spain on all income and revenues generated worldwide. This makes their total taxation in Spain higher, as this tax is levied on most of the activities, yields, and profits obtained by the individual. The exact percentage will depend on each particular case. It is a progressive tax rate, ranging from 17-47%. There are many exceptions that you can apply for, including the Beckham Law. Under this Law, if you have not resided in Spain for the last 10 years, you can pay a fixed rate of 24% on your income even if you are a Spanish tax resident. Foreigners and non-foreigners considered as non-residents in Spain must pay two main taxes: non-resident income tax and wealth tax. Because of the double taxation treaties, a non-resident in Spain usually has to pay income tax as a non-resident only in what refers to real estate properties. This does not take into account shares or money in the bank. If you have a property in Spain, you will have to pay this tax. There are two different scenarios to consider: If the property in Spain is rented, you will declare quarterly the income on the rent and pay 19% on it if you are from an EU member country and 24% if you are not. If the property in Spain is not rented and you use it when you come to Spain (it is usually empty) then you will not declare anything on a quarterly basis. The only tax liability you would have is on an annual basis. In both cases, you would file Form 210. If you are a non-resident you will also have to pay wealth tax on properties you own in Spain, as long as their purchase value is above 700,000 Euros. It is a progressive tax ranging from 0.2% to 2.5% depending on the specific value of the properties you own in Spain. If you have mortgaged the property with the purpose of buying it, you will be able to subtract the outstanding amount from the total value. It is paid annually by submitting Form 714. I highly recommend that you get the best advice when it comes to becoming a Spanish tax resident. If you are a UK landlord looking to invest in Spanish property, I advise you to read this article. What you should do next I am sure that if you are looking to become a Spanish tax resident, you want to ensure you pay the least amount of tax possible. I have been fortunate to be a tax resident in Spain and pay low taxes due to the team I have on hand to guide and advise me. If you want to take up Spanish tax residency and are unsure how to proceed, book some time here with my expert tax team. Getting the right advice now before you become a Spanish tax resident will save you money, time, and heartache in the future.
How to Determine Your Tax Residency in Spain Understanding Spanish tax residency status is crucial for avoiding penalties and complying with tax laws. Being a Spanish tax resident has essential benefits, and our comprehensive guide provides valuable guidance. As a tax resident in Spain, you can keep more money to yourself. What are the basics of Spanish tax residency? As a landlord and ex-pat with property in Spain, I understand that the subject of Spanish tax residency can seem daunting and confusing. The first element to consider is the concept of tax residency in Spain. This has nothing to do with residence in Spain for the purpose of foreigners or residence permits. Spanish tax residency is the condition according to the Spanish Tax Agency that a foreigner gains when living for a prolonged period of time during the year in Spain. This also includes if an individual has economic interests in the country. Being classed as a tax resident in Spain has important consequences. In many cases, you will pay less tax and lower percentages if you are a tax resident in Spain in comparison to being a non-resident. A person is considered a tax resident if they stay more than 183 days a year in Spain, if their core economic interests are directly or indirectly in Spain, or if their spouse or child lives habitually in Spain. Tax obligations are different depending on whether you are a resident for tax purposes in Spain or overseas. Taxpayers who are tax residents in Spain pay tax on their worldwide income. Taxpayers who are residents overseas are only taxed in Spain on the income considered to be obtained in Spanish territory. In both cases, taxation must take into account the provisions of any double taxation agreement that is in place. Visit here to read my article on the UK-Spanish Tax Treaty. Natural persons who are residents for tax purposes in Spain must pay personal income tax, called Impuesto sobre la Renta de las Personas Fisicas (IRPF). The Spanish tax year coincides with the calendar year. A natural resident is either a resident or non-resident for the whole tax year. Natural persons and entities who are not residents in Spain but who earn an income there must pay non-resident income tax, called Impuesto sobre la Renta de no Residentes (IRNR). It is critical to establish if you are a tax resident in Spain. Are you paying too much tax in Spain? I understand as an ex-pat living in Spain that you do not want to pay more tax than you need to. It is important to get the right advice and ensure that your Spanish tax residency accurately reflects your situation and financial needs. There is a specific type of proof that allows you to justify yourself before the Spanish Tax Agency and avoid being considered a resident for tax purposes. This will help you to avoid the payment of many taxes in Spain. Proof issued by your country of origin or country in which you have your main economic interest will highlight that you are a resident there. This will mean that you will not be taxed as a fiscal resident in Spain. This certificate works according to the agreement’s regulations between Spain and the third country. That is usually generated through a double taxation agreement or a tax treaty. It is valid only for one year, and that means the year in which it is requested. Most European countries have the same tax criteria as Spain. If you live in Spain for more than 183 days per year it is unlikely you will be granted a certificate. Certificates from EU countries or the USA are always accepted by the Spanish Tax Agency. Having a Spanish tax residency brings many economic benefits, and I am certainly paying less tax as a result of being a tax resident in Spain. Do I pay less tax as a Spanish tax resident? In the case of Spanish tax residents, the tax situation becomes an interesting one. Residents have to pay income tax in Spain on all income and revenues generated worldwide. This makes their total taxation in Spain higher, as this tax is levied on most of the activities, yields, and profits obtained by the individual. The exact percentage will depend on each particular case. It is a progressive tax rate, ranging from 17-47%. There are many exceptions that you can apply for, including the Beckham Law. Under this Law, if you have not resided in Spain for the last 10 years, you can pay a fixed rate of 24% on your income even if you are a Spanish tax resident. Foreigners and non-foreigners considered as non-residents in Spain must pay two main taxes: non-resident income tax and wealth tax. Because of the double taxation treaties, a non-resident in Spain usually has to pay income tax as a non-resident only in what refers to real estate properties. This does not take into account shares or money in the bank. If you have a property in Spain, you will have to pay this tax. There are two different scenarios to consider: If the property in Spain is rented, you will declare quarterly the income on the rent and pay 19% on it if you are from an EU member country and 24% if you are not. If the property in Spain is not rented and you use it when you come to Spain (it is usually empty) then you will not declare anything on a quarterly basis. The only tax liability you would have is on an annual basis. In both cases, you would file Form 210. If you are a non-resident you will also have to pay wealth tax on properties you own in Spain, as long as their purchase value is above 700,000 Euros. It is a progressive tax ranging from 0.2% to 2.5% depending on the specific value of the properties you own in Spain. If you have mortgaged the property with the purpose of buying it, you will be able to subtract the outstanding amount from the total value. It is paid annually by submitting Form 714. I highly recommend that you get the best advice when it comes to becoming a Spanish tax resident. If you are a UK landlord looking to invest in Spanish property, I advise you to read this article. What you should do next I am sure that if you are looking to become a Spanish tax resident, you want to ensure you pay the least amount of tax possible. I have been fortunate to be a tax resident in Spain and pay low taxes due to the team I have on hand to guide and advise me. If you want to take up Spanish tax residency and are unsure how to proceed, book some time here with my expert tax team. Getting the right advice now before you become a Spanish tax resident will save you money, time, and heartache in the future.
