Income Tax in Spain – Declaración de la Renta

Every year the Spanish tax man doles out billions of euros in tax rebates. Average rebates work out at around 780 euros each, for low to medium income tax payers.

They can do this because they have already had your money.

Unlike in the UK, where the tax man sets allowances against income in advance, in Spain, most people have a straight percentage of their gross pay deducted from their pay packet or they pay tax quarterly on business income. Then, when the tax declarations go in the following year, allowances, similar to those in the UK, (such as married man’s allowance and tax relief on pension contributions), are added to the equation. It means most people, (usually around 80 per cent of taxpayers), get a rebate. The campaign to present and collate personal income tax returns, begins in at the end of April and concludes at the end of June

If you spend 183 or more days in a calendar year in Spain in general terms you must declare all the income you generated in the previous year (January 1 to December 31) between the end of April and the 30 June of the current year.

Income tax  known as Impuesto sobre la renta is an incremental tax – it increases as the income you generate increases.

Even if your personal income tax is deducted monthly by your Spanish employer, or you have paid self employed tax deductions every quarter, you still need to bring everything together on the annual return – sometimes you are entitled to a rebate!

In general terms you are not required to file a Tax Return in Spain if:

  • You only have one source of income, for example your salary from a single employer or pension provider, and that this income amounts to less than or is equal to 22,000 €
  • You have two or more sources of income but all income has tax deducted at source IN SPAIN and your income amounts to less than or is equal to 12,000€ .

However the above DOES NOT APPLY If you are registered as an entrepreneur or if you yourself carry out professional or commerical activity, (Autonomo) in this case you must make a return.

Equally you must make a return if you have for example a State pension and private pension regardless of amounts as these are NOT taxed at source in SPAIN (do not confuse this with double taxation in your initial year of living in Spain)

For foreign residents it may also be useful to make a nil return in order to keep-up your proof of fiscal residence status in Spain

 

What do you include?
  • Your salary you will need to declare what you earnt as well as the amount deducted by your employer as a monthly retention.
  • Pension income both state and private
  • Real Estate revenue (including income (rents) gained from property and also amounts recieved from selling a property).
  • Investment Capital (such as dividends, interest and capital gains from transfer of shares)
  • Income from economic activity (self employment)

As a Resident you should declare all of your income in Spain, even if some of it was generated, or originated, or is invested in other countries.