Some Spanish taxes that you need to know about
FIRST OF ALL, ARE YOU A TAX RESIDENT IN SPAIN?
If you own a property in Spain, you would usually be recognised as a Spanish tax resident if you have spent more than 183 days in Spain within a single calendar year. If you spend less than 183 days in a single calendar year you will be classed as a non-resident. There are different taxes to suit both of these situations:
Personal income tax.
You would need to pay Income tax if you conduct business activities in Spain, this could be self or otherwise employed work. Furthermore, you will need to this tax if you have economically dependent family members (spouse or children under 18 years) who live in Spain and not necessarily yourself. However, it is recommended that you seek professional advice with Spanish tax experts, such as our advisors at www.psiconsultants.es
PERSONAL INCOME TAX
Tax residents in Spain will be liable to pay tax on their income from other countries, personal allowances can be used. Although, a Spanish non-resident will only be required to pay a fixed tax rate along with no personal allowances or deductions on Spanish income, such as rental income from a Spanish property. Understanding whether you are a Spanish tax resident or non-resident can have serious repercussions will yield a great impact on the income tax you must pay. This is especially the case as the Spanish government is clamping down on non-resident tax payers who do not realise that they need to pay non-resident tax.
Income is divided into two main categories:
Income from general activities. [This is composed of a national tax and a regional tax]
Income from Savings.
Income from life assurance policies.
Income from annuities.
Gains made from the disposal or transfer of assets.
These individual income categories are totalled and then deductions and allowances can be made. It is worth investigating with your local townhall, province or regional government before making any assumption about the regional rate.
UK PENSIONS TAX INFORMATION
Being a full-time resident in Spain will require you to pay income tax on any income from any pensions (state or private pensions). Triple check that you are able to collect your UK state pension in Spain by visiting these site for more information:
It is imperative that you notify HMRC of your current living status and location. Arrange for you pension to be delivered to your Spanish bank account. You will also need to inform HMRC that you are a tax resident in Spain in order to confirm you as paying Spanish tax on your income. In order to qualify for this, you need to visit your local tax office and obtain then complete a Certificado de Residencia Fiscal NEN from, after which you will need to send to HMRC.
Most state pensions will continue being taxed in the UK, even though your tax status is in Spain. If you choose to take a lump sum of your pension, you may need to pay the Spanish savings income tax. This is a big decision that will need to think a lot about, and you should seek independent financial advice as to your best course of action.
WEALTH TAX IN SPAIN
Whether you are a resident or non-resident in Spain, if you hold significant worldwide wealth, this Wealth Tax is calculated against the declared worldwide assets held after a tax-free allowance of €700,000 is applied. Residents of Spain, and who reside primarily in Spain, are granted an additional €300,000 tax allowance. Depending on the total value of the worldwide assets, you may be charged different tax rates, especially in where you reside in Spain. Some provinces charge more than others. Like with some taxes, there are exceptions from the wealth tax. Consult with a financial advisor to understand how you can better structure your assets to be more tax efficient.
PERSONAL TAX ALLOWANCES IN SPAIN
Being a resident in Spain, as opposed to a non-resident, will provide you with a great benefit, personal allowances for your income tax in Spain. This includes income from savings or general income. However, the Spanish allowance threshold has been slowly decreasing in recent years. A basic personal allowance for everyone under the age of 65 is set at €5,550, or €6,700 from age 65 and €8,100 from age 75.
Some other tax allowances in Spain, include:
Married couple allowance.
It can be a complex and overwhelming experience dealing your overall tax allowance, although working with a Spanish tax expert will be much easier way in ensuring that your tax is calculated correctly.
At PSI Consultants, our experienced legal, fiscal & visa experts can help you acquire residency & nationality in Spain through property investment in Spain. We will guide you through the whole process of gaining Golden Visa residency in Spain and we offer a wide range of services related to the management and transmission of property ownership in our department dedicated to conveyancing, donations & inheritances. Also in our legal department we manage the obtaining of NIEs, Residences, Wills, private contracts, representation and personalized legal consultation on all related matters.
If you would like to learn more about our Spanish services in the Costa Blanca area, please feel free to contact us at any time when our office is open between 9am - 2:30-pm, Mondays to Fridays.
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