Taxes in Spain
Warning relating to tax reassessment.
The Spanish tax authorities have found a creative way to bring in more tax.
This applies to the previously described “ownership tax” of 10%. In many cases the sale price of a property is less than the property’s actual value. Then additional tax will need to be paid.
When a property is sold for € 100,000, tax would be € 8,000. But if the tax authority assesses that the value is € 150,000, then the tax will be € 10,500. The authorities have four years to make this charge. However, they must first send a written confirmation to inform you of the additional tax, which gives the purchaser the time to appeal.
It is very important to make the appeal as in 95% of cases, the authorities will reverse the request. But if you do not advise them of the appeal or ignore the request then the chance is that the tax will need to be paid without delay.
The tax authorities in Spain are well aware of the enormous loss in taxes relating to rental income. Therefore it has been agreed with the electricity supply companies that they send control data regarding electricity consumption and also about who actually pays for the electricity. If there is another person paying the electricity bill, compared with the name stated on the deeds of the property, then it is clear that the property has been rented out, therefore the income needs to be declared and the relevant taxes need to be paid.
If you are a non tax resident in Spain then the tax on the profits of the letting is 24.75%
If you are resident you must declare the rental income in your annual tax return. If the property has been rented as a permanent residence, you need only declare 40% of the income, however if it is rented out as holiday accommodation then the entire amount needs to be declared. If the property has been rented out to persons under the age of 30 as permanent residence, then the income is completely tax-exempt.
Income tax in Spain in 2015
Most residents must complete a tax return, before the end of June each year. You pay tax retroactively for the previous year, the so-called income year. This means that this year, before the 25th of June, you will pay the income tax for the income of 2014.
But not all residents need to submit a tax return for. If you only have a pension of less than € 11,200 you don’t need to submit a tax return unless you have other income such as interest income or rental income. But we advise nonetheless to submit an annual tax declaration if only to prove that you are a tax resident in Spain.
You have to declare your worldwide income in the Spanish declaration as rental income, interest, capital gains from the sale of housing or other assets even though these are outside Spain. If you work in Spain then your income is declared according to the “certificado de retenciones”. It then also shows how much tax is withheld of your income each month and how you have paid to the Spanish social security system.
Self-employed (autonomos) pay their taxes every quarter, but must still submit an annual declaration to find out if they have paid too much or too little income tax during the year.
With the tax reform in 2015 the income tax allowance has been changed.
Income year 2014 compared to income year 2015
Personal deductions from € 5,151 to € 5,550
Over 65 from 918 € to € 1,150
Over 75 from 1 122 € to € 1,400
Disability Deduction from 2 316 € to € 3,000
Disability Deductions 65% from 7 038 € to € 9,000
Deduction when married couples presenting joint declaration from € 3,400 to € 3,400
Deductions for work-related expenses € 2000
Income year 2014 income year 2015
Up to € 17,707 24.75% up to € 12,450 20%
From € 17,707 to € 33,007 30% from € 12,450 to € 20,200 with 25%
From € 33,007 to € 53,407 40% from € 20,200 to € 35,200 31%
From € 53,407 to € 120,000 47% from € 35,200 to € 60,000 39%
From € 120,000 to € 175,000 49% Over € 60,000 47%
From € 175,000 to € 300,000 51%
Over € 300 000 52%
The actual calculation of your personal allowances can be rather complicated and it is wise to take the help of a tax advisor when making the declaration. The examples below can give a general idea of how the tax is calculated.
Examples: unmarried person, 76 year old, with an annual income of € 24,000 (consisting of three different pensions)
Tax Calculation for the income year 2015
Personal deductions: € 5,550
Over 75 years: € 1,400
Total deductions: € 6,950
Up to € 6950 = tax free
€ 5,500 is taxed at (20%) = € 1,100
€ 7,750 is taxed at (25%) = 1937 50 €
€ 3,800 is taxed at (31%) = € 1,178
Total to Pay = 4 € 215.50
To make your resident tax return
Tax representatives in Spain complete and presents the annual declarations for their customers. They provide information about what documentation they need to be able to do this and usually spend about an hour to prepare the declaration itself. They will make the calculation of the tax at the same time so that you at once get to know how much tax you have to pay. They will then also make the declaration to the tax authorities.