Spain and France Accountants blog

Am I a Spanish tax resident?

If you live in Spain for more than 183 days a year then you are classified as a tax resident here. Note that the number of days does not have to be consecutive, it is the total days stayed during the Spanish tax year, which is the 1st of January to the 31st of December.

If you also potentially hold tax residence in another country then you will be considered resident in Spain for tax purposes if your primary interests are in Spain, such as your professional and business activities, or if your spouse and/or children live in Spain.

How do I register for tax in Spain?

You are required to register as a taxpayer with the Agencia Tributaria (Spanish Tax Authority), this is required in order to file your very first resident tax return. To do this, you must have an NIE number. If you have a full residence card (TIE) then normally you will be registered for tax automatically and you do not need to take any further action. If you just have an NIE document then you can register for tax either online if possible in your case, or at the Tax Office in person by presenting the form Modelo 030. This form is also used whenever you need to inform Hacienda of any changes in your personal details.

Resident Tax Returns

Below is a summary of the forms you may need to file with the tax office as a Spanish resident:

Annual Income Tax Return – Modelo 100
Due by 30th june, or 25th June to pay tax by direct debit to your bank account

Personal income tax is Spain is known as Impuesto sobre la Renta de Personas Fisicas or IRPF. An annual declaration must be filed via the Form 100, also referred to as ‘La Renta’ to declare your Spanish and worldwide income. This means that any income you make from foreign assets, businesses, or savings has to be reported to the Spanish Tax Authorities.

The filing deadline to submit this form is at the end of June, and the online filing system usually opens at the beginning of April. It’s also worth noting that the taxpayer’s personal digital certificate is often required to file this return, because over the last couple of years the Tax Office’s new system has been having problems recognising the details on the taxpayer’s identification documents in order to register for online filing.

The tax rates are progressive ranging from 19% – 45%. More info can be found here.

Double taxation
To ensure that people do not pay double tax on their income, Spain has dual tax agreements with many countries. If you have already paid tax on the income earned in a country, depending on the type of income this amounts may be exempt from tax in Spain, or, the tax paid is deducted from the tax to pay in Spain on the same income. 

Wealth tax return, statement of worldwide assets – modelo 714
DUE BY 30TH JUNE, OR 25TH JUNE TO PAY TAX BY DIRECT DEBIT TO YOUR BANK ACCOUNT

Residents and non-residents of Spain who own any Spanish and foreign assets that exceed a certain net value are obliged to file this return. The tax is applied over an individual’s assets/acquired wealth, not on their income earned from the assets.

This specific tax varies per region or Comunidad Autónoma. Typically the tax applies to anyone who has acquired assets that have a net value of over 700,000 euros, though in some regions it is lower such as Catalonia and Valencia. In Madrid, there is currently an exemption from Wealth Tax.

If you think that Wealth Tax may apply to you this year, please let us know and we will send you further details. The filing deadlines are the same as for the Renta.

The scale varies from one region to the next – for instance in Andalusia it’s: 0.2% – 3.5%.

Beckham Law – A tax regime for expats – Modelo 151
Due by 25th June

The “Beckham Law” is a special regime that can be used by expats to reduce their taxes in Spain. Under this regime, individuals will be considered as a non-resident for tax purposes and will be liable for tax only on the income earned in Spain, not worldwide. They can also benefit from a lower tax rate of 24% (up to 600,000 Euros of annual salary) instead of the standard resident’s tax rate, which ranges between 19-45%.

To opt for this regime, you will need to be employed by a Spanish company and you must not have resided in Spain during the last 10 years.  Generally speaking, this regime is beneficial for those earning an annual salary above around 60,000 Euros. 

Declaration of Foreign Assets – Modelo 720
Due by 31st March

Tax residents are also obliged to report any foreign assets within the categories of deposits, investments and life assurance and property where the total amount is at least 50,000 euros. Although submission of this form is for informative purposes only, and not tax collection, Hacienda can charge extortionate fines if you fail to submit, file late, or declare incorrect information.

Find out more about the Modelo 720 by clicking here.

Self-employed?

If you’re self-employed, registered as an autónomo in Spain, your income tax will be paid on a quarterly basis by submitting a Modelo 130 However, you still need to include this income on your Modelo 100, which will calculate whether you have paid enough tax throughout the year.

Read more on autónomo tax obligations here.

We can help you

This blog post seeks to give a simple overview of what to expect when it comes to resident taxes in Spain, however, exact calculations will depend on your personal circumstances. If you require some assistance with your Resident tax returns, please email admin@europeaccountants.com or contact us here. We provide an English-speaking service online to prepare and submit all of the Spanish tax forms listed below:

– Modelo 030 – Registering for tax
– Modelo 100 – Annual Income tax declaration
– Modelo 151 –  Income Tax Return for individuals under the special regime 
– Modelo 714 – Wealth Tax
– Modelo 720 – Declaration of Foreign Assets
– Modelo 130 and Modelo 303 – quarterly income tax and VAT returns for autonomos/self-employed in Spain

You may decide to deregister as an autónomo/self-employed in Spain for various reasons, for example, if you are now employed by a company and taxed at source, or if you’re moving abroad, or if you no longer want to make social security contributions.

The process for deregistering as an autónomo/self-employed in Spain is relatively simple. As with the registration, there are two submissions required, the ‘baja en RETA’ (Social Security) and filing a Modelo 036/037 (tax) with Hacienda. Note that you must have a digital certificate if you are looking to do this online via the Agencia tributaria and Seguridad Social websites. Please feel free to contact us if you need our assistance.

As a Spanish resident, you are still obliged to submit an annual income tax return (IRPF/Modelo 100) and VAT return (Modelo 390) in the year following your last year as an autónomo. If you have any VAT credits on your account, you can also claim a refund by filing a Modelo 303 form for the final quarter of the year.

What happens if I want to reregister as an autónomo?

You can reregister again at any time, however, it’s worth noting that if you wish to do so within two years since you last registered, you will lose the right to ‘Tarifa Plana’ meaning that you cannot benefit from the reduced flat rate for newly self-employed individuals.

We offer an autónomo deregistration service to submit the relevant information with the Tesorería General de la Seguridad Social and Hacienda. Please email us at admin@europeaccountants.com for more details.

The Modelo 720 is a declaration form that must be submitted by all Spanish tax residents who own any foreign assets exceeding 50,000 euros. Although submission of this form is for informative purposes only, and not tax collection, Hacienda can charge extortionate fines if you fail to submit, file late, or declare incorrect information. Many of those who have moved to Spain are not even aware of this declaration and risk these massive penalties, therefore it is important to know if you meet the criteria and are obliged to file this form.

who is required to submit this return?

All Spanish tax residents who own assets located outside of Spain, that exceed over 50,000 euros in value are obliged to submit a Modelo 720. These assets may fall under any of the categories listed below:

1. Accounts in any kind of financial institution e.g. banks, building societies.
2. Investments/ rights of representation in foreign companies or other entities
3. Investments in foreign collective investment institutions (e.g. unit trusts).
4. Foreign life/ invalidity insurance;  income from foreign annuities
5. Property and rights to property.

Where assets are jointly held (e.g. with a spouse), a separate return must be submitted for each person and both must declare the full value of the asset and indicate their percentage holding in the asset.

How do I submit Modelo 720?

There is no option to submit the Modelo 720 form in person, therefore it must be submitted electronically on the Agencia Tributaria website.

All of your assets must be reported in Euros, so any investments that are valued in other currencies must be converted into Euros using the exchange rate as at 31st December of the filing year.

If you find the form too complex to complete yourself, we offer a service to prepare and submit the Modelo 720 to the Spanish tax office on your behalf. We would require the completion of a simple questionnaire to state the different assets owned and their value in Euros. For more guidance and information, please contact us.

When is the deadline to submit the Modelo 720?

You have three months, from 1st January to 31st March following the end of the year in which you are obliged to submit this return.

For the year 2020, the filing deadline is 31st March 2021.

How often do i need to submit the modelo 720?

If you have previously submitted this form, you only need to declare assets where the total value of assets in that class have increased by at least 20,000 Euros in value.

The Agencia Tributaria guidelines state the following:

After the initial return is presented, a new return must be filed in subsequent years when the total of any category of assets increases  (since the last filed declaration) by at least 20,000 Euros, either at 31^st December or during the last quarter of the year.

Although the guidelines are extremely uninformative on this issue, it would appear that only the categories of assets that are affected need to be resubmitted.

What are the penalty charges if I do not submit a Modelo 720 or if I miss the deadline?

Late, incorrect/incomplete, or non-submitted returns are taken very seriously and there are considerable fines being imposed by Hacienda, which can reach up to a hefty six-figures. The Agencia Tributaria FAQ’s imply that even the slightest error, even unintentional (e.g. in a bank account number) will be punished by a minimum fine of 10,000 Euros. The guidelines also mention “minimum” penalties of 30,000 Euros for non-disclosure.

European commission and Modelo 720 Fines

These unreasonably high penalties have been challenged by the European Commission in recent years, and they have prompted Spain to change its legislation. However, as revised laws have not yet been finalised, we strongly advise that you file the Modelo 720 by the deadline to avoid any issues.

If you require our assistance to file your Modelo 720, please do not hesitate to contact us and we will get back to you as soon as possible.

Depending on the number of assets that need to be declared, our standard charge for preparation and online filing of each declaration is between 100 and 230 Euros plus IVA.

When you sell your Spanish property as a non-resident, you may notice that you only receive 97% of the sale proceeds—this is because the buyer is required to withhold 3% of the sale price and pay this over to the Spanish tax office on your behalf. Whether you make a profit or not, the tax office will use this method to collect tax from from selling your property as a foreigner.

If you made little to no profit, you may be able to claim this money back, but you will only have four months from the date of sale to do this by submitting a final tax return (Form 210). This can be submitted in person at the local Tax Office here in Spain, or online through the Agencia Tributaria website.

The following documents are required to file the final return:

1. Copy of the Deeds (Escritura de Compraventa) for both the sale and purchase;
2. Proof of withholding tax which is Modelo 211 (this is important, as this document contains a key reference number ‘numero de justificante‘ which must be stated in your refund reclaim);
3. A schedule of the purchase and sales costs such as agency fees, Notary fees, and ITP
4. In the event that there will be a tax refund to claim, you would also need to provide a bank statement (or similar document) from your country of residence which shows the name of the account holder and IBAN.

A digital certificate is required from the Agencia Tributaria if you wish to file this return yourself and to obtain one, a visit to your local Tax office in Spain is required with documents to verify your identify.

Once your tax return has been submitted, the Spanish tax office may take quite a while to review your submission and pay any tax back—the average time for refund payment ranges between 12 and 18 months.

Looking to claim a tax refund on the sale of your property? Leave it with us! With our accountants’ digital certificate we can file the return and deal with any necessary subsequent communication with the Tax Office on your behalf. Our charge for this service is 250 Euros + VAT. Feel free to contact us if you have any queries and we will get back to you as soon as possible.

We have now entered the final quarter of 2020 and the end of the Brexit transition period is fast approaching. From the 1st of January 2021, the UK will no longer benefit from being an EU member state, and UK-resident owners of property in Spain will be affected with increased tax implications.

Continue reading “Brexit: changes in tax for non-resident property owners in Spain”