Income tax

These notes are intended as a guideline to income tax in Spain and should not be used as a substitute for proper professional advice. Please contact us and we will be happy to assist you.

1.

Personal Allowances for Spanish income tax - mínimo personal

Personal allowance

Under 65 years old 5,550 Euros
65+ 6,700 Euros
75+ 8,100 Euros

Child allowance

First child 2,400 Euros
Second child 2,700 Euros
Third child 4,000 Euros
Each further child 4,500 Euros

Elderly relative living with family whose income is less than 8,000 Euros pa:

65+ 1,150 Euros
75+ 2,550 Euros

Maternity allowance (Reducción por cuidado de hijos)

2,800 Euros per annum per child under three years old.


Earnings related Personal Allowance (for employees)

For taxpayers with salaries of less than 14,450 Euros and other income less than 6,500 Euros, there are the following deductions:

Earnings not more than 11,250 3,700 Euros
Earnings 11,250 to 14,450 3,700 - 1.15625 x (Earnings - 11,250)
Earnings 14,450 + 0

In addition, there is also a general allowance of 2,000 Euros applicable independent of the income of the taxpayer.


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2.

Capital Gains and Losses - Ganancias y Pérdidas Patrimoniales

An indexation allowance is given for the sale of real estate, but not for other assets. The rate of taxation is the same as for savings income, as follows:

IVA returns
First 6,000 Euros: 19%
6,000 - 50,000 Euros: 21%
50,000 + Euros: 23%
Non-residents: 19%

There is no capital gain if all the proceeds of sale of the taxpayer's main residence are reinvested in a new main residence.

There is an optional rollover relief regime for capital gains made by business. This is similar to the company tax rollover regime. Capital gains on fixed assets are not taxed immediately as far as proceeds are reinvested in fixed assets of the same type. The deferred gain is taxed over the following seven years.


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3.

Self-employment income - Rendimientos de actividades empresariales y profesionales

Estimación directa normal

Under this regime, tax is calculated according to the standard accounting rules.


Estimación directa simplificada

Unde this regime, there is an extra allowance for "provisions and expenses of doubtful allowability". This is calculated as follows:
5% * (Total income - allowable expenses).

As this extra allowanace reduces the tax payable, this regime is recommended for autonomos. Anyone with net turnover in the previous year of less than 300,000 Euros is eligible.


Estimación objetiva

Under this regime, tax is based on a fixed rate according to nature of the business activity, adjusted by various coefficients. Anyone with gross turnover in the previous year of less than 450,000 Euros is eligible.


Loss Relief

Trading losses can be set off against income from other regular sources in the same year, and likewise in future years.


Reduction in taxable base for small sole trader businesses which maintain or create employment.

In such cases, there is a 20% reduction in taxable trading income. A business is defined as small if the turnover in the previous year was less than 5 million Euros and the business has between 1 and 24 employees.


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4.

Rental income - Rendimientos del Capital Inmobiliario

Deemed income for non-residents

The deemed rental income for urban real estate not rented out or used as a second residence is:

2% * cadastral Value (valor catastral);
1.1 % if the cadastral value was revised after 1st Jan 1994.

If the cadastral value can not be determined, then the value used is 50% of cost. In this case, the percentage applicable is 1.1%.

The resulting taxable amount is currently taxed at 19% for residents of EU countries, Iceland and Norway and 24% for others.


Actual rental income for non-residents

This is currently taxed at 19% for residents of EU countries, Iceland and Norway and 24% for others.


Deductible expenditure: for residents, and non-residents from EU countries

All rental expenditure is tax deductible including:

  • Mortgage interest;
  • Normal repairs and renewals;
  • Replacement of central heating, security doors etc;
  • 3% annual depreciation allowance on the higher of cost of property/ cadastral value (land not included).

(Note that any depreciation claimed reduces the cost base for calculation of capital gain on subsequent sale). Allowable expenditure can not exceed rental income (i.e. it is not possible to have negative net rental income in any tax year).


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5.

Savings Income - Rendimientos del Capital Mobiliario

Savings income includes interest on savings accounts and dividends received.

Residents and non-residents
First 6,000 Euros: 19%
6,000 - 50,000 Euros: 21%
50,000 + Euros: 23%
6.

Employment Income - Rendimientos del Trabajo Personal

Taxable income

This includes:

  • Wages and salaries;
  • Redundancy pay over the current taxable threshold;
  • Reimbursements over the current taxable threshold;
  • Employer contributions into the employee's pension scheme;
  • Benefits in Kind - Retribuciones en Especie.

Exempt Benefits in Kind

  • Shares in the company or other group company with a value not exceeding 12,000 Euros;
  • Subsidised canteen food to a maximum of 9 Euros per day;
  • Subsidised sports and social facilities;
  • Work accident and civil liability insurance paid by employer on behalf of employee;
  • Health insurance paid by the mployer up to 500 Euros per year;
  • Provision of education to the children of employees.

Valuation of taxable Benefits in Kind (Retribuciónes en Especie)


Provision of accommodation

10% of the cadastral value (5% if the cadastral value was revised after Jan 1994).


Provision of motor vehicle

  • Vehicle gifted to employee: Cost (including taxes) less Benefits in Kind previously assessed for use by the employee;
  • Vehicle provided temporarily to the employee: 20% of cost (including taxes) annually.

Beneficial loans

The taxable amount is the difference between the interest paid by the employee and the interest that would have been paid under assuming the official interest rate.


Deductible expenditure

  • Social Security contributions;
  • Membership of trade organisations.


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7.

Tax administration

The Spanish tax year is the same as the calendar year. The Spanish tax system is based on self-assessment.


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8.

Allowable expenditure

Pension contributions of up to 30% of work income are deductible for income tax purposes. The maximum allowed deduction against taxable income is 8,000 Euros for taxpayers income.


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9.

Tax Credits - Deducciónes en Cuota

  • Tax credits can not produce a refund;
  • Payments on account and tax withheld at source can produce a refund.

Payments to acquire or renovate main residence (Deducción Vivienda Habitual)


Home owners

This deduction was abolished completely for properties purchased from 1st January 2013 onwards. For properties purchased before 1st January 2013, the maximum allowable expenditure is 9,040 Euros and the tax relief is 15%. The following payments are allowable:

  • Original capital payment to purchase property;
  • Mortgage interest paid;
  • Deposit in cuenta vivienda.

Tenants

The tax credit previously available for amounts paid to rent ones main residence was abolished as of 1st January 2015.


Donations

  • 25% tax credit for donation of goods of cultural interest;
  • 10% for other donations to legally recognised entities.

The base for calculating the deduction can not exceed 10% of taxable income.


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10.

International Double Tax Relief - Deducción por Doble Imposición Internacional

This applies to income and gains taxed abroad. The relief given is the lower of the foreign tax suffered and the Spanish tax due (calculated at the average rate).


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