The Personal Income Tax (Impuesto sobre la renta de las personas físicas / IRPF) is a direct tax levied on the income of individuals.
The individual’s income may derive either of a dependent work or obtained by means of self-employment: development of a business or professional activities.
The taxable income is determined as the difference between the income earned and the expenses that are deductible according with Spanish Law.
Following people must file income tax return in Spain:
- Individuals earning more than € 22,000.00 a year.
- If you changed of job within the same year and your last employer paid you more than 1,500 eur during the year.
The tax period coincides with the calendar year.
This tax is assessed differently for residents and non-residents in Spain.
Non-residents are liable for this tax on any income arising in Spain, such as a money deposit with a Spanish bank, a property in Spain, or income derived of any business in Spain.
Property owners are taxed on their property income. The tax base is the property catastral value (valor catastral), which can be found on any I.B.I receipt. Tax base rate is 24% of a 2% of the cadastral value.
Should you fail to pay this tax, you will be charged and penalized by the Spanish Tax Agency if you try to sell your property.
If you are a Spanish resident you will be taxed for your worldwide income. You may deduct your income tax paid in your home country.
Double tax treaties are in place to avoid double-taxation. When there is no treaty with your country of origin, you may deduct the foreign tax paid; foreign compensation may also be applied. Your Spanish Lawyer may calculate this amount for you.
Those non-residents living more than 183 days in Spain are also considered as residents for tax purposes, even if they have not obtained their residence permit.
Depending on the result of tax return, if the taxpayer must pay, tax declarations shall be filed from the 1st of May to the 20th of June. If the taxpayer is entitled to a tax refund, then this period will be extended up to the 30th of June.
Income tax returns must be filed before the Tax Office of the taxpayer’s address.
Taxpayers also have the possibility to file their tax return before the Spanish bank where they have an account; provided that they are entitled to tax refund or shall make any payment as a result of their tax declaration.
Certain deductible expenses, such as medicines, deductions for dependants, amounts paid for the purchase of a home or accounts opened for that purpose (“cuentas vivienda“) may be claimed in the annual tax returns.
Employers must provide employees with a certificate of taxes withheld (Certificado de Retenciones) so that employees are able to subtract them in order to calculate their tax obligation. Payments to the Spanish Social Security System can be deducted.