HEALTHPLAN MAGAZINE

Do you live or work in Spain and are concerned about your obligations to file an income tax return?

Are you unsure of how to submit a personal income tax return in Spain or indeed whether you even need to?

If so, this guide is for you.

In the following article, you’ll find all you need to know including:-

• The tax residency rules in Spain
• Whether you need to file a Spanish tax return
• When you need to file your annual tax return
• The tax rates for 2024
• How to work out how much tax you may owe
• An easy-to-use income tax calculator for Spain
• What the Spanish tax allowances are for 2024
• When the tax year is in Spain
• The penalties for late payment
• A whole load more.

Read on and let’s find out more.

As they say, there are only two things that you can guarantee in life, one being death and the other being taxes. Sorry to say, if you live and work here in Spain, this also applies to you. Although we can't tell you when your time is up, we can offer you some simple advice and information on the tax system here in Spain.

If you speak some Spanish, filing taxes as well as many other bureaucratic tasks here in Spain will be 10 times easier. You could also ask other expats living in Spain how they go about filing their taxes or if it is all just a little bit too much for the old grey matter, then you could always pay a few euros and get an accountant to do it for you. There are many here in Spain who speak English and will no doubt be happy to assist.

Whether you will be filing your income tax return (IRPF - Impuesto de Renta Sobre las Personas Fisicas) yourself or whether you will be leaving it to an accountant, it's a good idea to become familiar with the process and at least get a rudimentary understanding of how things work.

How Do I Know If I Have to File a Tax Return in Spain?

The tax residency rules for Spain are quite clear. According to the tax authorities (Agencia Tributaria) if you are a permanent resident or if you spend more than 183 days of the year in Spain you will usually need to file a tax return although there are a few exceptions (see list below). If you work in Gibraltar and live in Spain or if your earnings are from income earned abroad, you will still need to do a tax return in Spain as it is based on your worldwide income.

In most cases, you will need to file a tax return if:

• You are employed and have an annual income of over €22,000
• You are self-employed or have your own business
• Your income from yearly dividends, interest, and capital gains exceeds €1,600
• You receive rental income of over €1,000 per year
• It is the first year that you are filing a tax return in Spain

When Is the Spanish Tax Year?

This is quite a simple one to answer. The tax year in Spain runs from the 1st of January to the 31st of December, unlike in the UK where it generally runs from the 6th of April to the 5th of April. So for example, income for 1st January to 31st December 2024 will be paid in arrears between April and June 2025.

When Do You Have to File a Return Each Year?

The filing of your tax return for those living in Spain for the year ending 2024 will need to be done between the 6th of April 2024 and the 30th of June 2025. These dates can vary slightly from year to year, but in general, you need to be filing your tax return between April and June for the previous year's income (January to December).

In previous years, the PADRE tax return software could be used to submit your tax return, but in 2016 a new system called 'RENTA WEB' was introduced by the Agencia Tributaria tax authorities. Renta Web is a secure part of the agency's website where you can directly create a draft tax return and then submit it once ready. This means that there is no longer a need to download extra software. The new system is also compatible with mobile devices and there is even an app you can download to your phone, which can be used to receive security codes to access the system.

Further information about RENTA WEB can be found here.

Note, if you are self-employed (Autonomo) you will also have to file a quarterly tax return and pay your national insurance each month. (See the self-employed section below)

When Must I Pay the Tax By?

Any tax that is due has to be paid by the end of June for the previous year's income. If you do not pay your taxes on time, yes you guessed it, you will receive a penalty fine!

It is also worth noting that any outstanding tax cannot be taken from you after 4 years. (5 years 3 months in real terms)

What Happens If You're Late Filing Your Tax Return in Spain?

All income tax returns have to be filed within a set period. You can still pay your taxes after the tax filing deadline has passed, however, you will be liable to pay a surcharge or ‘recargo’.

The surcharge penalty charge will be a percentage of any outstanding taxes due, with the percentage rate dependent on how late you are with payment. The current rates for 2024 are:-

• Up to 3 months - 5% of any tax due
• Between 3-6 months - 10%
• Between 6-12 months - 15%
• Over 12 months - 20% + Interest

If you forget to submit your tax return before the filing window and NO tax is due, the fine is €100 or €200 if the Agencia Tributaria has previously requested you to file a return.

Further penalty fines are possible and can be up to 150% of tax due, plus a fine and interest.

How Much Tax Will I Have to Pay?

This will depend of course on your level of income. Like in the UK and other countries, there are tax brackets and thresholds that need to be applied to any income.

Income Tax Calculator For Spain

You can use the following Spanish income tax calculator to find out how much you may owe.
https://salaryaftertax.com/es/salary-calculator

Income Tax Rates for 2024

€0 - €12,450 - 19.0%
€12,450 - €20,200 - 24.0%
€20,200 - €35,200 - 30.0%
€35,200 - €60,000 - 37.0%
€60,000 or more - 45.0%
€300,000 or more - 47.0%

Source: Europe Accountants

Spanish Tax Allowances

Note that there is a personal tax allowance/threshold of €5,550. This means that you do not pay tax of 19% on the first €5,550 of income.

There are also income tax thresholds for pensioners, the disabled and those with children. These are outlined below.

Individual and Pensioner Allowances

Individual - €5,550
65 years and over - €6,700
75 years and over - €8,100

Capital Gains Tax Rates for 2024

(Dividends up to €1,500 are tax-free)
€0 - €6,000 - 19%
€6,000 - €50,000 - 21%
€50,000 - €200,000 - 23%
Greater than €200,000 - 26%

Non-residents - 19%

Disability Allowance

Grade 33%-65% disability - €3000
Grade 33%-65% disability and third-party care required - €6,000
Grade 65%-100% disability - €12,000

Child Allowance (less than 25, living in and income less than €8,000)

First child - €2,400
Second child - €2,700
Third child - €4,000
Fourth & additional children - €4,500
Additional for a child under 3 - €2,800

Parental Allowance (mother or father living in with an income less than €8.000)

Over 65's - €1,150
Over 75's - €2,550

Tax On Property Rental Income

Tax on rental income in Spain is charged at a flat rate of 19% for those who reside in the EU, Norway and Iceland and 24% for those residing in all other countries.

Note that rental expenditures such as mortgage interest payments, I.B.I, utility bills and community fees are tax-deductible.

Company Tax 

For smaller companies (between 1 and 24 employees and turnover of fewer than 5 million Euros) the corporate tax rates for 2024 are 25%.

Newly formed companies enjoy a reduced rate of company tax of just 15% for the first two years of business.

Filing a Joint Tax Declaration - Declaración Conjunta

Spain like the UK and other countries also tries to encourage marriage and it is possible to declare a joint tax return, which is referred to as a Declaración Conjunta. This means that you are awarded a further allowance of €3,400 for a spouse which can be added to the thresholds listed above.

You do not have to submit a joint declaration as in some cases, if both partners work and have an income, it could be more tax-efficient to do two separate tax declarations. As a simple rule, if only one of you is working, it will be better to do a joint tax return.

How To Submit Your Spanish Tax Return

How To File An Electronic Tax Return Using Renta Web

Renta Web is used directly via the website so there is no requirement to download any additional software to file your return.

You can view the main Renta Web page here

https://sede.agenciatributaria.gob.es/Sede/Renta.html

To access the Renta Web system, you will need to first register within the new 'Cl@ave PIN' security system, which allows you to access your personal data securely online.

The two ways to register with the Cl@ve PIN system are

• Via the Agencia Tributaria page here
  
• In-person at one of the many regional Tax Agency offices.

The ‘Cl@ve’ is a four-digit code that you choose and the ‘PIN’ is a code that is sent to your mobile device.

This will then enable you to undertake specific tasks such as creating a draft return, making modifications, submitting your return or finding out the status of any possible tax returns that may be due.

The PIN, which is sent to your phone can be requested either via the Agencia Tributaria website or via the agency's official Android or IOS apps. Search for ‘ClavePin’ via either platform's app stores.

Once you have applied, you will receive your codes via post to your address. The code can then be used on the Agencia Tributaria website and several other government department sites.

Further details on the Cl@ve PIN system can be found here.

You may also register for a digital certificate from the FNMT. Read our guide to getting a digital certificate for Spain.

Note that if you are due any overpayment of tax, it will usually be credited within 1 month of submitting your return.

How Do I Get My Tax Refund?

All tax refunds are processed manually. The tax office has six months in which to pay out any refunds due from the closing date of the RENTA income tax campaign. So in 2024, that would be six months from the filing deadline date of June 30.

You can find out if you are due for a refund via the RENTA website. You will need your Cl@ve/Pin to do this. 

Self-Employed - Autonomo Quarterly Income Tax

In Spain, if you are self-employed or "Autonomo" you will need to file your tax returns quarterly. Any tax due is then taken automatically from your bank account during the middle of the following month.

At the end of the year, as stated above, you will also have to declare a yearly return which will also take into account things such as interest on bank accounts.

The self-employed also have to pay their social security payment (National Insurance), which is €288 per month.

As of 2024, the social security rate for the self-employed increased from 30% to 30.6% of the minimum contribution base. This rate currently ranges from €944.40 to €4,070.10.

This payment can be used as a business expense so is, therefore, tax-deductible.

In November 2016 the Spanish government announced big discounts for self-employed social security payments. This means that those who have not registered as self-employed in the past 5 years, will pay €50 per month for the first 12 months of self-employment.

You can find out more about current self-employment tax rates and social security payments by reading our page Registering For Self Employed Autonomo In Spain.

Declaring Foreign Assets

In early 2013, new laws were introduced to combat fraud and tax evasion. The new law 7/2012 or "Declaracion Informativa Sobre Bienes y Derechos Situados en el Extranjero", means that anyone living in Spain for more than 183 days per year, must disclose overseas assets of more than 50,000 Euros to the Spanish taxman.

The categories that must be declared are:-

• Real estate/property
• Bank accounts
• Stocks, shares, investments and life insurance policies

You only have to declare these assets once, unless the value of each asset rises by more than 20,000 Euros. If any of the assets do increase in value by more than 20,000 Euros, you will have to declare it and pay any potential capital gains tax.

The form that needs to be completed is tax form 720 or Modelo 720 as it is known in Spanish. This form can be completed online via the Agencia Tributaria website.

Fines for not disclosing overseas assets used to be severe with a minimum of 5,000 Euros. However, following a decision by the European Union’s Court of Justice (CJEU) on January 27 which ruled that the 720 legislation was “disproportionate” and restricted the free movement of capital within the EU, the fines have now been reduced considerably.

Fines now range between €150 - €200 which is more in line with fines levied for filing income taxes late or incorrectly.

Private Health Insurance for Expats

If you want the security of knowing that you and your loved ones are covered against any unforeseen circumstances in Spain, please consider one of our excellent value, low-cost Sanitas health insurance policies. All of our policies are in English and are underwritten by Bupa.

You can get a quick policy quote here - https://www.healthplanspain.com/sanitas/sanitas-health-plans.html

Photo credit: Tax Credits via photopin cc