Tax reliefs in Spain: Read about some of the most useful tax reliefs and incentives in Spain that could save you money at the year end.
Spain offers a wide range of tax reliefs and incentives to both residents and non-residents. In this article, we will explore a variety of different tax breaks that are available, including those for income tax, wealth tax, gift and inheritance tax, and capital gains tax.
We will also look at how you can go about claiming these reliefs and the paperwork that is required.
Tax reliefs in Spain
Who can benefit from the tax reliefs in Spain?
The tax reliefs in Spain are designed for the benefit of a wide range of people, including:
- Residents in Spain
- Non-residents in Spain
- Businesses in Spain
Each group of people will benefit from different tax reliefs. For example, residents in Spain can benefit from the tax exemption on income from foreign sources, and the deduction of certain expenses related to their residency in Spain.
What are the tax reliefs in Spain for residents?
The residents can enjoy several tax reliefs in Spain, which are set out in article 45 of the Spanish Tax code. These reliefs are designed to help taxpayers reduce their taxable income and pay a lower amount of tax. Therefore, the Spanish residents are entitled to a few tax reliefs, which are set out below.
Income tax relief
Spanish residents are entitled to a percentage of their income tax back, depending on their marital status and the number of children they have. The amount of relief ranges from 8% to 14%.
Tax exemption on foreign income
Spanish residents are exempt from paying income tax on any foreign income they earn, if that income is not brought into Spain.
Capital gains tax reliefs in Spain
Spanish residents are exempt from capital gains tax on the sale of their main home, if they have lived there for at least two years out of the last five.
Other tax reliefs available to Spanish residents:
- The deduction for mortgage interest payments: This allows taxpayers to deduct the cost of mortgage interest payments from their taxable income.
- The deduction for social security payments: This allows taxpayers to deduct the cost of social security payments from their taxable income.
What are the tax reliefs in Spain for non-residents?
There are several tax reliefs available for non-residents in Spain, as follows:
- Income tax relief: Non-residents are entitled to a reduction in their income tax liability in Spain. This relief is based on the amount of time they spend in Spain each year.
- Capital gains tax relief: Non-residents are exempt from capital gains tax on the sale of Spanish property, providing they do not reside in Spain for more than 183 days in any given year. There is a sliding scale of tax rates, depending on how long the property has been owned. If the property has been owned for less than five years, the tax rate is 35%. If it has been owned for more than five years, the tax rate is 19%.
- Spanish inheritance and gift tax relief: Non-residents are exempt from inheritance and gift tax on assets located in Spain.
There is no estate or inheritance tax in Spain. However, there is a gift tax that applies to gifts made by residents and non-residents. The tax rates are as follows:
- Up to €6,000 – exempt.
- €6,001 to €30,000 – 4%
- €30,001 to €150,000 – 7%
- €150,001 to €500,000 – 11%
- €500,001 and above – 15%
What are the tax reliefs in Spain for businesses?
There are a few tax reliefs and incentives available for Spanish businesses as follows:
- Businesses can apply for a reduction in their corporate tax rate, which is currently 25%. This rate can be reduced to 20% or 15%, depending on the company’s size and sector.
- There are also several tax breaks available for businesses that invest in R&D. Companies can claim a deduction of up to 30% of their R&D spending, and there is no limit on the amount that can be claimed.
- Businesses that export goods or services can claim a deduction of up to 10% of their export income.
- Businesses that create new jobs can claim a tax credit of up to €5,000 per employee.
- Businesses that are registered for VAT can claim a refund of the VAT they have paid on certain business expenses. This refund is known as the “IVA reducido”.
How to apply for tax relief in Spain?
If you are a Spanish tax resident, you may be able to apply for tax relief on your worldwide income. This article explains how to do this, and what the conditions are.
To apply for tax relief in Spain, you must be a Spanish tax resident. This means you must have a permanent address in Spain, and you must be physically present in Spain for more than 183 days in a calendar year. You must also have paid Spanish taxes on your worldwide income in at least two of the last five years.
If you meet all these conditions, you can apply for tax relief by completing Form 720. This form is available from the Spanish tax authorities (Agencia Tributaria). The relief you can claim will depend on your circumstances. However, typically you can claim a deduction for your foreign income taxes, and a credit for any foreign taxes withheld from your income.
If you are a non-resident in Spain and have paid income tax in your home country on the same income, you may be able to get a refund of the Spanish income tax.
To apply for tax relief in Spain you must complete the Modelo 210 form and submit it to the Spanish tax authorities. The deadline for submitting the form is 31 December of the year following the year in which the income was earned. The amount of tax relief you are entitled to will depend on the amount of tax paid in your home country and the double taxation agreement between Spain and your country of residence.
If you are a non-resident in Spain and own a property, there are a few ways in which you can apply for the tax reliefs in Spain. The most common way to apply is through the application for the Non-Resident Income Tax (IRNR) which can be done through your local tax office.
There are a few other ways to apply for tax relief as a non-resident in Spain. You can read more about them on the Spanish government website.
What are the conditions to be eligible for the tax reliefs in Spain?
The tax reliefs in Spain are available to individuals and legal entities that meet certain conditions. To be eligible for the tax reliefs, individuals must be residents in Spain for tax purposes and must have paid income tax in at least 2 of the 5 years preceding the year for which the tax relief is claimed.
Legal entities must be registered in Spain for tax purposes and must have carried out economic activities in Spain in at least 2 of the 5 years preceding the year for which the tax relief is claimed. In addition, at least 50% of the members of the management or governing body of the legal entity must reside in Spain.
The following are some of the activities that are economic activities for the purposes of this relief:
- Manufacturing or trading goods or providing services.
- Owning or managing real estate in Spain
- Being a self-employed professional in Spain
- Receiving income from Spanish sources
To be eligible for the Spanish tax incentives and reliefs, you must also meet the following conditions:
- You must be carrying on a business activity in Spain.
- Your taxable income must be less than €300,000 per year.
- Your business must be registered with the Spanish tax authorities.
- You must file an annual return with the Spanish tax authorities.
The following are the available tax reliefs in Spain:
- The reduced rate of corporate tax is 25%
- The reduced rate of value-added tax (VAT) is 10%
- There is a flat rate of income tax of 24% for self-employed individuals.
- There is a deduction of up to €10,000 per year for business expenses.
- There is a deduction of up to €4,000 per year for mortgage interest payments.
- There is a deduction of up to €1,500 per year for contributions to private pension plans.
What is the deadline to apply for the tax reliefs in Spain?
The deadline to apply for the tax reliefs in Spain is December 31st of the year following the one in which the tax relief was granted. For example, if you were granted a tax relief in 2017, you would have to apply by December 31st, 2018.
If you are a new resident in Spain, you must apply for tax reliefs within six months of arriving in the country.
What are the benefits of tax reliefs in Spain?
Spain is a great place to do business, and one of the reasons is the tax relief that is available to companies. There are a few different benefits that come with tax reliefs in Spain, and below are some of the most important ones.
Tax relief makes it easier for businesses to invest in Spain. When businesses know they will be able to get a tax break on their investments, it makes them more likely to invest in Spain. This is because they know that they will be able to recover some of their investment costs through the tax relief system.
The business incentives and tax reliefs in Spain helps to keep businesses in the country. When businesses know that they can get tax relief on their investments, it makes them more likely to stay in Spain. This is because they know that they will be able to recover some of their investment costs through the tax relief system.
Tax relief encourages businesses to expand their operations in Spain.
When businesses know that they can get a tax break on their investments, it makes them more likely to expand their operations in Spain. This is because they know that they will be able to recover some of their investment costs through the tax relief system.
Tax relief helps businesses to be more competitive in Spain. When businesses know that they can get a tax break on their investments, it makes them more likely to be willing to move, invest, stay and expand the operations in Spain. This makes it easier for businesses to compete, and it also helps to create new jobs, and boost the economy.
In this article, we have introduced you to some of the most common tax reliefs and how to claim them. Keep in mind that these are just guidelines, and you should always consult with a tax specialist to find out exactly how you can benefit from tax reliefs in Spain.
If you found this article helpful, please go to the rest of the website for more about the general accounting standards in Spain, some of the tax reliefs in Spain, the company audit requirements and audit exemptions, understanding the Spanish tax system, or more accounting and financial topics in International Accounting, Audit, Taxation, Accounting Software, Cloud Accounting and Accounting Automation.