Taxation in Spain: A useful guide to the Spanish tax system, and what you need to know before starting a business in Spain.
Taxation in Spain can be a confusing topic, with several different taxes levied on different types of income and assets. In this article we post, we will provide an overview of the main types of taxation in Spain, including income tax, value-added tax (VAT), property tax, and inheritance taxation in Spain. We will also provide some tips on how to reduce your tax bill in Spain.
The new Spanish system, which will come into effect in 2019, will see a reduction in the number of taxes and a simplification of tax rates. This change has been made to encourage investment and make Spain more competitive internationally.
The new tax rates are as follows:
- Corporation tax: 15%
- Income tax: from 19% to 24%
- Value-added tax (VAT): 21%
Types of Taxation in Spain
There are three main types of taxation in Spain: income tax, value-added tax (VAT), and property tax.
Income taxation in Spain is paid by individuals and is calculated based on the amount of money they earn. The rate of income tax in Spain varies depending on the amount of money earned but is generally lower than in other European countries.
The rate of VAT in Spain is currently 21%, which is relatively high compared to other European countries.
Property taxation in Spain is paid by owners of property in Spain and is based on the value of the property. The rate of property tax in Spain varies depending on the region but is generally lower than in other European countries.
Deductions on taxation in Spain
There are several tax deductions available in Spain. The main one are the deductions on mortgage interest, deductions on rent payments, deductions on medical expense. The main attributes to entitle you to get these deduction upon your circumstances are listed below:
- Mortgage interest: Homeowners can deduct the interest they pay on their mortgages from their taxable income.
- Rent payments: Renters can deduct the rent they pay from their taxable income.
- Medical expenses: Medical expenses that exceed 7% of your taxable income can be deducted.
- Charity donations: Donations to charity can be deducted from your taxable income.
Inheritance and gift taxation in Spain
Inheritance and gift taxation in Spain is a complex system that can be difficult to understand. In this article, we will try to explain the basics of how it works. First, it is important to note that there are two types of inheritance and gift taxation in Spain: national and regional. The national tax is applied to all gifts and inheritances, regardless of where in Spain they take place. The regional tax, on the other hand, is only applied to gifts and inheritances that take place in certain regions of Spain.
Inheritance and gift taxation in Spain is levied on the recipient of the gift or inheritance. The rates of tax payable depend on the relationship of the recipient to the donor. If the recipient is a relative of the donor, then the tax rate is lower than if the recipient is not a relative.
The following gifts and inheritances are exempt from inheritance and gift tax in Spain:
- Gifts and inheritances between spouses or registered partners
- Gifts and inheritances between parents and children
- Gifts and inheritances between brothers and sisters
- Gifts and inheritances between grandparents and grandchildren
Value-added (VAT) taxation in Spain
In Spain, value-added tax (VAT) is known as Impuesto sobre el Valor Añadido (IVA). It is a tax that is charged on goods and services that are bought and sold. The rate of VAT in Spain is 21%. Businesses that sell taxable goods or services in Spain must charge 21% VAT on the sale price of those goods or services. They must also submit a VAT return to the Spanish tax authorities every quarter, reporting the total amount of VAT that they have collected.
Corporate income taxation in Spain
Corporate income tax in Spain is levied on the taxable income of companies’ resident in Spain. The standard rate of corporate income tax is 30%, although several reduced rates and exemptions are available. Spain imposes a withholding tax on dividends, interest, and royalties paid to non-resident companies. The withholding tax rates vary from 5% to 35%, depending on the type of payment and the recipient company’s country of residence.
Personal income taxation in Spain
Spanish personal income tax is levied on the income of individuals. The tax is imposed by the government of Spain and collected by the Spanish tax authorities. Residents of Spain are subject to Spanish personal income tax on their worldwide income, while non-residents are subject to Spanish personal income tax only on their Spanish-source income.
Spanish personal income tax rates vary depending on the amount of income earned. The highest marginal tax rate is 43%, which is applicable to income over €120,000. A reduced tax rate of 24% applies to income between €17,707 and €24,000. Income below €17,707 is exempt from taxation.
The Spanish government also levies a social security tax, which is payable by both employees and employers. The social security tax rate is currently set at 20.55%.
How to pay your taxes in Spain
There are a few different ways that you can go about paying your taxes in Spain. The most common way is to pay them directly to the Spanish tax authorities, but there are also a few other methods that you can use.
The first way to pay your taxes is to go to the website of the Agencia Estatal de Administración Tributaria (AEAT), which is the Spanish tax authority. There, you can find all the information that you need about paying your taxes. You can also pay your taxes online through this website. Another way to pay your taxes is to go to a bank and pay them there. You can also pay your taxes at a post office.
If you do not want to pay your taxes in person, you can also pay them by mail. Just make sure that you include all the necessary information, including your name, address, and tax identification number.
What to do if you don’t pay your Spanish taxes.
If you are a Spanish citizen and live in Spain, you are required to pay taxes on your income and assets. If you do not pay your Spanish taxes, you may face penalties and interest charges. There are a few ways to pay your Spanish taxes. You can pay them online, by mail, or in person at a tax office. You can also hire a tax preparer to help you file your taxes.
If you do not have the money to pay your taxes, you may be able to apply for a payment plan or an instalment agreement. You can also ask for a reduction or exemption from your taxes.
Taxation and expatriates in Spain
Spain imposes a series of taxes on its expatriate residents. These taxes are generally levied on income, assets, and capital gains. Income tax in Spain is levied at a flat rate of 24%. This is payable on your worldwide income, regardless of where you are resident. However, there are several deductions and allowances which can be claimed to reduce your taxable income.
In addition to income taxation in Spain, you will also be liable for Spanish social security contributions (“cotizaciones sociales”). The amount of social security contributions due will depend on your income and the type of work you are doing.
The current rates for social security contributions are as follows:
- Employees: 19.5% of gross salary
- Self-employed: 27.9% of taxable income
To wrap things up
Spain has a rather complex system of taxation, which can be bewildering for foreigners. In this article, we have introduced the main types of tax that are levied in Spain and offered some tips on how to minimize your tax liability. If you are living or doing business in Spain, it is essential to understand the tax system, get a tax advisor, and take appropriate steps to minimize your tax bill.
If you found this article helpful, please go to the rest of the website for more information about worldwide accounting certifications, and other financial topics in International Accounting, Audit, Taxation, Financial Planning, Cloud Software, and Financial Technologies (Fintech).
Read this article in: English – Dutch – French – German – Spanish