Income Tax in Spain: Am I liable to pay it?

Income Tax in Spain: Am I liable to pay it?

If you are living or working in Spain, you will be liable to pay Spanish taxes on your income and assets and will need to file a Spanish tax return.

Who is a resident?

The first question to answer is who is considered a resident for tax purposes. This consideration must not be confused with the legal status of resident, which I have explained in detail y my previous post “Living and working in Spain”.

Natural persons (private individuals) are considered resident in Spain for tax purposes if they remain in Spain for more than 183 days of the calendar year.

Anyone who does not find themselves in this situation will be considered a Non-Resident Income Tax payer (see our previous post “Non-Resident Income Tax: What is it and why do I have to pay it?”).

Who has to pay taxes in Spain?

As a Spanish resident, you will need to submit a Spanish tax return and pay Spanish Income Tax, at progressive scale rates, on your worldwide income if:

  • your annual income from one source of employment is over 22.000 €;
  • you are self-employed or run your own business;
  • you receive rental income of over 1.000 € a year;
  • you have capital gains and savings income of more than 1.600 € a year;
  • it is your first year declaring tax residency in Spain;

Among other examples.

You will have to declare all overseas assets worth more than 50.000 € (using Form 720). Your taxable income is the income left after deductions for social security contributions, pension, personal allowance, professional costs, etc.

Do I have to register for taxation in Spain?

You will need to register for tax in Spain with the Spanish Tax Authority, whether you are a resident or non-resident.

However, in recent years the police and the Foreign Office have begun registering anyone who passes through their system, which has unfortunately resulted in many foreigners being incorrectly registered. It is therefore very important to make sure what you are considered to be liable for by the Spanish Tax Office, as many have been registered as tax residents without their knowledge.

What are the rates?

Personal Income Tax is split between state and region and while the state has reduced taxes and simplified the income bands, this has not happened right across Spain. Each region sets its own tax bands and rate of income tax, so how much income tax you pay depends on where you live.

Income Tax rates





State tax


Regional tax


Total tax


0 12.450 9.5 9.5 19
12.450 20.200 12 12 24
20.200 35.200 15 15 30
35.200 60.000 18.5 18.5 37
60.000 + 22.5 22.5 45

If you are resident in Spain you will be subject to Spanish taxation on your worldwide income.

When do I have to pay?

The end of June is the deadline every year, by which time residents must have filed their annual Income Tax return for the previous year, and you can start submitting your tax returns from the beginning of April (exact dates vary each year).

Not submitting your tax return or submitting it incorrectly can result in expensive fines, so it is important that you seek professional advice and assistance for peace of mind.

Gabriella Mary Trussler Rowland
4408 Ilustre Colegio de Abogados de Almería

Inheritance Tax reform in Andalucia

Inheritance Tax reform in Andalucia

Finally, a much needed change to Inheritance Tax in Andalucia has arrived and will be coming into effect on the 1st January 2017. With Andalucia being one of the poorest regions of Spain it was becoming increasingly difficult to justify it being the region with the highest level of Inheritance Tax, forcing many inheritors to renounce their inheritance because of the unaffordable tax bill that came with it. Consequently, a restructuring of the tax had long been a matter of debate and negotiation, on a regional as well as a national scale.


Higher threshold

The main change brought about by the new Inheritance Tax reform is the increase of the general threshold from 175,000 € to 250,000 € for each individual beneficiary. This means that as long as the value of the part of the entire estate being inherited is under this amount, no Inheritance Tax will be owed by said heir.

In addition, to inheritances of between 250,000 € and 350,000 € a 200,000 € reduction is applied (e.g. if an inheritor’s share is valued in 270,000 € tax will only be due on 70,000 €). The effect of this change is to correct the leap that currently exists where, the moment the inheritance is even a euro over the threshold, Inheritance Tax is owed on the entire amount. This circumstance quite clearly placed inheritors at a comparative disadvantage, and was one of the main criticisms made of Inheritance Tax regulation in Andalucia.


Main residence

Another important change is the introduction of increased allowances for the inheritance of the deceased’s main residence by spouses, ascendants or descendants, or collateral relations over 65 years-old. Specifically, a 100 % allowance is applied when the value of the property is under 123,000 €, which reduces 1 % each time as the property value band increases, with the minimum allowance being 95 % when the property is valued at anywhere over 242,000 €.

Furthermore, as of the 1st January the beneficiary will now only be required to maintain ownership of the property for 3 years, as opposed to 10 years as it stands at the moment.


How is the tax rate calculated?

The above allowance, together with any other allowance the heir may be entitled to, is applied to the amount above the general threshold to determine the taxable amount.

Once we have the taxable amount the Inheritance Tax scale is applied, as well as a coefficient that depends on the relation to the deceased and the inheritor’s existing assets, to determine the tax rate that applies. All of these aspects remain unaltered by the tax reform.


Will this apply to UK residents post Brexit?

The regional allowances for Andalucia in the event that both the deceased and the beneficiary are EU residents. When this is not the case, only state allowances may be applied, which are far fewer.

Therefore, depending on the result of the negotiations between the UK and the EU, these regional allowances will continue to be applied to UK residents post Brexit, or not.


It is important that all of these circumstances and potential costs are taken into account when preparing your will, so as to organise your will and manage your wealth in a way that will be most beneficial to yourself and your inheritors. All of which makes seeking professional assistance in these matters essential, to avoid any unexpected and costly surprises when it’s too late.


Gabriella Mary Trussler Rowland
4408 Ilustre Colegio de Abogados de Almería