TAX INFORMATION FOR RESIDENTS IN SPAIN

1.- To assess whether you are resident in Spain or in UK.

2.- To gather the information and documents required to prepare your Spanish Income Tax Return.

3.- Resident Tax Calendar.

4.- Who is obliged to provide the Spanish Income Tax return.

5.- Menu of Sources of Income.

6.- General Tariff.

1.- To assess whether you are resident in Spain or in UK.

When you are deemed to be resident for tax purposes in Spain and in the UK, Article 4 of the Double Taxation Agreement between Spain and UK indicates where you should be considered to be resident.

(1) For the purposes of this Convention, the term `resident of a Contracting State` means, subject to the provisions of paragraphs (2) and (3) of this Article any person who, under the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature; the term does not include any individual who is liable to tax in that Contracting State only if he derives income from sources therein. The terms `resident of the United Kingdom` and `resident of Spain` shall be construed accordingly.
(2) Where by reason of the provisions of paragraph (1) of this Article an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules:
(a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closer (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting state of which he is a national;
(d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
(3) Where by reason of the provisions of paragraph (1) of this Article a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.

 

2.- To gather the information and documents required to prepare your Spanish Income Tax Return.

If it is the first time you require our services to prepare your Income Tax return, we attach the list of documents you should bring with you. Many of them may not be applicable in your case.

1.- Photocopy of your NIE/Residence Card and passport.

2.- Tax information provided by the Spanish Tax Department.

3.- Draft of Income Tax return (if received from the Tax Department)

4.- Certificate of retentions made on salary.

5.- Certificate or information on retentions on pensions.

6.- Information from your bank of interests and capital.

7.- Information of payments made into a special account for the purchase of a home.

8.- Information of mortgage payments of your home.

9.- Information of rentals of houses, premises, etc. and expenses incurred from these.

10.- Certificate of retentions on account of Income Tax from rentals.

11.- Deeds of property/ies.

12.- Information about shares, public debt or other assets, such as investment funds.

13.- Information of company shares.

14.- Certificate of life insurance.

15.- Disability information.

16.- Pension plan information.

17.- Information about donations to charities.

 

3.- Resident Tax Calendar.

The period to declare and eventually pay Income Tax in Spain is from the 1^st of May to the end of June. Notwithstanding, the software to prepare the Income Tax returns is available from June.

You should contact us at the beginning of May providing us with the above detailed information (from 1^st of January to 31^st of December of the previous year). We will check that information and will provide you with an appointment to show you the Income Tax return and then sign it.

 

4.- Who is obliged to provide the Spanish Income Tax return.

The provided information is just a short description of the common cases where it is  not necessary to declare Income Tax in Spain. This does not substitute the advice for each individual.

As a general rule everyone has a duty to present the Income Tax return, for income from the 31^st of January to the 31^st of December.

 

The exceptions to the rule (those who are not obliged to declare Income Tax) are:

 

- Those who obtain a global yearly income of no more than 1000 Euros, regardless of the nature of the income.

 

- Those who have losses in their Capital Gains of 500 Euros or more.

 

- Those who exclusively receive one or more of the following Incomes:

 

a)      Salaries or pensions, with the following limits:

1.- As a general rule those who receive up to 22.000 Euros from only one payer.

 

2.- Those who receive up to 22.000 Euros from more than one payer providing that they also comply with the circumstances below:

-         The amount of the income received jointly by the second and further payers does not exceed 1500 Euros.

-         That the sole income received is the described in Article 17.2.a of Law 35/2006 and according to the special regulations there has been a retention at source. (those incomes from Social Security pensions, Government, disability, retirement, pension schemes, amongst others).

 

3.- Those who receive up to 10.000 Euros when any of the following circumstances arise:

-         When it proceeds from more than one payer and the addition of the second and further pensions/salaries are together over 1.500 Euros.

-         The income has the nature of divorce maintenance.

-         The payer is not obliged to retain according to the regulations.

-         When the income is subject to a fixed rate of retention (for example; company directors).

 

b)      Net Returns of movable assets and Capital Gains, both subject to retention, with a limit for both of 1.600 Euros. 

c)      Deemed Income provided from tenancy of second home; returns from movable assets without retentions (treasury debts); and subsidiaries to buy an officially protected house, with the limit of 1.000 Euros.

 

Apart from the above exclusions, there is an obligation to declare an Income Tax return those tax payers with a right to deductions from:

-         Investment in special account for the purchase of a home-

-         International Double Taxation.

-         Contributions to disabled persons individual assets.

-         Pension plans.

-         Insured pension plans and others.

-    Dependency insurance.

5.- MENU OF SOURCES OF INCOME

a) The sources of Income Taxable at a progressive rate.

b) The sources of Income Taxable at a flat rate of 18%.

GROSS BASE

a) What are the sources of income taxable at a progressive rate?

1) Salaries, pensions, and assimilated sources.

- This source when produced in over one year may have a 40% reduction.

- This source of income admits some deductions as expenses.

2) Returns from property and rents.

3) Interest from loans paid by companies vinculated with the interest received.

4) Returns from business activities.

5) Capital Gains generated where there is no transmission of assets.

6) Presumption of income derived from immovables other than home, excluded land.

7) Tax transparency for returns and profits of partnerships and other assimilated where the tax payer is involved.

8) Tax transparency for non residents in Spain, companies or schemes where the tax payer is vinculated to reduce the tax in Spain.

9) Image rights.

10) Collective Investment Institutions.

b) What are the sources of income taxable at a flat rate of 18%?

1) Capital Gains generated from transmission of assets.

2) Income from Capital (Art. 25).

 

 

Those obtained as result of own assets , own shares  or own participation in  any type of entity:

 

      -           Dividends, Assistance Premiums, Profit Sharing.

-          Return on assets of any type authorized to participate in an entitys’ profits, with the exception of the issue of some shares.

-          Returns derived from the use or benefit of stocks or shares that represent the participation in shareholders’ equity of an entity.

-          Any other utility derived from an entity by the condition of partner.

-          The distribution of the stock premium of shares or benefits.

 

 

2.- Those obtained by the transfer of equities to third parties:

 

-          Returns derived from any instrument/draft of giro or credit.

-          Returns derived from accounts in financial institutions.

-          Income derived from transactions of temporary transfer of financial assets with a repurchase agreement.

-          Income settled by a finance company for the transmission, transfer or transfer of a credit.

 

 

3.- Those derived from operations of capitalization and from life/disability insurance contracts and from income derived from savings deposits:

 

-          a) Returns derived from operations of capitalization and from life/disability insurance contracts (except those that are taxed as earned income):

 

1º. Pure endowment/differ capital: earning = equity – the amount of the paid premiums.

 

2º. Immediate life annuities.

 

- Not acquired by inheritance or legacy: the income is the result of applying to each annuity a percentage according to the age of the person who lives on the investment income plus profitability accrued up to the setting up of the income.

 

- Acquired by inheritance or legacy: the income is, exclusively, the result of applying to each annuity a percentage according to the age of the person who lives on the investment income.

 

  

      3º. Immediate Temporary annuities:

 

- Not acquired by inheritance or legacy: the income is the result of applying to each annuity certain percentages  plus profitability accrued up to the setting up of the income.

 

- Acquired by inheritance or legacy: the income is, exclusively, the result of applying to each annuity the percentages of the Income Tax Law.

 

 

      4º. Income derived from retirement insurances (life) or disability (different to those in Art. 17.2.a) in those that there is no mobilization of provisions of the insurance contract:

 

- Not acquired by inheritance or legacy: they will form part of the Gross Tax Base (18%) until the moment that they exceed the paid premiums (they must have been signed two years prior to retirement).

 

- Acquired by inheritance or legacy: they will form part of the Gross Tax Base (18%) when they exceed the current actuarial value of the income at their constitution (they must have been signed two years prior to retirement).

 

NET BASE

What are the tax reductions?

1.      Pension plans and other expenses for pension schemes.

2.      Insurance for covering risk of disability.

3.      Payments made for schemes in benefit of disabled persons.

4.      Payments on behalf of exposed by a judicial decision.

FREE ALLOWANCE REDUCTION

- Generally 5050 Euros.

- For tax payers over 65 years of 5950 Euros.

- For tax payers over 75 years of 6150 Euros.

- Other amounts for disabled and children.

- Further free allowances for families that declare jointly:

-         marriage not legally separated 3400 Euros.

-         in the case of unmarried couples or legally separated couple 2150 Euros.

TAX RATE

a)      General rate.

b)      Flat rate at 18%.

NATIONAL TAX DEDUCTIONS

-Investment in habitual home, purchase or improvements.

-Tax deductions in business activities according to the Corporation Tax Act.

-Gifts to charity.

-Income from Ceuta and Melilla.

-Investments in Spanish Historic Heritage.

-Payments in special business savings accounts under the Nueva Empresa Act.

REGIONAL TAX DEDUCTIONS

 

-Birth or adoption.

-Large families.

-Payments to kindergarten/playschool.

-Disabled tax payers over 65 years of age.

-For relatives of the tax payer that live with him/her that are over 75 years of age, or 65 years of age and disabled.

-Housework of one of the spouses.

-Purchase of first home for tax payers of 35 years of age or under.

-Purchase of home by disabled people.

-Money invested in purchase or improvement of habitual home proceeding from Public help.

-For rents paid for renting the habitual home.

-For payments of renting a home required for work necessities.

-Investments on habitual home for profitability of renewable energy.

-Ecologic purpose gifts.

-Valencian Heritage Gifts.

-Donations to promote the Valencian language.

 

6.- GENERAL TARIFF

 

Base Liquidable - Hasta  €	Cuota Integra - €	Resto Base Liquidable - Hasta  €	Tipo Aplicable - Porcentaje
0	0	17.707,20	24
17.707,20	4.249,73	15.300	28
33.007,20	8.533,73	20.400	37
53.407,20	16.081,73	En adelante	43