Income Tax in Spain is deducted directly from your salary. The amount of tax that you have to pay depends on the amount of the income that you earn and on your personal circumstances.
However, there are certain amount of taxes which are static, for example the most common one; "IVA" - Value Added Tax (impuesto sobre el valor añadido) which is payable on a wide range of goods and services at varying rates (21% for general goods, 10% reduced and 4% super-reduced).
There are some exceptions regarding IVA rates, for example, second-hand property sales attract a tax that is generally between 6% and 8%.
General Types of taxes
- Income Tax (impuesto sobre la renta de las personas físicas/IRPF): Payable on worldwide income. Spanish Income Tax rates are below the European average and have a large number of deductions.
- Business Tax (impuesto sobre actividades económicas/IAE): Paid by all businesses including the self-employed once a year (formerly called "licencia fiscal").
- Company or Corporation Tax (impuesto sobre sociedades): Paid at 35 per cent on profits by partnerships and registered companies such as a Sociedad Anónima (SA) or Sociedad Limitada (SL).
- Property or Real Estate Tax (impuesto sobre bienes inmuebles urbanos, formerly called contribución urbana): Paid by property owners. You won't pay the tax if you reinvest the money from your property within 1 year.
- Wealth Tax (impuesto sobre el patrimonio): Payable on capital assets, including property.
- Capital Gains Tax (impuesto sobre incremento de patrimonio de la venta de un bien inmeuble): Payable on the profits made on the sale of property and other assets located in Spain
- Inheritance and Gift Tax (impuesto sobre sucesiones y donaciones): Payable on worldwide assets.
- Garbage Collection/Mains Drainage Tax (basura y alcantarillado): An annual tax payable by property owners.
- Offshore Company Tax (impuesto especial): An annual tax on offshore companies that don't declare the individual owner of property in Spain or the source of investment.
- Social Security (seguridad social): Isn't strictly a tax, but it is payable by employees and self-employed citizens.
- Motor Vehicle Tax (impuesto de circulación): Paid annually by all Spanish vehicle owners with a registered plate.
- Value Added Tax (impuesto sobre el valor añadido): Payable on a wide range of goods and services at varying rates.
Delegación Especial de Madrid
Calle Guzmán el Bueno, 139
Tel: (0034) 91 582 67 67
VAT in Spain
Value Added Tax (VAT) is a tax charged on the sale of goods or services and it is included in the price of most products and services that we use every day. VAT is charged at different rates for various goods and services. You can get an extensive list of VAT ratings from the Agencia Tributaria Española.
- Standard rate (21%): On most goods and services in Spain,
- Reduced rate (10%): Passenger transport, toll roads, sporting events of an amateur nature, exhibitions and fairs, health products and equipment, non-basic food products and water, rubbish collection and treatment, pest control and wastewater treatment, etc
- Super-reduced rate (4%): Books, newspapers and magazines (Electronic equivalents are taxed at the full standard rate), human medicine, basic foodstuffs (bread, milk, cheese, eggs, fruits, vegetables, cereals and potatoes)
Exempt from IVA
- Education provided by the state or licensed bodies
- Tutoring on subjects that are included in the curricula at all educational levels
- Sporting services provided by public bodies or associations
- Cultural services such as museums, libraries, seminars and conferences
- Artists, writers, composers and translators of artistic and scientific work
- Postal services
VAT return forms must be self-summited each quarterly period (January, April, July and October).
Businesses must file the "303 form" for their quarterly VAT returns in Spanish. However, certain qualifying businesses must account for and pay VAT monthly. In this case, tax returns must be filled and the tax paid within the first 20 calendar days of the month following each monthly period.
I work for a uk company which has no presence, other than I, in Spain. I arrived in Madrid mid 2001 but the period I was to remain here has always been unclear. Initially it was to be 6 months only.
I am having a small nightmare because definition of when my tax residence actually shifts from one country to the other is difficult. According to UK legislation, the uncertainty of my permanence implied waiting until a full tax year was out (this last April) after which it would appear that my non-UK-tax-residence is retroactive to when I first left (mid 2001).
Spanish legislation appears to say that I am tax resident for the full calendar year where more than 183 days are spent in the country. It does not APPEAR (I still don't know) to be retroactive. I have to calculate trips abroad - I believe I spent some 20 days under 183 in Spain in 2001.
So: having been out of the UK for a full tax year now I have the following problem: if I do go back to UK inland revenue and claim non residence from mid 2001 (remember it seems to be a retroactive thing) I am worried that the Spanish tax man will then be notified and fine me for not having paid six months of 2001 (2002 tax year is now due in two months time).
On the other hand from what I can tell of Spanish rules: I only need to request non UK residence as of Jan 2002, since in 2001 I spent less than 183 days in the country. Hence I would ask for my 2002, to date, tax to be returned and pay it to the Spanish.
It remains unclear whether the timing of all this will allow me to receive the money from the UK before I have to hand it over to Spain - hence, a possible cash flow crisis looms as well as possible fines for not having paid 2001 locally. It is difficult to see how I could have done better since my permanence here is still unclear and I had to wait for April - I feel cought out by the system and lack the knowledge to take correct action which will avoid the probable fines.
A fundamental point seems to be whether the 2001 year is divisible and possibly the point about 183 days. It certainly is divisible in the UK but does not appear to be in Spain. Surprising that the Spanish should not want to retroactively ask me for whatever days I spent in Spain working once I had established myself (remember 183 days spent in a calendar year) as a local resident in 2002 (ie June 2002).
Note: I have paid taxes regularly month by month in the UK throughout.
If you're interested I'll let you know how the story ends.
If you have the 1M$ answer please help!
PS fines for late payment in Spain appear to be 5% if the delay is 3 months and 20% thereafter + interest at bank of spain interest rates for the current year. Something like that.
PPS Spanish tax year is Jan-Dec payable in June. UK tax year is April to April (5th - 5th)?