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The tax system in Spain, along with Spanish tax rates has some similarities with other European countries.
However, when you want to settle in Spain, a basic knowledge of the country’s tax system is required.
You must keep in mind that the Spanish tax system has a variety of sectors, with each autonomous community having its own regulations.
For example, in the Canary Islands, the IVA is replaced by the IGIC (Impuesto General Indirecto Canario).
Who should pay taxes in Spain?
Not all citizens are taxpayers.
Under certain minimum income conditions, some individuals can be exempt from taxes.
In addition, to be taxable, you must have the status of a resident, have a Spanish tax number, and have an assigned NIE.
This is granted to any natural person who lives in Spain for more than 183 days a year, or who concentrates the bulk of their economic activities in the country.
It should be noted that bilateral agreements exist between Spain and other countries intending to avoid double taxation.
The Agencia Tributaria deals with all taxation in Spain.
Types of Spanish taxes
Spanish taxes fall into separate categories:
1. Direct taxes
A tax is said to be direct when it is paid and borne by the same person.
Personal income tax (IRPF)
This tax is the most important in all companies.
It is levied on income received by citizens in a tax year.
As it measures the economic capacity of taxpayers, it is also a progressive tax, since the people who have generated the most money are the ones who pay the most.
It applies to all natural people resident in Spain and the retention rate is progressive varying between 19% and 45%, depending on income.
This also applies to those who are self-employed.
It applies to three types of income: rents, salaried work and invoices.
The peculiarity of income tax in Spain and Spanish tax rates is that it is levied at source, directly from wages.
Nevertheless, it is necessary to fill out an online tax return once a year, the purpose of which is to regularise the amount received by the State with the actual amount due.
If you overpaid, you then must fill out an application for a refund, or if you underpaid, alternatively pay the state the difference.
Non-resident income tax (NRI)
This is a tax on income generated in Spain by people who do not live in Spain.
Corporate tax
This is one of the direct taxes levied on companies to tax their wealth.
Companies are subject to corporation tax if they have their registered office on Spanish territory and it applies to the profits of the enterprise.
Although the general tax rate has been 25% since 2016, specific rates of 20%, 15% and 1% may apply in certain cases.
Learn more about the ETVE tax regime to see if you can benefit.
Estates and donations
This is a tax to be paid when transferring assets free of charge.
The donation is made during their lifetime by a person who wants to pass on some of their property.
Succession or inheritance is made after death.
It is important to take into account that this is a tax ceded to the autonomous communities, so there are differences between each community.
Wealth tax
This tax is levied on the wealth of individuals.
It is also a tax ceded to the autonomous communities and it is complementary to the IRPF.
It is calculated based on the value of all of an individual’s property, starting from 700,000 euros and with an exemption for real estate assets of 300,000 euros.
2. Indirect taxes
Spanish tax rates are levied on economic transactions (for example, VAT), taxing services or consumer goods.
VAT
Value-added tax is the most important indirect tax.
It is determined by the consumption of goods and services by individuals and enterprises.
There are 3 VAT rates: 21%, 10% and 4%.
The default is 21%, however, different rates apply to certain goods and services.
Food in general, glasses and lenses, and the hotel sector are subject to 10%.
The necessities of food, books, newspapers, medicines, and vehicles for disabled people are subject to 4%.
Transfer tax and stamp duty (Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados)
This is a tax that falls into 3 categories.
- Transfer duties are levied on all transfers for consideration (no donation or inheritance) that are not subject to VAT.
- Stamp duty is levied on the formalization of certain notarial, commercial and administrative documents.
- Partnership tax is levied when companies are incorporated. It is also a tax devolved to the autonomous communities.
Simplify your taxes in Spain
Understanding your tax obligations and Spanish tax rates can be complex, but with the right guidance, it doesn’t have to be overwhelming.
If you have any questions or uncertainties, don’t hesitate to reach out to Delaguía&Luzón.
We offer professional tax and accounting services in English, Spanish, Russian and French.
Entrust your tax management to our team of professionals!
Our experienced lawyers are here to assist you every step of the way.
FAQ
What are Spanish tax rates?
Spanish tax rates vary by tax type. Personal income tax (IRPF) ranges from 19% to 45%, while VAT rates are 21%, 10%, or 4% depending on the goods or services.
What is IRPF in Spain?
IRPF (Impuesto sobre la Renta de las Personas Físicas) is Spain’s personal income tax, applied progressively based on income from work, rentals, and invoices.
What is a Spanish tax number?
A Spanish tax number, like the NIE for individuals or CIF for companies, is required for tax filing and economic activities in Spain.
What are the types of taxes in Spain?
Spain’s taxes fall into two categories:
- Direct Taxes: Personal income tax (IRPF), non-resident income tax, corporate tax, wealth tax, and estate/gift tax.
- Indirect Taxes: VAT and transfer taxes.
