Spanish Taxes Overview
Individuals are resident in Spain for tax purposes if they meet at least one of the following criteria:
- Spend more than 183 days in Spain during a calendar year. In determining the period of stay, temporary absences are included in the count, except when the tax residence in another country can be proven. Special anti-avoidance rules are established for tax havens. Temporary visits to Spain to comply with contractual obligations under cultural and humanitarian collaboration agreements with the Spanish authorities which are not remunerated are not included when calculating the 183-day residence period.
- Have Spain as their main base or center of activities or economic interests. It is presumed, unless proven otherwise, that a taxpayer’s habitual place of residence is Spain when, based on the foregoing criteria, the spouse (not legally separated) and underage dependent children permanently reside in Spain. Spanish PIT law contains specific anti-avoidance rules regarding this matter.
Persons who do not meet any of the foregoing criteria are not resident in Spain for tax purposes. In such cases, Spanish-source income and capital gains in Spain are subject to NRIT.
Under Spanish law, the concept of part-year resident does not exist. An individual is either a resident or non-resident and is taxed as such for the entire tax year.
However, in certain situations, a person may be resident for tax purposes in two different countries. This could be the case, for instance, of expatriates working in Spain who are resident in both Spain and their home country. A person who is resident in another country may qualify for a relief or exemption of Spanish tax under DTTs between the home country and Spain.
Most DTTs signed by Spain consider the following to be relevant when determining place of residence:
- Permanent home.
- Personal and economic relations (center of vital interests).
- Habitual dwelling.
- Nationality- citizenship.
Value-added tax (VAT), in Spanish IVA
Spanish VAT is payable on supplies of goods and services carried out in Spanish VAT territory and on imports/intra-EU acquisitions of goods and services. There are three rates for the different types of goods and services, which are as follows:
· Standard rate of 21%, for regular supplies of goods and services.
· Reduced rate of 10%, for necessities (e.g. food and agricultural products not included in the ‘super reduced’ 4% rate, dwellings, other qualifying services). Live cultural events and cinema tickets are taxed at the reduced rate of 10% too.
· Super reduced rate of 4%, for necessities other than those classified under the reduced rate (e.g. bread, milk, books, medicine).
Temporary reductions in rates can apply for specific reasons (e.g. for sanitary reasons, for economic reasons, etcetera). On the other hand, certain activities are VAT exempt, including, among others, financial and/or insurance activities, medical activities, educational services. These activities do not grant the right to deduct input VAT. Having said that, some supplies are VAT exempt and grant the right to deduct input VAT, namely, the performance of intra-EU supplies of goods and exports of goods provided that certain conditions are met.
In the Canary Islands, a specific tax is applied instead of VAT, called the Canary Island General Indirect Tax (IGIC). IGIC is pretty like VAT although there are some differences, mainly in relation to the applicable rates that are normally lower than VAT. Guidelines given by the Spanish mainland authorities are normally also followed by the authorities in the Canary Islands.
In Ceuta and Melilla, a specific sales tax called IPSI is applied. IPSI has rules different from the VAT and, in general terms, its application is only for some activities/taxable events.
Model 720
The modelo 720 is a form that must be completed by all residents of Spain and submitted to the tax authority if you hold assets overseas over a certain amount in certain financial categories. Here we explain the details.
The modelo 720 states that all individual assets with a value of over €50,000 located abroad as of 31st December each year must now be declared to the Spanish tax authorities. This includes all accounts with financial institutions, custodian accounts, real estate, assets held in companies abroad, shares, trusts, etc.
There are three asset classes – Immovable property (real estate), Bank Accounts and Investments. If the value in any category exceeds the €50,000 threshold as at December 31st (or on average over the three proceeding months for bank accounts) then a declaration must be made. 50,000€ is the total for any one asset class, so for instance if you have five bank accounts overseas and the total value between them all is €50,000 or over each account must be reported. The same applies to all the asset classes. If you have assets in joint names the assets must be reported if they are 50,000€ or over. The value of the assets reported is at 31st December each year. The report needs to be completed between January and March for the previous tax year. Failure to comply will mean a heavy fine (a minimum of €10,000 and a further €5,000 on top per asset) and in some cases a prison sentence.
There is no statute of limitation, so the tax offices can ask for information on your assets from the date it was set up. Every year the Asset Declaration here in Spain needs to be considered. For most who have completed the Modelo 720 (the Asset Declaration form) they are not required to do it again unless; 1) The valuation in any of the three Asset classes increases/decreases by more than €20,000 with respect to the previous year. 2) You acquire new assets. 3) In certain cases where assets have been relinquished i.e. one investment closed and another put in its place, or a property has been sold etc. Therefore the advice is to check every year to make sure that this does not apply to you. Remember a change in the exchange rates could push you over the €20,000 limit.
The modelo 720 caught a lot of people by surprise in Spain when it became law in 2013. But governments all over Europe are trying everything to reduce national deficits in anyway they can – Spain is no different.
The good news is that you can now look at the ways to restructure your investment portfolios and bank accounts to make them tax efficient by investing in products that are approved by the Spanish tax authorities that will minimise your income tax liability. Last year at Finance-Spain.com we helped many Expatriates with the Asset declaration and saved them a lot of worry, hassle and money by working with them prior to the year end deadline to ensure they fully understood what needed to be declared and why. If you are unsure of anything to do with the Asset declaration ACT NOW and call us at Finance-Spain.com so we can put your mind at rest. We are here to help you. If you would like to discuss the above or arrange a free consultation please contact us.
Wealth tax
Wealth tax is levied on Spanish tax residents’ worldwide net assets and on Spanish non-residents’ goods and rights that are located, may be exercised, or should be complied with in Spain.
The tax is levied on the assets held by the taxpayer as of 31 December (accrual date).
Law 38/2022, of 27 December 2022, for the establishment of temporary energy taxes and taxes on credit institutions and financial credit establishments, which creates the temporary solidarity tax on large fortunes and modifies certain tax regulations has extended the individuals to which wealth tax applies.
For tax period 2022 onwards, shareholdings when at least 50% of the total assets of the company consists, directly or indirectly, of Spanish real estate assets are subject to wealth tax. For these purposes, the value of the real estate assets would not be the book value reported for accounting purposes by the company, but the value arising from specific wealth tax rules for real estate assets. This value would be the higher of the acquisition value, the cadastral value, and any other value assessed by the tax authorities for tax purposes.
The following tax relief is applicable for this tax:
- A minimum tax-exempt amount. All autonomous communities of Spain can establish their own minimum tax-exempt amount.
- If an autonomous community does not establish its own minimum tax-exempt amount, the amount established by Spanish law , in Valencia region is 500,000€ will apply.
- In the case of non-tax residents, they have the option to apply either the state regulations or the autonomous community regulations (including the minimum tax-exempt, tax reliefs, and tax rates) governed by the territory in which the highest value of their assets and rights located in Spain is found.
- Habitual dwellings are tax exempt up to EUR 300,000.
- Interests in family companies or business assets may also benefit from a tax exemption if certain requirements are met.
The tax liability is calculated by applying the progressive rates established by the autonomous communities in Spain to net taxable income (i.e. after applying tax relief). If the corresponding autonomous community does not establish its own scale of progressive rates, the following scale will apply:
| Taxable income (up to EUR) | Tax liability (EUR) | Rest of taxable income (up to EUR) | Applicable rate (%) |
| 0.00 | 0.00 | 167,129.45 | 0.2 |
| 167,129.45 | 334.26 | 167,123.43 | 0.3 |
| 334,252.88 | 835.63 | 334,246.87 | 0.5 |
| 668,499.75 | 2,506.86 | 668,499.76 | 0.9 |
| 1,336,999.51 | 8,523.36 | 1,336,999.50 | 1.3 |
| 2,673,999.01 | 25,904.35 | 2,673,999.02 | 1.7 |
| 5,347,998.03 | 71,362.33 | 5,347,998.03 | 2.1 |
| 10,695,996.06 | 183,670.29 | and above | 3.5 |
Autonomous communities may establish their own tax relief for wealth tax or an abatement of the tax. Several autonomous communities have already stated that they intend to establish a full tax abatement for wealth tax.
Taxpayers are required to file wealth tax returns if they have a tax liability or their wealth (exempt or not) exceeds EUR 2 million.
Solidarity tax on large fortunes
Law 38/2022, of 27 December 2022, for the establishment of temporary energy taxes and taxes on credit institutions and financial credit establishments, creates the temporary solidarity tax on large fortunes.
This was a temporary tax that, in principle, was established only for the tax period 2022 and 2023, but finally it has become permanent, and is applicable to residents whose net asset value on 31 December is equal to or higher than EUR 3 million.
The tax base is determined by the application of the wealth tax regulations. The same occurs with the exemptions except for the EUR 700,000 exemption, which applies to both tax residents and non-tax residents in Spain.
The tax liability is calculated by applying the following progressive rate:
| Taxable income (up to EUR) | Tax liability (EUR) | Rest of income base (up to EUR) | Applicable rate (%) |
| 0 | 0 | 3,000,000.00 | 0 |
| 3,000,000.00 | 0 | 2,347,998.03 | 1.7 |
| 5,347,998.03 | 39,915.97 | 5,347,998.03 | 2.1 |
| 10,695,996.06 | 152,223.93 | Onwards | 3.5 |
This tax is complementary to wealth tax, so the wealth tax debt paid in relation to the same tax period should be deducted from the solidarity tax amount.
Gift and inheritance tax
Spanish gift and inheritance tax is levied on goods and rights acquired by Spanish tax residents by inheritance, legacy or other type of succession, or by donation or other inter vivos legal transfers with no charge.
Spanish gift and inheritance tax is also levied on goods and rights acquired by Spanish non-residents in the manners stated above, whatever their nature, which are located, may be exercised or should be complied with in Spain. However, if a DTT has been signed between Spain and the non-resident’s country of residence, taxation will depend on the DTT applicable.
The tax is levied on the assets’ net acquisition value.
The tax liability will depend on different matters such as the relationship between the taxpayer and the donor/deceased, or the taxpayer’s previous wealth.
Spain’s autonomous communities have extensive powers that enable them to pass their own laws regulating different aspects of this tax, and many autonomous communities have established significant tax relief.
Spanish gift and inheritance tax regulations have been reformed with effect from 1 January 2015 as a result of a judgement given by the EU Court of Justice on 3 September 2014, which established that these regulations are an obstacle to free movement of persons and capital and breach the Treaty on the Functioning of the European Union by allowing discrimination in the tax treatment of gifts and inheritances between resident and non-resident successors and donees and between gifts and similar disposals of property located in and outside Spain. The reform introduces several rules to equate tax treatment for the discriminating situations listed by the EU Court of Justice. Note in Valencia region there is an allowance of 100,000€ between parents and children plus 150,000€ extra for the property to be inherited
The general tax rates are as follows (although they can be modified by autonomous communities):
| Taxable income (up to EUR) | Tax liability (EUR) | Rest of taxable income (up to EUR) | Applicable rate (%) |
| 0 | 7,993.46 | 7.65 | |
| 7,993.46 | 611.5 | 7,987.45 | 8.50 |
| 15,980.91 | 1,290.43 | 7,987.45 | 9.35 |
| 23,968.36 | 2,037.26 | 7,987.45 | 10.20 |
| 31,955.81 | 2,851.98 | 7,987.45 | 11.05 |
| 39,943.26 | 3,734.59 | 7,987.45 | 11.90 |
| 47,930.72 | 4,685.10 | 7,987.45 | 12.75 |
| 55,918.17 | 5,703.50 | 7,987.45 | 13.60 |
| 63,905.62 | 6,789.79 | 7,987.45 | 14.45 |
| 71,893.07 | 7,943.98 | 7,987.45 | 15.30 |
| 79,880.52 | 9,166.06 | 39,877.15 | 16.15 |
| 119,757.67 | 15,606.22 | 39,877.16 | 18.70 |
| 159,634.83 | 23,063.25 | 79,754.30 | 21.25 |
| 239.389,13 | 40,011.04 | 159,388.41 | 25.50 |
| 398,777.54 | 80,655.08 | 398,777.54 | 29.75 |
| 797,555.08 | 199,291.40 | and above | 34.00 |
Property tax
Property tax is a local tax levied on the owners of properties located in Spain.
The tax liability is a percentage of the rateable value of the property depending on the type of the property (i.e. rural or urban) and the municipality where it is located.
Rates can be fixed by each municipality, with a minimum and a maximum that can be increased slightly if certain requirements are met:
| Urban property (%) | Rural property (%) | Special properties (%) | |
| Minimum | 0.4 | 0.3 | 0.4 |
| Maximum | 1.1 | 0.9 | 1.3 |
Tax on the increase of urban land value
When urban properties are transferred, a local tax is levied on the theoretical increase of the property’s value (tax on the increase of urban land value). Taxable income for the calculation of the tax takes into account the rateable value of the property and the duration of ownership.
On 11 May 2017, the Spanish Constitutional Court stated that regulations laid down by law that tax where there is no increase in value of the urban property transferred are unconstitutional and, consequently, null and void. Consequently, taxpayers that have paid incorrect amounts of tax, where there was no increase in the value of the property, may claim a refund of the tax paid within the statute-of-limitation period by means of a special procedure that commences with the filing of a request with the tax authorities.
Later, on 9 November 2021, Royal Decree Law 26/2021, of 8 November, was published in the Official State Gazette, introducing a new case of non-taxation for these cases in which there is no increase in value in the difference between the values of said land on the dates of transfer and acquisition.
The tax is paid by the transferor of the property (provided that the transfer is not a donation).
Whereas Law 31/2022, of 23 December 2022, increased the maximum amount of the coefficients to be applied to the value of the land at the time of accrual, based on the period of generation of the value increase, Royal Decree-Law 8/2023, of 27 December 2023, decreased the aforementioned coefficients.
| Period of generation | Coefficient |
| Less than 1 year | 0.15 |
| 1 year | 0.15 |
| 2 years | 0.14 |
| 3 years | 0.14 |
| 4 years | 0.16 |
| 5 years | 0.18 |
| 6 years | 0.19 |
| 7 years | 0.20 |
| 8 years | 0.19 |
| 9 years | 0.15 |
| 10 years | 0.12 |
| 11 years | 0.10 |
| 12 years | 0.09 |
| 13 years | 0.09 |
| 14 years | 0.09 |
| 15 years | 0.09 |
| 16 years | 0.10 |
| 17 years | 0.13 |
| 18 years | 0.17 |
| 19 years | 0.23 |
| Equal or more than 20 years | 0.40 |
Exit tax
Income not yet allocated
If PIT payers cease to be PIT payers in Spain as they change their place of residence for tax purposes, they should declare any income not yet allocated in their last PIT return or file a supplementary tax return to declare this income (tax return filed without applying penalties, late payment interest, or surcharges).
When the taxpayer’s place of residence is changed to another EU member state, the taxpayer may opt to include any income not yet allocated in one’s last PIT return or to file a supplementary tax return to declare such income when each item of income to be declared is obtained (tax return filed without applying penalties, late payment interest, or surcharges).
Latent capital gains qualifying shares or interests in Collective Investment Institutions (CIIs)
If taxpayers resident in Spain change their tax residence to another country during at least ten of the 15 tax periods prior to the last tax period for which a PIT return should be filed, in general, the taxation of latent capital gains on shares or interests in companies or CIIs classified according to their value (EUR 4 million) or the interest percentage (25% for EUR 1 million and over) is brought forward.
Payment may be deferred in the event of temporary relocation for work reasons or if the relocation is to a country or territory with which Spain has signed a DTT with an exchange-of-information clause. If, during the following five years (which may be extended for a further five years for cases of relocation for work reasons), taxpayer status is acquired again without any transfer of the shares or interests, the deferred debt and any accrued interest shall be waived by the tax authorities. In this case, the taxpayer may ask the tax authorities to rectify the self-assessment and claim a refund of tax paid.
Special rules are established for changes of tax residence to another EU member state
Special tax on gaming income
A special 20% tax is levied on the following prizes:
- Prizes received from lotteries and games organised by the State Lottery and Gaming Corporation and regional bodies or entities, draws organised by the Spanish Red Cross, and the types of games that the Spanish Organisation for the Blind is authorised to conduct.
- Income from lotteries, games, and draws organised by public bodies or entities that carry on social or welfare non-profit-making activities in other member states of the European Union and have the same business aims as the bodies or entities indicated above.
The tax-exempt net amount for lotteries and games organised from 2020 onwards is EUR 40,000.
The tax base for this special tax is the amount of the prize that exceeds the tax-exempt amount. The tax rate is 20%, which is applied on the tax base minus any withholdings and advance payments applied.
Beckham Law
What is the Beckham Law?
The Spanish tax regime can be pretty demanding, as regular tax residents have to pay taxes on their worldwide income, which can go up to 52%, and also pay taxes on their worldwide wealth. Quite a lot!
Fortunately, there are several tax benefits available that will help you save money, like the Special Expatriate Tax Regime, known as Beckham Law.
With this regime, you will only be taxed on your Spanish earnings and foreign income from employment. Any other worldwide income won’t be taxed nor will it have to be declared.
What are the main advantages of this law?
The Beckham Law, named after the famous football player, David Beckham, who was the first person to benefit from it, provides many advantages:
- Allows you to pay property and income taxes as if you were a non-resident during your first 6 residency years.
- You will only have to pay a flat tax rate of 24% on your first 600,000 euros income.
- You will only have to pay a flat tax rate of 47% for any income above 600,000 euros.
- Avoid declaring your goods and assets located abroad and getting taxed on your worldwide income and worldwide wealth.
- Avoid getting taxed on foreign capital gains (dividends, sale of shares, interest, etc.).
Please note that you could be subject to a Wealth Tax if your Spanish net worth exceeds the limit of the autonomous community where your highest value of assets is located.
To know more about the net worth limit in your autonomous community, get in touch today.
Who can benefit from it?
If you’re an expat living continuously in Spain for more than 183 days, you will be considered a tax resident and therefore be obligated to pay taxes on your earnings.
The Beckham Law can be applied to Spanish tax residents that fall under the following situations:
- Foreign individuals with a job offer in Spain that haven’t been tax residents in the last 10 years.
- High-income expats that hold executive or management positions.
- Managers who have relocated and work in a Spanish company.
The following individuals are excluded:
- Self-employed workers or Autónomos.
- Professional sports athletes.
- Directors of business entities that own more than 25% of equity.
Social security contributions
Under the general regime, social security contributions are paid on wages and salaries. In Spain, the minimum monthly base is EUR 1,323 and the maximum is EUR 4,909.50 in 2025.
The general contribution rates are 6.48% for employees, depending on the type of contract, and 30.57% for employers, plus a variable rate for occupational accidents (e.g. 1.50% office work).
Certain persons may be exempt from paying social security contributions, provided that the following requirements are met:
- There is a social security agreement in force between Spain and the person’s home country that allows for this possibility.
- The employment relationship with the home country employer is maintained and the person continues to pay social security contributions to their home country social security system.
- The person’s stay in Spain is limited to a few years (usually between one to five years, depending on the social security agreement in force between Spain and the home country).
To qualify for the exemption, nationals of EU countries must obtain a document certifying continuing liability in their home country and nationals from other countries must obtain a document certifying coverage by the social security authorities in their home country.
On the other hand, the contribution system for the self-employed is modified, establishing a system whereby the self-employed will have to pay contributions according to the income they obtain. This system is made up of 15 economic brackets, and inclusion will vary depending on the income obtained by the self-employed. Within the bracket in which they are included, they will be able to choose the level of contributions they wish to pay. The minimum contribution for the lower bracket is set at EUR 653.59, while the maximum contribution in the upper bracket is set at EUR 4,909.50. Social security benefits would depend on the contributions paid by the self-employed, the general rate being 31.4%, which is applied on a monthly social security contribution base chosen by the self-employed.
Effective January 1, 2025, the additional solidarity contribution will come into force for employees whose remuneration exceeds the established maximum contribution base. This contribution will apply exclusively to the portion of the monthly salary that surpasses the maximum contribution base, calculated through a progressive tier system that determines the applicable percentage based on the amount of salary earned. The first tier includes the portion between the maximum base and up to 10% above it, subject to a rate of 0.92% in 2025. The second tier covers the portion between 10% and 50% above the maximum base, with a rate of 1% in 2025. The third tier applies to the portion exceeding 50% above the maximum base, with a rate of 1.17% in 2025. These rates will increase by 0.25% annually until 2045. The solidarity contribution will follow the same allocation scheme as contributions for common contingencies, with the majority of the burden assigned to employers: 83.39% borne by the employer and 16.61% by the employee. It will not affect employees whose income remains below the maximum contribution base, nor self-employed workers, regardless of their income.