In this episode, we unpack the complex world of Spanish personal income tax for residents. An introduction for Belgian and Dutch expats, emigrants and owners of a property in Spain.
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Key Takeaway: Tax residence in Spain does not depend on registration, but on actual circumstances. Once you are a tax resident, your worldwide income (Renta Mundial) is taxed in Spain. Proper preparation and an understanding of the (regional) rules can save you thousands of euros.
1. When are you considered a tax resident in Spain?
You are regarded as a resident by the Spanish tax authorities (Agencia Tributaria) if you meet at least one of the following three criteria:
- The 183-day rule: You spend more than 183 days per calendar year in Spain. Please note: temporary absences (such as holidays or business trips) count as days spent in Spain, unless you can prove that your tax residence is in another country.
- Centre of economic interests: The basis or main purpose of your professional or economic activities is in Spain.
- Presumptions regarding family circumstances: Your legal partner and/or dependent minor children are usually resident in Spain. (This is a rebuttable presumption, but the burden of proof lies with you).
2. The Renta Mundial & The Two Baskets
As a resident, you declare your worldwide income (from both Spain and abroad) via the annual tax return, known as Modelo 100. Spain does not treat all income as a single lump sum, but divides it into two separate “categories” (Bases Imponibles):
La Base Imponible General (The General Basket)
This basket is subject to a steep, progressive rate (up to ~50%). This includes:
- Income from employment (including pensions!)
- Income from economic activities (profit as a self-employed person/entrepreneur)
- Net rental income from property
- Imputed rental income (notional income on unlet second properties; often between 1.1% and 2% of the cadastral value)
- Grants and prizes won
La Base Imponible del Ahorro (The Savings Basket)
This basket offers better value and has flatter, standardised rates (19% to 30%). This includes:
- Returns on movable capital (dividends, bank interest, life insurance policies)
- Capital gains arising from the disposal of assets (gains on the sale of shares, cryptocurrency or
- (property)
Savings plan rates: 19% (up to €6,000), 21% (up to €50,000), 23% (up to €200,000), 27% (up to €300,000), 30% (any amount above €300,000).
3. Regional Differences
In Spain, general income tax is a matter for the central government in 50% and falls within the remit of the regions in 50%. Each Autonomous Region has the power to set its own tax brackets, rates and allowances. This results in enormous differences in the tax burden:
- Community of Madrid: Tax-friendly. Maximum combined top rate of ~43%.
- Andalusia: Rates have recently been reduced. Maximum combined top rate of ~45%.
- Catalonia: High taxes. The maximum combined top rate can be as high as ~48%.
- Valencia region (including the Costa Blanca): Very steep progressive scale. The combined top rate can be as high as ~52%.
4. Favourable provision: The ‘Beckham Law’ (Article 93)
A special scheme for foreign talent, directors and start-up entrepreneurs. Do you meet the criteria? If so, you will be taxed as a non-resident (in the year you move and for the following five years).
- Flat rate: 24% on Spanish employment income up to €600,000 (47% thereafter).
- Exemption: No Spanish tax on non-Spanish income (such as foreign
- dividends or rent).
- Capital gains tax: Only on assets physically located in Spain (obligación real).
Conditions: You must not have been a tax resident in the last 5 years. The application must be submitted via Form 149 within 6 months of starting the activity.
Glossary of Tax Terms
IRPF (Impuesto sobre la Renta de las Personas Físicas): The Spanish personal income tax for residents.
Worldwide Income Tax: The principle that tax residents pay tax on their worldwide income.
Form 100 / Form 149: Form 100 is the form for the standard annual tax return. Form 149 is the form used to opt into the Beckham Law.
State/Regional component: The state component (set at national level) and the regional component (set by the specific Autonomous Community) of income tax.
Ready to make your Spanish dream tax-proof?
The rules are complex. Please get in touch for a personal, exploratory chat and make the most of your move to Spain.
