Introduction

Spain is no longer the tax haven it once was, when taxes were low and tax evasion a way of life. Today it is more difficult to avoid paying taxes and penalties are severe. However, despite the efforts of the authorities to curb tax dodgers, tax evasion is still widespread. Many non-resident homeowners and foreign residents think that they should be exempt from Spanish taxes. Some inhabit a twilight world, not officially resident in any country.

Yet tax evasion is illegal. It is a criminal offence and offenders are heavily fined or even imprisoned. On the other hand, tax avoidance, paying as little tax as possible and finding loopholes in the tax laws, is common. It is not so much the level of taxes, but the number of different taxes, for sometimes small amounts, which makes taxation complex.

This chapter will only deal with personal taxation. A later chapter is devoted to inheritance tax. Business taxation is a totally separate, complex subject outside the scope of this book. To start with, let’s look at a list of taxes.

Personal Taxation

• Income tax(impuesto sobre la renta de las personas fisicas) is payable by residents on world-wide income and by non-residents on income arising in Spain.
• Non-residents and residents with more than one property must pay a deemed property income tax(rentimientos del capital inmobiliario) which is usually referred to as renta.
• Wealth tax(impuesto sobre el patrimonio) is payable by residents and nonresidents on high-value capital assets, including property.
• Capital gains tax(impuesto sobre incremento de patrimonio de la renta de un bien inmeuble) is payable by both residents and non-residents on the profits made on the sale of property and other assets located in Spain.
• Inheritance and gift tax(impuesto sobre sucesiones y donaciones) is payable by residents on the transfer of worldwide assets and by non-residents on Spanish assets, upon death.

Business Taxation

• Business tax(impuesto sobre actividades economicas) is paid by all businesses with an annual turnover of more than 600,000€, including self-employed.
• Company or corporation tax(impuesto sobre sociedades).
• Value added tax(impuesto sobre el valor anadido) is payable on a wide range of goods and services at varying rates.

Other Taxes

• Property tax(impuesto sobre bienes inmeubles – IBl) is paid by all property owners to the town hall, whether resident or non-resident.
• Taxes concerned with buying a property, including transfer tax(derechos reales) and land tax(plus valia).

• Offshore company tax(impuesto especial) is an annual tax on offshore companies which do not name an individual owner of the property, or the source of investment.
• Waste collection (basura) is an annual tax payable in some areas, whether resident or non-resident.
• Motor vehicle tax(impuesto de circulation) is paid annually by all those owning a Spanish registered vehicle, plus a one-off registration tax upon purchase.

Principal Facts

Taxation is at the best of times complicated. In that context the Spanish taxman does not disappoint. As you would expect, the tax system is also ever changing. Most taxes in Spain are based on self-assessment where the individual is liable to report and calculate any tax due. The Agenda Estatal de Administratión Tributaria collects government taxes but it is commonly called by its old name, Hacienda. The Spanish tax year is 1 January to 31 December.

Tax returns must be presented between 1 May and the 20 June. Tax is paid at the same time as its declaration in June, or 60 per cent with the balance by the following November. Tax returns are submitted to the district office where a person is resident for tax purposes, or they can be filed and payment made at designated banks.

Payment must be made in cash as personal cheques are not accepted, although if filing at a bank where an account is held, they will make a transfer to the tax authorities – the preferred method. If no payment is due on a declaration, it still must be filed at the tax office in the normal way. Delay in filing a tax return may result in a surcharge while late payment of a tax bill will result in a surcharge of 20 per cent. Copies of tax returns should be retained for five years.