Tax In Spain

A Contractor's Guide to Taxes : 

One of the most consistently challenging aspects of contracting in Spain is complying with the country’s tax system. As well as paying tax in Spain, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge. 

A Contractor's Guide to Work Permits: 

Immigration is one of the primary concerns for any contractor hoping to start working in Spain. Permanent employees will find it easy to get their Spanish work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.

EU nationals are not required to apply for a work permit to undertake employment in Spain. Non-EU nationals must apply for a work permit. There are two types of work permits in Spain, the Cuenta Ajena and the Cuenta Propia. The Cuenta Ajena is given to those who have a contract with a specific company and the Cuenta Propia is for those who are self-employed.

The Cuenta Ajena is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Spain is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue. 

How Can Umbrella Companies Help You Get a Work Permit in : 

As your permanent employer, umbrella companies are able to sponsor you for your Cuenta Ajena provided they’re on the register of approved sponsors. Many different companies offer this service, because it makes contracting in Spain infinitely simpler and saves you the hassle of continuous paperwork. Instead of changing your work permit every time you get a new contract, you can just work how you ordinarily would under the same permit. They protect you from the bureaucratic “rain” of legal compliance with the Spanish immigration authorities. They can even deal with the Spanish Embassy directly. 

Through their service you may be able to use a business visa to get started quickly and then transition to a work visa in Spain. It depends on your specific visa requirements. Be aware you may have to register for a residence permit in Spain.

How do I calculate my taxable income: 

If you’re working in Spain under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Spain for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Spain, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in Spain through PAYE is left with the prospect of doing everything themselves.

Do you know much about Spanish Tax Law? Does Spain have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Spain can range from 19 to 45 percent, but this may vary according to the autonomous community where you reside. You need to be sure you are placed in the correct tax brackets.

Tax Calculator: 

If you are a contractor and want a calculation on your tax and net retention in Spain, we can supply it to you free of charge. 

Using an Umbrella Company for Income Tax : 

Contractors in Spain are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Spain umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).

The companies are experts in Spanish taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Spanish tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax: 

We work with numerous umbrella companies in Spain, many of whom are experts in tax and immigration laws. If you have any questions about tax in Spain, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Spanish work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Spain but without the overhead of directly dealing with the Spanish tax authorities. Get in touch with us today for some reliable advice on tax in Spain!

  

When Do You Need to Lodge Your Tax Return?: 
Tax year is the calendar year. Tax returns may be filed from May 1.
Tax Filing Deadline : 
June 30
Can you file it online? : 
Yes, https://www.agenciatributaria.gob.es/AEAT.sede/en_gb/Inicio/Inicio.shtml
Currency: 
Euro (EUR)
Tax-free Threshold in: 
None
Grossed Income: 
Up to 12,450
Tax Rate: 
19%
Grossed Income: 
12,451 to 20,200
Tax Rate: 
24%
Grossed Income: 
20,201 to 35,200
Tax Rate: 
30%
Grossed Income: 
35,201 to 60,000
Tax Rate: 
37%
Grossed Income: 
Above 60,000
Tax Rate: 
45%
How long does it take to set up: 
13 days
How much does it cost: 
EUR 1154
Is it easy? : 
Starting a Business Rank: 86. (Source: World Bank)
How to File Taxes in: 

A personal income tax return should be filed by any resident whose gross income exceeds EUR 22,000 or EUR 12,000 for employees who obtain income from more than one employer. However, everyone must file a Spanish tax return in their first year of tax residency. The following steps outline the process to file tax returns.

Collect your identity card and register your obligation to pay tax

Step 1: Collect a Foreigner’s Identity Card (NIE) number through the local foreigner’s office or police station within 30 days of arrival into Spain. This usually takes 2-3 weeks to arrive.

  • Note: a Spanish national would be issued with a DNI (Spanish National ID) instead of the NIE.

Step 2: Using this NIE number, you must register your obligation to pay Spanish tax with the Agencia Tributaria by filing Form 30. Guides for filing this form may be found here.

Option 1: Using a provisional declaration form (most common)

Step 3: From April 6, you can log into the Agencia Tributaria using your NIE and request a provisional declaration form (‘borrador’). This is a draft statement that is based on a limited amount of pre-filled information including employment, property and bank statements.

Step 4: Modify any existing information that is incorrect.

Step 5: Enter deductions that may offset your income. This includes:

  • Personal/marriage allowance
  • Deductions for children and dependents
  • Mortgage relief
  • Pension contributions
  • Rent
  • Time spent abroad for your employer.

Step 6: Tax residents must report assets from abroad exceeding EUR 50,000 using Form 720. This may also be submitted online. A minimum fine of EUR 20,000 may be imposed for breaching this obligation. Assets include:

  • Accounts in which the individual is the titleholder, or is a representative, authorized person or beneficiary, or has disposal powers. 
  • Securities, rights, insurance and life or temporary annuities.
  • Real estate or rights on real estate.

Step 7: If you have tax due, you can pay in one go at your bank or choose to pay in 2 instalments by direct debit (end of June and November). Tax refunds will usually be paid into your account around 3 to 4 months after filing your tax return.

Option 2: Submit your own income tax declaration (for more complicated tax returns)

Step 3: Log into the Agencia Tributaria using your NIE.

Step 4: You can submit your own income tax declaration form without a borrador and this can be done online by filing one of the following forms:

  • Form 100: Spanish income tax declaration for residents.
  • Form 150: Income tax declaration for non-residents.
  • A list of other forms that may apply can be found here.

Step 5: Enter in information relating to deductions.

Step 6: See steps 6 & 7 in Option 1.

Notes: 

Personal tax is levied on gross income at progressive rates as according to the above table.

It must be noted that the total tax liability is the general rate plus the tax liability under the autonomous community rates. This means that the final marginal tax rate will vary according to the marginal tax rate of the community where the taxpayer resides. For example, the maximum marginal rate for a resident in Madrid is 44% and 48% for a resident in Cataluña.

Non-residents are taxed at a flat rate of 24% on Spanish-sourced income.

Residents of EU member states and EEA countries are taxed at a flat rate of 19%.

Does the 183 day rule apply in: 

Yes

When do you become a tax resident in: 

You become a tax resident in Spain if:

  • You spend more than 183 days in a calendar year in Spain, or
  • The centre of your activities or economic interests is in Spain. A presumption of residence arises if an individual’s family lives in Spain. 
Am I taxed on my global income in: 

Yes, if you are a resident. Non-residents are only taxed on their Spanish-source income. 

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