The Value of Using Tax Calculator Spain: A Tool for International Contractors
If you are planning on working for clients in Spain you might not know how much tax you will pay on your income. How can you find accurate rates on taxes in Spain, so that you can plan your budget based on net income? Without tax information you could easily agree to a contract rate that won’t cover your monthly expenses.
One new expat contractor from South Africa shared how they were considering a client offer from a Spanish client, and wanted to know how much their pay would be reduced by taxes. The client couldn’t advise them as an independent contractor on taxes and rates, so they really felt stuck in making a decision. They had always been an employee where the employer took care of calculating and withholding their taxes.
This is a frequent issue for expat contractors entering a new country, where they don’t have a tax advisor or any experience with the system. It’s not just a matter of convenience for you, as you will want to know when you are negotiating with your client how much of your pay rate will be retained as net income.
We have solved this problem for you with our updated Tax Calculator Spain, which you can find below in this article.
Spain Tax Calculator for Expats
When you work in Spain as a contractor, you must also pay taxes on your income. The challenge is adjusting to a new tax system that may be quite different from your home country. For example, Leon was a contractor from the UK who was negotiating his contract with a Spanish client.
He was trying to understand how to use the quoted rate of pay (gross income) and calculate his net income after taxes. This involved researching Spanish tax rates for the average salary in Spain, and estimating the amount of tax owed. He wasn’t sure if it was accurate but didn’t want to hire an accountant just for the calculation.
We advised him that he could get an accurate estimate by using our Tax Calculator Spain, so that he could negotiate a rate that would take into account his tax liability and eventual net income. Here is our updated Tax Calculator Spain for you to discover your taxes and annual net income:
Taxation in Spain
Contracting in Spain means complying with all local laws and regulations including taxation. If you are there long term, you will pay progressive rates on your gross income, ranging from 19% to 47%. Non-resident contractors on a short term project would pay a flat 24% rate on gross income. There are also special rates for EU members from some countries.
Spain has also just launched a digital nomad visa for freelancers that want to live in the country, while working remotely for non-Spanish clients. The 24% expat tax rate will be applied to your earnings under this visa, even though you can renew it for up to five years. To qualify, only 20% of your income can come from Spanish sources.
If you are set up as a true self-employed (autonomo profesional), then you will have to withhold and manage your taxes. If you are an employee of your client, they will handle the withholding for you, as will an umbrella company if you choose to use their services. This is one of the advantages of umbrella companies: accurate tax withholding from client payments to ensure compliance. Tax rates are the same for both resident self-employed and employees, although contractors may have the ability to deduct more business expenses.
Double Taxation and Tax Treaties
If you work long term in Spain, you will become a tax resident, and subject to income tax on global earnings. This brings up the possibility of double taxation where you are paying tax in both Spain and your home country. Fortunately, many countries have tax treaties with Spain, which allow a credit to be applied to avoid double taxation.
You will want to research the applicable tax treaty between your home country and Spain, to see how it will affect your contracting. Even if a tax treaty applies, you may still need to file a tax return in both countries. If you stay in Spain long enough, you could possibly ‘lose’ your home country tax residency, meaning that you won’t owe taxes there. This will not apply to US contractors who will always be liable for tax on worldwide income, subject to any tax treaties.
Filing and Payment in Spain of Income Taxes
Once you know what your estimated taxes in Spain will be, you will also want to know how to file and pay taxes. Here are the basic steps, or you can always hire an accountant to do it for you.
- Step 1: Collect a Foreigner’s Identity Card (NIE) number through the local foreigner’s office or police station within 30 days of arrival in 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.
- 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 information relating to deductions.
- Step 6: If you have tax due, you can pay in one go at your bank. Alternatively, you can 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.
If you use an umbrella company for contracting in Spain, they can assist you with tax filing and payment systems.
How Contractor Taxation Can Assist your with Income Tax in Spain
If you are new to contracting in Spain, calculating taxes and any expat benefits can be overwhelming. This is where contracting through an umbrella company can be of real value: from invoicing, receiving payment and paying taxes.
Even if you use our Tax Calculator Spain to know your taxes pre-hire, you may want additional help once your contract begins.
Contractor Taxation has fully vetted umbrella companies in Spain that can assist you with understanding the tax rates and computing your net salary. This means that you can know your real income pre-hire, and will have an ally throughout your contracting journey in Spain.
Other benefits of umbrella companies include:
- Manages all client payments, tax withholding and any social contributions
- Issues you a payslip each month, to a local or foreign account
- Sponsors work permits
- Helps set up the contract with the client
- Moderates any disputes with your client
- Advises on access to totalization and double taxation treaties
If you have questions about how an umbrella company can help you as an international contractor in Spain, please contact us at Contractor Taxation.
FAQs
Expats pay the same progressive tax rates of 19-47%, similar to citizens and residents, if they are staying long term. Non-resident expats pay a flat 24% rate.
The cost of living in Spain is relatively low compared to some EU countries, which may be a factor in your decision to contract in the country. One expat was considering two client offers, one in Belgium and the other in Spain. The Belgium offer was higher, but after taking into account the high Belgium tax rates and cost of living, the Spanish offer was more attractive.
The highest tax rate is 47% for all amounts earned over EUR 300,000. Because Spain uses a progressive system, the rates begin at 19% and each successive income level has a different rate applied. Our Tax Calculator Spain accounts for all of the different rates and income levels to give you an accurate estimate of taxes and net income.
If you are not working physically inside of Spain, then you will not have to pay taxes in Spain. You will just file and pay taxes in the country where you reside.
There are mathematical formulas for doing this (if that is your talent), or you could simply use our Tax Calculator Spain to do it automatically for you.