The income tax of residents in Spain („Declaración de la Renta“, Modelo 100) - 7 typical questions about the income tax return


18th May 2019

 

As at the moment the period for filing the income tax declaration of 2018 is open, I wanted to answer the 7 most common questions about the income tax of residents in Spain.

 

If you are interested in information about the Special System for foreign workers displaced in Spain (the so-called "Beckham-Law"), please have a look at this article.

1. Who has to file an income tax return in Spain?

In principle, all residents of Spain, i.e. all natural persons who have been living in Spain for more than 183 days in the respective calender year, have to file their income tax return. I explained when someone is considered resident and when not in another article.

2. What kind of income is taxed with income tax?

a) taxed income:

As the name implies, income tax will tax all "income", i.e. any income that a person earns or otherwise receives in any way.

Residents are taxed on the following income, regardless of where the income was generated. All income from all over the world must be declared:

  • Income from employment (salary),
  • Social benefits (e.g. unemployment benefits), pensions, severance payments,
  • Income from real estate (mainly rental income),
  • Income from movable assets (interests, dividends, insurance payments, patent rights, etc.),
  • Income from self-employment ("autónomos"),
  • Capital gains (for example, from the sale of real estate, shares, etc.),
  • Lottery winnings, compensation for damages, subsidies received (from the state or province),
  • Special provisions ("imputación de rentas") apply if the taxpayer owns vacant properties or rents them out to family members, also for income from tax havens and when the taxpayer definitely leaves Spain.

So for example if someone works in Spain, and also receives interests from a savings account in Germany, as well as dividends from a Swiss company, he must include all this income in his income tax return in Spain, and can deduct the taxes already paid abroad to some extent (in accordance with the provisions of the double taxation treaty between Spain and the country of origin of the income).

b) income from donations and inheritances:

Income from donations and inheritances are not taken into account in the income tax return, they do not have to be indicated. Those income have their own taxes. So if your received a donation, you have to pay donations tax (within 30 days after the donation). If you inherited something, you have to pay inheritance tax (within 6 months after the date of death).

3. Must the income tax return be filed in any case?

No, not every resident who had income in 2018 has to file an income tax declaration. There are some income limits, who stays below does not have to file an income tax return (but can do it voluntarily of course).

You do not have to file an income tax return regarding 2018, if:

  • you only had income from work of less than € 22,000 (in case of several employers during the year, this limit applies only if with the second and subsequent employers you earned a total of less than € 1,500);
  • you only had income from work of less than € 12,643 (in case of several employers during the year, this limit applies if with the second and subsequent employers you earned more than € 1,500);
  • you only had income from movable property and income from capital gains of less than €1,600 (and the payer made income tax deductions);
  • you only had income of less than € 1,000 from public subsidies and government bonds as well as imputed real estate income ("imputación de rentas");
  • you only had losses of assets of less than € 500;
  • you only had Income from dependent and self-employment, movable and immovable property, as well as capital gains of in total less than € 1,000.

4. What is better: individual or joint return?

In Spain there is the possibility that members of a so-called familiy unit ("unidad familiar") can make a joint income tax return. A family unit consists in a married couple (with or without children), and in unmarried couples with common children. In the last case, the family unit consists of one parent and the child (or children).

The main difference is that there is an additional tax-free allowance for joint returns. However, in the case of married couples, this only pays off if one of them earns little or nothing.

5. How much is the income tax in Spain?

How high the effective tax burden of a person is, can be difficultly detailed here, because many circumstances have an influence on that, such as the personal situation, the place of residence, possibly existing deductions, etc. 

 

Therefore only so much: In the income tax of residents, all income is assigned to one of 2 areas: the "general tax base" or the "tax base for savings". Depending on the area, different tax rates apply.

a) general tax base („Base imponible general“):

Roughly speaking, income from work (self-employed or dependent), rent, sublease, image rights, patent rights, as well as imputed income from empty real estate are included in the general tax base.

This part of the income is taxed progressively, with half of the income being taxed according to the state tariff and the other half according to the tax rate of the Autonomous Province in which the taxpayer resides.

 

With an income of up to € 12,450, the tax rate is around 19% and then it increases progressively to around 43.5-46%, from an income of around € 60,000. Some provinces have more income levels, e.g. the top tax rate for incomes over € 150,000 is up to 48% in some regions.

b) tax base for savings („Base imponible del ahorro“):

Income from movable assets, such as interests, dividends, etc., as well as capital gains, fall under the tax base for savings.

Taxation is also gradual, from 19% for income of up to € 6,000, to 23% for income of more than € 50,000.

6. Until when must the income tax return be submitted?

The income tax return for 2018 must be submitted by 1st of July 2019 at the latest.

Anyone who has to pay something and wants the tax office to collect this automatically from the bank account on the 1st of July must submit the declaration by 26th of June 2019 at the latest.

 

It is possible to divide the payment into 2 installments (without interests), the fist payment is then normally 60% on the 1st of July and the second payment is 40% on the 5th of November 2019.

7. How can the income tax declaration be filed?

One can either prepare and submit the income tax return on his own or have it prepared and filed by a tax advisor.

a) prepare and file the income tax return by yourself:

Everyone can fill in and submit his income tax return by himself through the website of the Spanish Tax Office

The Spanish tax office also provides extensive information on the income tax return (in Spanish).

 

For most taxpayers, there is already a so-called "Borrador" online, that is a draft for the income tax return, in which the Tax Office has already entered all known income (for example, everything that employers, banks and since 2018 also the Internet portals for vacation rentals have already reported).

 

I recommend not simply confirming this draft, but at least checking it, because, for example, foreign income (and taxes already paid abroad) are normally not automatically included, not all tax deductions are automatically made, but must be declared actively (for example, for rental costs, certain educational expenses for children, ...). Likewise, the Tax Office can not always know how long somebody rented out a second home, and how long it was vacant.

b) get the income tax return prepared and submitted by a tax advisor:

Of course you can also have your tax return prepared by a tax consultant. This saves time and nerves and is especially recommendable for those who do not speak Spanish well enough, or have multiple income from different sources and/or different countries, and for all who simply not want to spend their time with it.


Conclusion:

This article is intended to give an overview on the subject of the income tax return of residents in Spain ("Declaración de la Renta", Modelo 100), but it can never replace a personal consultation and analysis of the individual case.

 

The deadline for filing the tax return is the 1st of July 2019. If you want the payment to be debited from your bank account, you must submit the declaration by the 26th of June at the latest.

 

If there are no particular difficulties, for example in case of someone who only has income from work and interests in Spain, this person can probably prepare and file the tax return on his own. Spain is very progressive, everything can be submitted online and there are also extensive information possibilities on the website of the Tax Office (although often only in Spanish).

 

In case the situation is not so easy (for example: complicated family situation, self- employment, income from real estate, foreign income, etc.), I would recommend having your income tax return prepared by someone who is familiar with Spanish taxes.

 

You would like to make your tax declaration by yourself, but have questions about some points? Please feel free to arrange a consultation with me!

 

You don´r really have the time or just don´t feel like doing your tax return, reading endless instructions and being on hold at the Tax Office? No problem: Just let me prepare your income tax return!

 

I request all necessary information from you, answer your questions, prepare the tax return and submit it after your OK. 

It is that easy.