Living in Spain - Taxes & Charges

The following taxes exist in Spain:

1-DIRECT TAXES

A) Personal income tax (IRPF): Taxes all income earned for work performance, professional or business activities, income and wealth. Its amount is given by the volume of income earned in the tax year, which coincides with the calendar year, and it is a progressive tax (the higher the income, the higher the percentage of tax), taking into account retainers and income on account made for particular types of income, such as income from self-employed or employed work or income from non-property investments. This tax is declared during May and June of the year following the tax year declared, and non-declaration, or declaration after the deadline, entails the imposition of sanctions. 

In general, if you live in Spain for 183 or more days during a given tax year, you will have to declare all your income there, regardless of where you earned it. In determining one's 'tax residence', however, other considerations may be taken into account, such as closer personal and economic links, residence of family members, the place where most of the work is done… so that it is possible to find out and fix your tax residence, if there are any doubts. 

Moreover, the Member States of the EU have made tax agreements with each other in order to avoid double taxation of persons living and working in different countries of the Union.

B) Corporation tax: This is very similar to personal income tax, but it applies to legal entities (companies, businesses, associations). The rate of taxation currently stands at 35%, but there are also other special types.

C) Wealth tax: This taxes progressively all the assets you possess in any country provided they exceed the exemption minimum.

D) Tax on inheritance and donations: acquisition of goods and services by a successor or given free inter vivos.

2-INDIRECT TAXES

A) Value added tax (VAT): This is levied on the supply of goods and services by employers and professionals and on imports. The rates of taxation vary between 4% and 16%, depending on how necessary the goods are considered to be, and all without prejudice to statutory exemptions.

B) Tax on capital transfers and documented legal acts: This is levied on legal and commercial documents and particular transactions, such as the purchase of fixed assets and the establishment of mortgages.

There are also other EXCISE DUTIES which are levied on the consumption of particular goods such as alcohol, tobacco and hydrocarbons.

In addition to these State taxes transferred totally or in part to the Autonomous Communities, there are other LOCAL TAXES, levied by municipalities as a tax on immovable goods, or a vehicle tax.

LABOUR CHARGES: These are the total costs incurred by the employer for the use of labour. They include payroll costs (basic salary + fringe benefits), and other costs, which include non wage earnings and obligatory social security contributions. 

The average labour charges borne by Spanish companies was EUR 2,177.50 per worker per month in the last quarter of 2004, a growth of 2.7% compared to the same period in the previous year. The highest labour charges are in industry, followed by construction and services. By Autonomous Community, the highest charges on labour correspond to Madrid, the Basque Country, Navarre and Catalonia, whereas Extremadura, the Canaries and Murcia have the lowest charges.

Text last edited on:06/2005

Source: European Union
© European Communities, 1995-2006
Reproduction is authorised.