Spanish taxation for foreigners

Everything related to taxes is complex and often feared. In Spain, as in many other countries, there are different taxes applicable to transactions and individuals depending on each individual’s specific situation.

Let’s clarify some aspects related to Spanish taxation for foreigners.

Which foreigners must declare their income?

The difference between declaring income tax and not doing so lies in whether or not you are considered a tax resident in Spain:

If you are a tax resident in Spain, you will have to pay taxes here on all income you have earned in any country.
If you are a non-resident, you will only have to pay taxes on the income you have earned in Spain, without taking into account what you earn in other countries.

How do you know if you are a tax resident in Spain?

You are a resident of Spain if you meet any of the following conditions:

You stay in Spain for more than 183 days a year, i.e., more than 6 months. Sporadic absences are included in this calculation, unless you can prove that you reside in another country.

If you come from a tax haven, the Tax Agency may require stricter evidence that you haven’t spent enough time in Spain.

Your main source of income or financial interests are in Spain. This takes into account whether you work here, own a business, or have major investments in the country.
Your immediate family lives in Spain. For example, your parents and siblings.
If your partner, who is not legally separated, and/or minor children reside in Spain, the Treasury will assume that you do so as well, unless you prove otherwise.

If you meet any of these criteria, you must file your tax return as a tax resident, and you’ll be considered as such for all Spanish tax matters.

What if you are not a tax resident?

If you do not meet the conditions in the previous section, you will be considered a non-resident for tax purposes and:

only pay taxes on income earned in Spain.
You will pay taxes through the Non-Resident Income Tax (IRNR).
You’ll have simpler, fixed-rate taxation, but without the deductions available to residents.

Other taxes that affect foreigners in Spain

In addition to personal income tax, if you are a foreigner residing in Spain, you may be subject to other taxes depending on your specific personal situation and the transactions you carry out in the country.

1. Wealth Tax (IP)

The Wealth Tax applies to individuals with high net worth and affects assets and rights both in Spain and abroad, if you are a tax resident.

Some aspects to take into account:

It applies to net assets exceeding 700,000 euros, although there is a minimum exemption that may vary depending on the Autonomous Community.
The habitual residence has an exemption of 300,000 euros.
Non-residents only pay taxes on assets located in Spain.

2. Non-Resident Income Tax (IRNR)

In the case of non-tax residents who earn income in Spain, they will not have to file a Personal Income Tax Return; they will have to pay taxes under the IRNR:

It applies to rents, work income, economic activities and capital gains.
The general tax rate is 24% or 19% if you are a resident of the European Union, Norway, or Iceland.

3. Inheritance and Gift Tax (ISD)

When an inheritance or donation is received in Spain, the Inheritance and Gift Tax applies. This tax varies depending on the Autonomous Community of residence and applies to both residents and non-residents who receive assets in Spain.

There are tax breaks for this tax based on the relationship between the inheritor and the deceased, as well as other types of payment reductions.

4. Property Tax (IBI)

Owning a home in Spain means you have to pay property tax every year, regardless of whether you live in the country or not.

This tax is local in nature and its amount is calculated based on the property’s cadastral value.

Although it varies depending on the municipality where the property is located, the percentage typically applied ranges from 0.4% to 1.3% of the property’s cadastral value.

Some taxes, such as Personal Income Tax, are not the same for foreigners and Spaniards. The difference in these cases lies in whether you are a tax resident or not, depending on the number of days you stay in the country, the activities you carry out, or the family you have residing there. In addition to Personal Income Tax, other taxes also apply to foreigners, such as Wealth Tax, Property Tax, and Inheritance and Gift Tax.

The consequences of renouncing an inheritance

The consequences of renouncing an inheritance are:

of the assets and rights of the inheritance cannot be accessed.
You have to give up everything, it can’t be done partially.
The portion of the inheritance that is rejected will increase the portion of the inheritance of the legitimate heirs who have accepted it.

An alternative to rejecting the inheritance is to accept the inheritance with the benefit of inventory. In the latter case, if the inheritance entails debts, these will not affect the estate of the heirs and will be settled with the assets of the estate itself. The heirs will receive any remaining debt.

Acceptance for the benefit of inventory as an alternative to rejection of the inheritance

Accepting the inheritance with the benefit of inventory is a legal option with which the heirs can accept the inheritance without having to face debts, which may even exceed the value of the inherited assets.

This decision protects the heir’s personal assets.

How acceptance for the benefit of inventory is carried out

The steps followed in accepting the inheritance for the benefit of inventory are as follows:

Formal acceptance. The heir must formally express his or her willingness to accept the inheritance for the benefit of inventory.
Inventory. A detailed inventory is made of the estate’s assets and debts.
Filing before a notary. The inventory is submitted to a notary for approval.
Payment of debts. Debts are paid from the assets of the inheritance.
Distribution of remaining assets. If any assets remain after paying debts, they are distributed among the heirs.

Deadlines for acceptance for the benefit of inventory

There are differences in the deadlines depending on the situation:

If the heir already has the inheritance or part of it in his possession, he must communicate his decision within 30 days.
If the heir does not have the inheritance in his possession, the deadline to communicate his decision is 30 days from the expiration of the deadline to accept or reject the inheritance.

Accepting or rejecting the inheritance is an important decision because it affects the heir’s assets. It is advisable to do so in certain cases, such as when there are significant debts or expenses related to the assets. In this case, you will need to consult a notary. There is also the option of accepting the inheritance with the benefit of inventory.

Further information

This article is part of our service Taxes in Spain for foreigners. Visit this section where you will find all the useful information on this topic, including a complete guide Taxes in Spain for non-residents and foreigners.

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