Spain is one of the most popular European destinations for expats. Not only does it rank well amongst expats from other European countries, but it has also recently been receiving a higher number of expats from outside of Europe. The reasons for this are due to its favourable climate, particularly along the Mediterranean coast, and due to its modest standard of living and laidback lifestyle.
Whilst the Spanish way of life is fairly laidback, Spain’s tax system certainly isn’t. With income tax, capital gains tax, wealth tax and succession/inheritance tax amongst others, seeking financial advice for your tax and wealth planning has become far more of a priority.
Our team of advisers will be able to provide you with a tailer-made personalised financial plan targeted at achieving your long-term financial goals. We will help you achieve your dream of becoming financially independent and give you the ability to make the most out your time in Spain.
Residency | tax rates
You are considered tax resident if you are resident in Spain for more than 183 days during the year (January to December) or if your major source of income or economic activity occur in Spain. If you are considered Spanish tax resident, you are subject to tax on your worldwide income and gains.
Spanish residents must submit a spanish tax return and pay spanish income tax on their worldwide income in the following cases:
In Spain, income tax is split into two categories; income which is savings related versus income which is non-savings related (also known as general income).
Your personal income, which is not categorised as savings-related, is subject to Spain’s general income tax rates. This includes:
In Spain, tax rates are not uniform across the country. The amount of income tax you pay is based on your earnings, and which of the 17 autonomous regions you live in. Your total tax liability will be a calculation of the state’s general income tax rates plus the relevant regional tax rates.
Spain’s general income tax rates in 2021 are the following:
EUR 0 – EUR 12,450
EUR 12,451 – EUR 20,200
EUR 20,201 – EUR 35,200
EUR 35,201 – EUR 60,000
EUR 60,000 – EUR 300,000
Over EUR 300,000
Income which is considered as savings related is taxed differently. This includes income from:
Residents are taxed on their worldwide savings income and non-residents on their Spanish savings income at a fixed rate. The rates for 2021 are as follows:
Annual Savings Income
EUR 0 – EUR 6,000
EUR 6,000 – EUR 50,000
EUR 50,000 – EUR 200,000
Over EUR 200,000
The Beckham Law
You may be forgiven for believing that footballer David Beckham only made an impact on the football pitch, however, he also left his mark on the Spanish tax system. When David Beckham joined Real Madrid in 2003, the Beckham Law was allegedly set up so that he did not have to pay tax on his worldwide image rights.
As a result, the Spanish authorities introduced a special tax regime for foreigners working in Spain on an employment contract with a Spanish company. This allows foreign workers to pay a flat fee of 24% instead of the progressive tax rates on their worldwide incomes. The flat rate of 24% can be applied for income up to the amount of €600,000. The excess will be liable to tax at 47% (this was increased from the 2021 tax year from 45%).
Personal Allowances & Deductions
Under age 65: €5,550
Between 65 and 74: €6,700
From age 75: €8,100
Additional allowances for children under 25 living with you
€2,400 for the first child
€2,700 for the second
€4,000 for the third
€4,500 for the fourth
You can also claim tax deductions in Spain for:
The content of this guide is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing in this guide constitutes a solicitation, recommendation, endorsement, or offer by MWC Group or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the laws of such jurisdiction. Please contact your own lawyer, accountant, or tax professional with any specific questions you have related to the information provided that are of legal, accounting or tax nature. The content of this guide is of a general nature and does not address the circumstances of any particular individual or entity. All information of this guide is provided in good faith, however we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information. By reading this guide, you agree not to hold MWC Group, its affiliates or any third party service provider liable for any possible claim for damages arising from any decision you make based on information or other content made available to you by this guide.