Quick guide to tax & accounts in Spain
1. Get an NIE number.
This is a Spanish ID number which is essential for just about any legal, fiscal or bureaucratic transaction such as opening a resident’s bank account, paying taxes, buying property etc.
It’s not essential for a non-resident who simply stays in Spain a few weeks a year but if you want to buy property you will have to as you will need this number in order to pay the taxes arising from the purchase of property.
For an EU passport holder it’s a formality but non-EU nationals will probably need to find a local “gestor” to get together all the necessary papers and forms to make the application.
In all cases it will take some weeks to be issued so if you need one, don’t leave it to the last minute!
2. Before starting a business seek independent advice.
If you want to start a business in Spain get advice on the alternatives, the tax implications and the associated costs and obligations whether you set up a company or work as a self-employed person.
3. If you’re running a business (limited company, sole trader or freelance), talk to an expert on what tax returns need filing.
Most business will have to file quarterly VAT return (IVA), annual summaries and an annual tax return (“Impuesto Sociedades” for companies, “Renta” for individuals).
Other returns such as employee/sub-contractor income tax, rent payments or EU operations will be applicable depending on individual circumstances. . The penalties for non-filing, or even late submission, can be heavy and may lead to a tax inspection.
4. As an employee of a Spanish business it may be obligatory to file an annual income tax return.
Most income from a job in Spain is taxed at source (“IRPF”). On low incomes, filing your annual income tax return (“Renta”) is not obligatory.
Broadly, if you earn less than EUR 23,000 in a calendar year from one employer there is no obligation to do the return although it may be beneficial if you are a property owner as there is tax relief on mortgage payments and relief on fees payed to professional associations and unions and pension contributions.
If you earn more than the above or have several sources of income, you must complete your tax return before 30th June for the previous year. The tax year in Spain runs from January to December.
5. A non-resident owning a property here has to file and pay annual income tax.
If you own a property here and are considered non-resident the property always attracts income tax and the annual “Renta” will need to be filed.
The tax payable will be based on any rental income received but even if the property does not earn real income the tax will still be applied according to the property’s notional tax value (“valor catastral”). This must be completed before the 31st December for the previous year.
In addition all other income arising in Spain is taxed too e.g. interest earned in a Spanish bank account.
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