Income tax return time in Spain

Have you submitted your income tax return in Spain?   You have until 1 July to declare the income and gains you earned in 2023.

It’s that time of the year in Spain, when we have to compile and submit our personal income tax returns – our declaración de la renta – for the 2023 tax (calendar) year.  If you are a tax resident in Spain, this will cover your worldwide income and gains.  The system opened on 3 April, with a final deadline of 1 July.

There are penalties for late returns, so don’t leave it too late. It can be complicated if you earn income from various sources, particularly from overseas, or if you are eligible for deductions.  In this case, using a tax accountant could make your life much easier and ensure you get it right.

The tax form for residents is Modelo 100 Residentes Fiscales en España.  Beckham regime taxpayers use Modelo 150 or 151.    These can be filed online or in person at the tax office.  Couples can choose whether to submit individual or joint returns, but joint returns are usually only beneficial where one spouse’s income falls below the personal allowance.

Do you need to submit an income tax return in Spain?

Most foreign nationals living in Spain need to complete a tax return. Generally, only those on low incomes and where it is taxed at source in Spain are exempt.

If you believe you are not a tax resident in Spain (in which case you only need to declare income and gains earned in Spain), ensure you have this right.  If the tax office believes you are a tax resident here, it will be up to you to prove otherwise.

In summary, if you meet any of the criteria below, you are resident in Spain for tax purposes:

1. You spend more than 183 days in Spain in total in a calendar year, or
2. Your ‘centre of economic interests’ is in Spain, or
3. Your ‘centre of vital interests’ is in Spain (i.e. if your spouse lives here).

Spanish income tax rates and deductions for 2023 income

General and savings income are taxed differently in Spain but you need to declare them both on your personal income tax return.

The progressive 2023 rates for general income (employment, pensions, rentals etc) are as follows:

Since each region can adjust the local rates, this is just an average and you need to establish the rates for your autonomous community.

You’ll find the rates for the regions popular with expatriates in our free Spain Tax Guide.

Spain provides a type of personal allowance for individuals and families, the Mínimo Personal y Familiar.    For 2023, the national basic allowance is €5,500 if you are under 65, increasing to €6,700 up to age 75 and then to €8,100, though some regions have different levels of allowances.  You may be able to claim additional amounts if you have dependent descendants or ascendants living with you or if one of you is disabled.   These allowances are not taken as a deduction against taxable income; instead, they are given as a tax credit against the total tax payable.

There may be other deductions available depending on your circumstances; your tax accountant will guide you accordingly.

The progressive rates for savings (investment) income do not vary per region and for 2023 income are:

What you need to declare

Tax residents of Spain are liable to Spanish income tax on their worldwide income and gains, so you need to declare all income you earn in the UK and anywhere else outside Spain, whether it is pension, rental or investment income.  You need to follow the Spain-UK double taxation treaty to establish where to declare and pay tax on your UK income.

UK pension income is taxable only in Spain when received by a Spanish resident, with one key exception – income from UK government service pensions(e.g. civil service, local authority, fire service, police, certain teachers, but not NHS pensions)remains taxable in the UK.  It is not taxed in Spain, but you still need to include it in the calculation to determine the Spanish tax due on income which is taxable in Spain. This can push you into a higher tax bracket.

UK rental income is taxable in both countries, but the UK tax paid can be offset against your Spanish liability.

Capital gains made on the sale of movable assets (so excluding real estate) are exclusively taxed in the country where the person receiving the gain is resident.  So if you live in Spain and sell any UK investments, whether equities or bonds or substantial shareholding in UK companies, your gain is only taxed in Spain.  If you sell a UK property, however, the gain is taxable in both countries under the local rules, but your UK capital gains tax payment will be credited against your Spanish liability.

Wealth tax returns

Note that wealth tax and solidarity tax returns are also due by 1 July, when you declare your worldwide assets as at 31 December 2023.   But you only need to submit one if your tax liability, after deducting all possible deductions and allowances, results in tax due.  You don’t need to file a return if you don’t have any tax to pay.

Residents of Andalucía and Madrid should, however, note that although you receive a 100% credit for the main wealth tax, if the total value of your assets is more than €2 million, you still need to complete a wealth tax return. This is only for information purposes, as no tax is due.

You may have paid more tax in 2023 than was necessary. Act now to lower your tax bill in Spain.

Tax planning

If you are concerned about how much tax you’ve paid in 2023, take specialist tax and wealth management advice to see if you can improve your tax position for 2024 and beyond.  Take care to only use tax planning arrangements that are compliant in Spain, and to declare your worldwide assets and income correctly each year.  While there is not much you can do on employment income, if you are retired and have investment capital, some investment arrangements provide significant tax advantages in Spain.

This article is a brief summary covering the basic elements of income tax in Spain.  It is important to seek personalised, professional advice. For questions about completing your tax return, speak to a tax accountant.

If you have any general questions about taxation in Spain and how you may be able to lower your tax liabilities, please do not hesitate to contact us.  Our advisers are cross-border tax and wealth management specialists with in-depth knowledge of the Spanish tax regime and the compliant tax planning opportunities available there.

Contact Blevins Franks to arrange a personal consultation now.