You need to review your tax planning from time to time, to check that it is up to date with tax reforms and that you’re using all the available opportunities to reduce your tax liabilities.
It is important to review your tax planning from time to time, to check that it is up to date with Spanish tax reforms over recent years as well as international developments that may affect you. You also want to make sure you are using the opportunities available in Spain to reduce tax liabilities for yourself and your heirs.
This article summarises the key taxes affecting residents of Cataluña and those owning property here.
There were no changes to income tax rates at either state or regional level, so we pay tax at the same rates as last year.
|Taxable base (€)
||Tax payable on band (€)
|0 – 12,450
|12,450 – 17,707
|17,707 – 20,200
|20,200 – 33,007
|33,007 – 35,200
|35,200 – 53,407
|53,407 – 60,000
|60,000 – 120,000
The above rates only apply to general income (employment, pension, rental income, etc).
The 2017 rates for savings income (interest, dividends, income derived from life assurance contracts, purchased annuity income and capital gains on the sale or transfer of assets) are:
|0 – 6,000
|6,000 – 50,000
Non-residents who earn income in Spain pay tax at fixed rates of 19% if they are EU/EEA residents or 24% if resident elsewhere. For rental income, EU/EEA residents can deduct allowable expenses and so are taxed on net income. Everyone else is taxed on gross income.
Wealth tax is possibly the most unpopular tax among Cataluña’s wealthier residents and property owners. Effectively ‘abolished’ in 2008, it was reinstated in 2011 and been kept in place since. As part of measures to increase tax revenue, wealth tax has been extended again for 2017.
Spanish residents pay this tax on the net value of their worldwide assets as at 31st December. Non-residents are liable on Spanish assets only. In Cataluña, rates rise progressively from 0.21% to 2.75%. There is however an individual allowance of €500,000, plus up to €300,000 if you own your main home.
This can be a tough tax for wealthy residents. If you are affected seek specialist advice on how you may be able to reduce it, particularly on your investment capital where the way you hold assets can make a considerable difference.
Succession and gift tax
Spanish succession and gift tax affects everyone living here or owning local property or other Spanish asset. Tax is paid by each recipient and spouses are not exempt. There have been no changes at state or regional level this year, and Cataluña remains an attractive region to live in, from a succession tax point of view.
Tax rates for inheritances range from 7% for inheritances under €50,000 to 32% for inheritances over €800,000. There are different multipliers but these do not affect spouses, descendants or ascendants, only group III and IV beneficiaries. Additionally, spouses and civil partners recognised as ‘pareja de hecho’ benefit from a 99% relief, while children, grandchildren and parents receive relief depending on the amount they inherit. For example, those inheriting under €100,000 get a 99% relief, while those inheriting over €3m get 20%.
In any case, children under 21 receive an allowance of between €100,000 and €196,000 depending on their age, while children over 21 and spouses get €100,000. Grandchildren get €50,000 and parents €30,000. This increases to €275,000 for beneficiaries over 75. Relatives up to the 3rd degree and step-children get €8,000. Distant and non-relatives do not get an allowance.
The main home relief in Cataluña is 95%, for property valued up to €500,000 when the property is kept for at least five years.
UK nationals need estate planning to cover both Spanish succession tax and UK inheritance tax.
Do not forget that Modelo 720 needs to be submitted by 31st March 2017, reporting the non-Spanish assets worth over €50,000 you owned at 31st December 2016 if you were resident in Spain. If you previously submitted this form, you only need to report again if the value of an asset increased by over €20,000; you sold an asset, closed an account or obtained new assets.
Automatic exchange of information
The global automatic exchange of information regime, implemented under the Common Reporting Standard, is now in force. This year the Spanish tax authorities will receive information on all its taxpayers’ overseas financial assets from 54 jurisdictions. A further 47 countries start to collect data in 2017, ready to exchange it in 2018.
If you live in Cataluña and have, for example, investments in the Isle of Man, bank accounts in Switzerland or pension funds in the UK, the Spanish local tax authorities will automatically receive information on these assets.
Cross-border tax planning is complex. You need to ensure you are declaring income and paying tax in the right country, and are only using legitimate tax planning arrangements.
With specialist advice you can often use compliant arrangements to reduce tax on your savings, investments, pensions and assets. Blevins Franks has been advising UK nationals in Spain for forty years. We have in-depth knowledge of Spanish taxation and how to use tax regime to your advantage – with the right tax planning Spain can be very tax efficient for retired expatriates.
Any questions? Ask our advisers for help.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.