As an employee or self-employed person living in Spain, you will have to pay income tax. The Spanish tax is progressive and is directly deducted at source by the employer who pays it to the State. There are 7 tax brackets ranging from 19% to 49% and they start from the first euro of salary received, with some possible deductions. I’m going to tell you everything about income tax in Spain.
Tax scale
Spain proposes a progressive tax. This means that a rate is applied to each income bracket and not to the whole.
For example, for an annual income of 20.000 € you will be taxed at:
19% on 12.450 €
24% from 12.451 € to 20.000 € or 7.549 €
On the other hand, Spain taxes income from the first euro cent received and not like France or England where there is a total exemption from taxation below a certain threshold.
Also, Spain has implemented the withholding tax, which means that the amount of taxes to be paid is deducted directly from the wages by the employer. The latter then transfers the amounts collected to the Spanish State.
Here is the income tax scale in Spain:
Tax return
Even though taxes are deducted at source, Spain imposes the obligation to file an annual return, called renta. This declaration simply allows you to verify the information and amounts received throughout the previous year.
This declaration is made online from April to June for the previous fiscal year (January to December in Spain), directly on the website of tax authorities.
With this declaration, the Spanish tax authorities can ensure that the correct amount has been collected. In this case, there are two possibilities: a refund from them, or a tax adjustment to be paid.
Taxpayers with a gross annual income of less than €20,000 are not required to file this return, but may do so on a voluntary basis.
Tax deductions, reductions and exemptions
In Spain there are certain deductions depending on the number of dependent children. They must be unmarried, under 25 years of age and living in the same household. The child must also have an annual income of less than €8,000. The proposed deduction is:
2.400 € for the 1st child;
2.700 € for the 2nd child;
4.000 € for the 3rd child;
4.500 € per child beyond the 3rd.
Spain allows to reduce the amount of tax to be paid by allowing the possibility of deducting interest on loans (main residence) or donations made to organizations.
It is also possible to deduct certain expenses from taxable income, such as alimony, child care expenses, health insurance premiums or accommodation for a parent.
Finally, in Spain, some income is exempt from taxation, such as social security benefits for incapacity or severe disability, public scholarships, alimony received from parents by virtue of a court decision, finiquito(termination of employment) compensation and certain social benefits and assistance.
