Taxes in Spain

 

Although the Taxes in Spain are comparatively lower than in the UK , they can often be much more complex and need to be be understood if you are to remain on the right side of the law.

A Tax Consultant , Asessor or Gestor can be an invaluable resource in steering you through this minefield. He will ensure that you take optimum advantage of your current tax status and also ensure that you don't make mistakes that you may later regret. These days avoiding paying taxes in Spain is more difficult and penalties can be severe. However, despite the efforts of the authorities to curb tax dodgers, tax evasion is still in evidence and non-resident home owners are often among the worst offenders,as is paying out or being paid cash in hand thereby avoiding value added tax (IVA) and income tax. It is also preferred by many Spaniards for payment, rather than cheque or credit card, even when large sums are involved. Whilst this is a very common way of doing business it is still illegal in the eyes of the law.

The Spanish tax system is complicated , even experts have difficulty agreeing with the tax authorities. Taxes are levied by three tiers of government : the central government, autonomous regional governments and local municipalities. Government taxes are administered by the Ministry of Economy and Taxation which is based in Madrid: Assessment and tax collection centres in the capital towns of the provinces operate a five year assessment and tax collection service.

Unpaid back taxes can only be claimed for the current past five years as there is a five year statute of limitations on the collection of back taxes there are currently around 15 different taxes for which individuals are liable. The main ones are listed below.

Major Spanish Taxes

Income Tax: Payable on worldwide income if resident in Spain, or if non resident in Spain, on income arising in Spain

Business Tax: Paid by the self-employed once a year.

Capital Gains Tax: Payable on the profits made on the sale of property and other assets located in Spain.

Company Tax: Paid at a percentage of profits by partnerships and registered companies.

Wealth Tax: payable on the value of worldwide assets if resident in Spain, or if not resident in Spain, payable on the value of Spanish assets alone

Note: Note: This tax was been eliminated on 01/01/2008, but re-introduced by Royal Decree in Parliament on 16.09.2011, however the circumstances in where and how the tax is applied had been revised AND Parliament insist that this is temporary re-introduction rather that a permenant fixture.

Inheritance and Gift Tax: Payable on assets situated in Spain or assets passing to a beneficiary who is Spanish resident

Motor Vehicle Tax: Paid annually by all vehicle owners

Offshore Company Tax: Annual tax on offshore companies that don't declare the individual owner of property in Spain or the source of investment.

Property Tax: Paid by all property owners.

Rubbish Collection: Annual tax payable by all residents and non resident property owners

Social Security: Isn't strictly a tax but is payable by employees and the self employed.

Value Added Tax (IVA): Payable on a wide range of goods and services at varying rates.

It is more than likely than only a few of these taxes will apply to you , but it is still adviseable to seek professional help to fully understand them and their implications.

Taxes also arise in the form of Inheritance Tax , and on Buying & Selling Property In Spain , However , it is better to look at these as completely separate issues.