La Renta in Spain
Save money in your income tax return Renta in Spain
Are you in Spain for more than six months (183 days) of the calendar year, or are your core economic interests in Spain? If the answer is yes, then you are considered to be a tax resident in Spain.
As a fiscal resident, you will be liable to pay Spanish taxes on your worldwide income and assets and will need to file a Spanish tax return.
Your Income Tax Return, now with a Videoconference
Do you need to lodge your tax return, but simply can’t find the time to visit one of our branches? At Pellicer & Heredia you can now file your tax return with a simple videoconference meeting. It takes seconds to connect and one of our experts will be assisting you, reviewing your documents just the way they would in a face to face meeting.
Once your appointment is confirmed, you will receive an email with the date and time, together with a link to access the conference. Please note that no registration is required. When your appointment is due, simply click on the link indicated and the connection will be made instantly.
Do you have to file a Spanish tax return?
There are exceptions in place, which we will highlight below:
- €22,000 income in the year from employment and pensions, including those from overseas.
- This limit falls to €14,000 under the following circumstances:
The income has not been taxed at source (Spain).
The income comes from more than one source (e.g. two jobs or two pensions, or one of each). If the other sources add up to €1,500 or less you can still use the €22,000 exemption.
However, a return becomes obligatory in certain circumstances no matter how low your earnings are, such as:
- If you have a claim for double taxation
- If you are due a refund
- If you have made pension contributions
- If you are claiming deductions for cost of buying your main residence
- If you have capital gains or income above certain limits
Types of income
Below we list 5 types of income:
- Income from work (paid employment, pensions).
- Investment income (interest, dividends).
- Income from real estate (rentals, second homes).
- Income from economic activities.
- Capital gains (lottery, gambling winnings, sales of assets such as homes, stocks, etc.).
Personal Allowance 2021
- Minimum: €5.550
- Older than 65 years: €6.700
- Older than 75 years: €8.100
In addition, employment income and pensions have a minimum exemption of €2.000.
There is a further reduction of €5.565 when the income is below €13.115, and it progressively disappears until the income is above €16.825.
Spain is divided into 17 autonomous regions, and taxes are split between state and regional Governments, with each autonomous region deciding on its own tax rates and liabilities, so how much income tax you pay depends on where you live. Below are the state bands and rates applied to general taxable income:
Taxable General Amount 2021
- Up to 12.450: 19%
- Remaining 7.750: 24%
- Remaining 15.000: 30%
- Remaining 24.800: 37%
- Remaining 240.000: 45%
- From 300.000 onwards: 47%
Savings Income includes income from interest, dividends, life insurance, purchased annuities (not annuities purchased with pension funds) and capital gains on the sale of transfer of assets (not property).
Taxable Savings Amount 2021
- Up to 6.000: 19%
- Remaining 44.000: 21%
- Remaining 150.000: 23%
- Over 200.000: 26%
Most Important Deductions
- Deduction of 15% on the total of the purchase of your main residence, acquired before 01.01.2013.
- Deduction of 10.05% on the amount paid in rentals (contracts before 1 January 2015, as long as it was declared in 2014 income tax).
- Additionally, the Comunidad Valenciana has a further deduction of 15% on the amount paid in rentals, with a limit of €550, when the tenancy contract is registered with the Comunidad Valenciana.
- Double Taxation Deduction.
Most Important Modifications in 2021
For the taxpayers who are tax residents in the Valencian Community there are some modifications:
Two new sections have been included in the regional scale:
- From 140.000€, the rate applicable to the general tax base is 27,50%; 2 percentage points more than the previous maximum.
- From 175.000€ and above, the rate applicable to the general tax base is 29,50%; 4 percentage points more than the previous maximum.
Therefore, the maximum marginal rate applicable for residents of the Valencian Community in 2021 will be 54% (29.5% + 24.5%), which represents a maximum increase of 6 percentage points compared to the financial year of 2020.
Taxpayers whose general taxable income exceeds 140,000 euros are the ones affected by these changes. Those with a lower taxable base will continue as before.
Other changes of income tax to be highlighted are:
- The percentage of the deduction for investments in installations for self consumption of electricity or for the use of certain renewable energy sources in the taxpayer´s habitual residence is a 40% of the amount invested. It used to be 20%. The maximum base for this deduction is 8,000€, so the maximum deduction applicable in the income tax would be 3.200€ (40% of 8.000€). For second homes, the deduction rate remains at 20%.
- A new deduction is established whereby taxpayers may deduct from their regional tax liability up to 6,000 euros, 30% of the amounts invested during the year in the subscription and disbursement of shares or holdings in companies as a result of agreements to incorporate or increase the capital of certain entities, including public limited companies and limited liability companies,
- A new fixed-amount deduction of 300 euros is created for taxpayers who habitually reside in municipalities at risk of depopulation.
For more information, please do not hesitate to contact our multidisciplinary professional firm specialised in taxation. At Pellicer & Heredia we can analyse your tax situation on a personalised basis, as well as carry out a tax planning study in accordance with your needs.