Income tax return time in Spain
By Paul Montague, Partner, Blevins Franks
928 433 411 | canaryisles@blevinsfranks.com | www.blevinsfranks.com
Have you submitted your Spanish income tax return yet? You have until 1 July to declare the income and gains you earned in 2023.
It’s that time of the year 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 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. 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 a return?
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 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 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:
- You spend more than 183 days in Spain in total in a calendar year, or
- Your ‘centre of economic interests’ is in Spain, or
- 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) in the Canary Islands are as follows:
| Income band | Total tax rate |
| Up to €12,450 | 18.5% |
| €12,450 – €17,707 | 23.5% |
| €17,707 – €20,200 | 26% |
| €20,200 – €33,007 | 29% |
| €33,007 – €35,200 | 33.5% |
| €35,200 – €53,407 | 37% |
| €53,407 – €60,000 | 42% |
| €60,000 – €90,000 | 46% |
| €90,000 – €120,000 | 47.5% |
| €120,000 – €300,000 | 48.5% |
| Over €300,000 | 50.5% |
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, it is 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:
| Income | Tax rate |
| Up to €6,000 | 19% |
| €6,000 to €50,000 | 21% |
| €50,000 to €200,000 | 23% |
| €200,000 to €300,000 | 27% |
| Over €300,000 | 28% |
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, where 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. If you do not have any tax to pay, you don’t need to file a return.
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 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. For advice on effective tax planning in Spain, to lower liabilities on savings, investments and pensions, speak to a cross-border tax and wealth management specialist such as Blevins Franks.
The 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.
Blevins Franks Wealth Management Limited (BFWML) is authorised and regulated by the Malta Financial Services Authority, registered number C 92917. Authorised to conduct investment services under the Investment Services Act and authorised to carry out insurance intermediary activities under the Insurance Distribution Act. Where advice is provided outside of Malta via the Insurance Distribution Directive or the Markets in Financial Instruments Directive II, the applicable regulatory system differs in some respects from that of Malta. BFWML also provides taxation advice; its tax advisers are fully qualified tax specialists. Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of trusts, retirement schemes and companies. This promotion has been approved and issued by BFWML.
You can find other financial advisory articles by visiting our website here
