Just like residents in most countries around the world, residents in Spain have to pay taxes to the Spanish government to help fund local and national services – with tax liabilities dependent on circumstances such as employment and property ownership in the country.
There are also many foreigners who move to Spain or live there part-time, with some working and some relying on passive income, such as pensioners and retirees.
So, if you move to Spain without being employed or self-employed, do you have to pay tax in Spain?
This blog briefly explains how taxes work in Spain for people who don’t actively earn income while living in Spain – especially those who own holiday homes.
Who has to pay taxes in Spain?
Anyone who earns income or owns property in Spain needs to register this information with the Spanish authorities and pay the appropriate taxes, whether they are a resident in Spain or not.
Those who live in Spain for more than 183 days out of the year will be considered tax residents, while those who spend less time staying in Spain than this will be considered non-tax residents.
However, this doesn’t mean a non-tax resident is not liable for tax at all – a person’s tax residency status determines the rate of tax owed in Spain and whether they are eligible for any exemptions, deductions, or other special tax regimes.
Tax residents are liable for more local and national taxes and must pay income tax in Spain on global income, though many countries have agreements with Spain to prevent double taxation on the same income in both countries. Meanwhile, non-tax residents are only liable for income tax in Spain on earnings or assets within Spain.
Even if you live in Spain for less than 183 days a year, you could still qualify as a tax resident if your primary economic interests are in Spain – such as your main business or residence, or if dependant family members are tax residents.
Even if you do not work during your time in Spain, it’s likely that you will still need to file tax returns and pay tax in Spain.
Income tax in Spain
Even if you are not working while in Spain, if you are receiving income passively from another source, such as pension payments from abroad or your own savings as a retiree, then this will still be taxable.
According to the personal income tax law in Spain, the tax-free allowance for passive income is 22,000€ a year if the income is from a single source, such as state benefits. This is reduced to 15,000€ a year if there is more than one source – such as payments from both a state pension and private pension scheme.
If you receive a pension from your country of origin after moving to Spain as a retiree, you must file a tax return and pay income tax in Spain if your passive income exceeds the thresholds above. You should not have to pay tax on this income twice if your country of origin has a double taxation agreement with Spain.
The same applies if your passive income is derived from other sources, such as returns on investments or capital gains from selling assets, whether in Spain or abroad.
If you do not actively work in Spain, but earn rental income from property that you own in Spain, you must file quarterly tax returns and pay income tax on your rental earnings.
The standard rate for income tax in Spain starts at 19% for Spanish residents and EU/EEA citizens, with a flat rate of 24% for non-residents and non-EU/non-EAA citizens.
Even if you do not work and do not rent out your property in Spain, you could still be taxed 2% of the property’s cadastral value, as the Spanish government still classifies it as a taxable benefit.
Property tax in Spain
Whether you live in Spain part-time or full-time, you’re likely to have bought a property there – which comes with its own tax liabilities, regardless of your income.
All property owners in Spain have to pay IBI (Impuesto sobre Bienes Inmuebles), a municipal tax which local town halls charge at around 0.4–1.3% of a property’s cadastral value – the rate is determined by the municipality and can vary from one region to another.
The cadastral value, as mentioned above in relation to rental income tax, is the rateable value of the property. This is usually lower than its market value and dependent on the location, size, age, and condition of the property.
On top of this ongoing annual tax for property owners, both tax residents and non-tax residents who work and don’t work could be liable for a wealth tax in Spain if the total value of their assets is more than 700,000€.
IP (Impuesto sobre el Patrimonio) applies to global assets for tax residents and assets within Spain only for non-tax residents, with the rate varying from 0.2%–3.5%.
Real estate and cash are not the only assets liable – the total value must include all vehicles, antiques, art objects, luxury items, investments, shares, annuities, loans, etc.
An additional wealth tax called ISGF (Impuesto Solidario a las Grandes Fortunas) is also being trialled, charging 1.7%–3.5% on asset values worth more than 3,000,000€.
Therefore, if you own assets in Spain that are liable, you must file a separate tax return declaring their value and pay the tax.
Get help with Spain taxes
Hopefully, this blog has provided some insight into which taxes you might be expected to pay in Spain even if you aren’t working while staying in the country.
Taxes tend to be confusing for most people, regardless of the country, but language barriers certainly don’t make things any easier. If you need help figuring out which taxes you owe in Spain and how to file the right tax returns on time, an English-speaking lawyer in Spain could be just the solution.
Here at Manzanares Lawyers, we offer a range of legal services for those who move to Spain or own second homes in Spain – from expats and retirees to Golden Visa holders.
Our specialists can provide professional guidance or act on your behalf with power of attorney in Spain as required.