Income tax

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Barcelona is a great place to live, but there are also taxes here, even if you have no income! Although nobody likes paying them, they are necessary and inevitable.

The Spanish tax system is complicated. For that reason, this section contains basic information on the main taxes that affect natural persons (individuals), with a special focus on people from other countries who come to live in our city.

For fiscal or legal advice, or for solutions to specific questions, we recommend that you contact a specialist.

In Spain, the income obtained by natural persons are subject to the payment of the following taxes:

IRPF for tax residents in Spain.
IRNR for non-residents who obtain an income in Spain.

Please note that if you receive a donation or inheritance, the amount is not subject to either of these taxes, but to inheritance and donations tax (IDS for its initials in Spanish), where applicable.

Furthermore, if you are a worker who has transferred to Spain, you will also find what is popularly known as the Beckham Act to be of interest.

You should also know that there is a tax that has to be paid even if you have no income and you are living off your savings. This is the Impuesto de Patrimonio (IP), or Wealth Tax, which is explained below.

Another important matter is that, under certain circumstances, you have to make an informative declaration about the assets you possess outside Spain, via the form Modelo 720 for situated assets and rights, and Modelo 721 for cryptocurrency. Although this is only informative in nature and you do not pay tax, you may be fined if you do not make the declaration.

Income tax (IRPF)

The IRPF is a tax on the income of natural persons who are residents (in tax terms) in Spain, according to their personal and family circumstances.

The tax return can be filed either individually or jointly. The latter option will be possible for:

Married people, whether without children or with children (minors or judicially incapacitated adults).
Legally separated persons and de facto couples with dependent children (minors or judicially incapacitated adults). In this case, only one of the parents can file the joint return with the children.

When is a taxpayer considered to have tax residency in Spain?

a) The taxpayer stays in Spanish territory for more than 183 days in a natural year (from 1 January to 31 December).

b) The main centre or base of their economic activities or interests is located in Spain (also known as centre or base of your economic activities).

c) When their non-separated legal spouse and their dependent children under the age of 18 are habitual residents in Spain, unless there is evidence to the contrary.

What does the IRPF tax levy?

The IRPF targets the taxpayer's income and their capital gains and losses, regardless of the place where these have occurred and whatever the residence of the taxpayer may be.

One of the characteristics of this tax is taxation on certain allocations of income. These are presumed incomes for the Treasury, i.e. the administration assumes they exist. One example is where, apart from their main residence, a person owns another property that is not let to a third party.

These are the items of income subject to IRPF taxation:

Occupational income, such as the salary that an employee receives, or a pension.
Earnings from economic activities, such as the income obtained by a self-employed individual who runs a business.
Capital gains from investment income, which include the interest from bank accounts or loans, dividends from shares, etc.
Capital gains from property income, such as income received for renting a property that you own.
Imputed income, such as the income that the Tax Office allocates to you according to the rateable value of a property you own but have not rented out.
Capital gains and losses, such as the gain or loss obtained from the sale of shares or a property you own.

How much do you pay?

IRPF is a progressive tax, which means that the amount deducted increases in proportion to the income, gains or income allocation.

In order to determine how much IRPF each taxpayer should pay, the amount known as the base liquidable, or net tax base, must be calculated. This is the taxpayer's net income with corresponding fiscal adjustments according to personal and family circumstances.

IRPF tax rates or percentages are applied to the net tax base on a progressive scale. The aim is for people who earn more to pay more.

The IRPF state tax rates are the same throughout Spain, but in addition to these tax rates, you also have to add regional tax rates. For this reason, if you live in Barcelona, you must look at the corresponding tax rates in force in Catalonia.

The marginal rate is the highest that a taxpayer can pay, i.e. the highest percentage band that is applied to your net tax base. In the case of Catalonia, the latest marginal rate was 50% (24.50% state rate + 25.50% regional rate).

However, you should know that, in general, i.e., regardless of the Autonomous Community you live in, income from investments and properties is subject to taxation rates of between 19 and 28%.

What can I deduct from my income?

The permitted deductions also vary according to whether they are a general or regional deduction.

At present, the general deductions include a deduction for investment in newly or recently created businesses, deductions for donations and other contributions, deductions for construction work to improve energy efficiency in dwellings, etc.

Please remember that regional deductions vary from one Autonomous Community to another. At present, among other deductions in Catalonia, there are deductions for the birth or adoption of children, widowhood, for the renovation of your habitual residence, for certain donations, for investment as an angel investor to acquire shares or stock in new or recently created businesses, etc.

Lastly, remember that if, as a recent arrival, you are renting your accommodation, you cannot deduct your monthly rent. And if you have recently bought a property and you are living there, you cannot deduct the mortgage either.

When is the IRPF tax return presented?

Usually, the IRPF [income tax] declaration must be presented by 30 June of the following year (i.e., your income in 2023 must be declared, and the tax paid, by 30.06.2024). Normally, it is possible to submit your declaration from the first week of April, so you have nearly 3 months to do it. However, it is a good idea to check the fiscal calendar every year.

In the event of voluntarily submitting your IRPF declaration late (without first receiving a demand from the Tax Authorities), you will have to pay more. Either a surcharge or interest on arrears for late payment, depending on the time that has lapsed since the deadline (30 June) and the date on which you make the tax payment.

Can you present a joint IRPF tax return?

The IRPF tax return is normally presented individually. However, people who are part of a family unit can present it jointly.

Broadly speaking, a joint tax return can be presented by:

A married couple, whether they have children or not (minors or adults who are legally designated as having disabilities).
Legally separated people and civil partnerships with dependent children (minors or adults who are legally designated as having disabilities). In this case, only one of the parents can present a joint tax return with their children.

It is important to emphasize that there is a reduction in the net tax base for joint tax returns for families consisting of both spouses, who are not legally separated, and where applicable, by the children under the age of 18 who live with them.

Non-resident income tax (IRNR)

Income tax for non-residents (IRNR) directly taxes the income obtained in Spanish territory by non-resident natural people and entities in Spain.

As explained below, real estate yielding no income as such (such as properties that are not being rented out) is also subject to this tax.

Who is considered to be a non-resident?

Natural persons are considered to be non-residents in Spain if they do not have their habitual residence in Spanish territory, in accordance with the requirements established above in the section on IRPF.

When is an income understood to have been obtained in Spain?

The traditional criteria for determining whether an income has been obtained in Spain is of a territorial nature. For example, income from work carried out in Spanish territory or the interest or dividends obtained from entities residing in Spain would be subject to IRNR taxation.

What IRNR tax rates are applicable?

In general, the applicable tax rates on income obtained by natural persons who pay the IRNR tax are:

A flat rate of 19% for residents in the European Union, Iceland and Norway. Please note that since July 2021 Liechtenstein tax residents are no longer taxed at the flat rate of 19%, but at 24%.
A flat rate of 24% for all other taxpayers. Please note that, since Brexit, non-residents living in the UK fall under this second case.

However, non-resident individuals will always be taxed at the flat rate of 19% on capital gains, interest and dividends.

What if I don't have any income in Spain but I own real estate there?

Non-tax-residents with real estate in Spain that is not being rented out (i.e. empty properties) are also subject to Income Tax for Non-Residents (IRNR).

The tax base is calculated by taking a percentage of the property's rateable value. This is generally 2% of that value. However, the percentage is reduced to 1.1% if the value has been revised or modified either in that tax period or in the previous ten. If the property has no rateable value or the owner has not been informed of it, the applicable percentage is 1.1% of 50% of the property's acquisition value (or of 50% of its confirmed value for other taxes if higher).

Currently, in Barcelona, 1.1% must be applied.

Once you have established the tax base (rateable value x 2% or x 1.1% if applicable), you must apply the tax rate to it: 19% for non-residents from the EU or 24% for non-residents from outside the EU.

Special tax system applicable to foreigners coming to work in Spain on an employment contract (Beckham Act)

There is a special scheme for workers posted to Spanish territory that was designed to attract highly qualified and innovative people to improve the internationalisation and competitiveness of local companies.

This tax regime is commonly known as the Beckham Law because it was initially used by certain football clubs to sign players, and the English football player David Beckham was one of the first to benefit from these special rules. However, under this Act, professional athletes are currently excluded from the special rules.

Under the current legislation, natural persons who acquire tax residency in Spain, as a consequence of transferring to Spanish territory for work reasons may choose to pay IRNR (Spanish Non-Resident Tax) although they are in effect tax resident individuals.

Thanks to recent legislative changes, not only highly qualified individuals can benefit from this regime, but also digital nomads and entrepreneurs and investors in accredited start-ups.

How long can the Beckham Act be applied for?

The Beckham Act is applicable during the tax period in which the change of residence was carried out and for the five following financial years (1+5).

For example, if a worker moves to Spain in September 2024, requests and is then granted the application of this tax system, the Act will apply from the year 2025 (the first year of tax residence in Spain) and the following 5 years after that, that is, until 2030.

However, if the move and the start of the work activity begin, for example, in May 2024, the validity of this special tax regime will cover the period 2024-2029, as 2024 is considered the first year of tax residence in Spain.

What are the requirements for filing under the Beckham Act?

In order to qualify for this special tax system, the following conditions must be met:

a) Not having been a resident in Spain in the five financial years preceding the year in which the change of residency is carried out.

b) That the change of residency occurs as a consequence of one of the following circumstances:

An employment contract (except for professional sportspeople) with a Spanish company, or when the move is organized by the employer and there is a signed Employee Relocation Agreement.
The acquisition of the status of administrator in a Spanish company. (The previously existing limitation on holding less than 25 % of shares in such a company is now only maintained for asset-holding companies).
Obtaining residence through the international telework visa (digital nomad). Important: This visa does not apply to persons with European citizenship.
Carrying out an entrepreneurial activity in accordance with the terms of Act 14/2013.
Providing highly qualified professional services to innovative start-ups or conducting training and research in innovation.

c) Not obtaining income that could be classified as being gained through a permanent establishment in Spain.

It is very important to stress that there is a time limit on opting for this special tax system. If you wish to use this system, you must inform the Tax Authority within a maximum of six months after registering with Spanish Social Security or signing the documents making it possible to retain the Social Security legislation in the country of residence prior to the move. If you fail to do this within that time period, you will lose this advantageous opportunity.

It is crucial to bear in mind that there are certain requirements and exceptions to the conditions for travel to Spain; therefore, it is important to review your particular situation with a specialist lawyer.

Lastly, it is worth highlighting another recently introduced new feature regarding the applicability of this tax system to family members of persons entitled to this tax system. From now on, they will also be eligible for the following scheme:

the spouse of the person covered by this regime (or, where there is no marriage, the parent of the children), provided that certain conditions are met; and
their children under 25 years of age (or whatever their age in the case of disability).

What are the main incentives for filing under the Beckham Act?

Under the Beckham Act, the taxpayer is taxed exclusively on the income obtained in Spanish territory, except for employment-related income, which is subject to taxation in its totality, wherever the income is produced and whatever the residency of the taxpayer may be. In other words, in spite of being a de facto tax resident in Spain, the person will be treated as a non-tax resident.

The applicable tax rate is fixed (unlike that of personal income tax) at 24% up to €600,000 and 47% for everything above that amount. However, dividends, interests and capital gains are taxed at a rate of between 19 and 28%.

It is worth noting that, (unlike with personal income tax for tax residents), and in spite of very high tax savings, certain items and expenses are not tax-deductible.

Finally, it is interesting to note two additional advantages for taxpayers to whom the Beckham Law applies:

They are required to pay property tax (IP) exclusively on the assets or rights they own and which are located, or which may be carried out or must be complied with inside Spain.
Unlike those who are considered resident in Spain for tax purposes, they are not obliged to report their assets and entitlements located outside Spain via Form 720/721.

For further information

Finally, please remember that all the information contained in this document applies to natural persons (individuals), because legal persons (companies) pay tax under their own taxation rules. Therefore, if you want to set up a new company in Barcelona or, for example, establish a branch of a foreign company, we advise you to consult the relevant information with specialists.

Consult the various Public Tax Offices concerned: