Taxes

Taxes

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.

Wealth tax (IP)

Property tax is one of the least popular taxes among taxpayers, and is one that does not exist in many countries. It is applied to both tax residents and non-residents in Spain, although most people do not have to present a return for this tax a minimum amount exempt from this tax. 

The Wealth Tax is an annual charge that taxes the net wealth of natural persons on 31 December of each year, although it is declared, if applicable, several months later.

This is an individual tax and therefore does not allow joint tax returns with a spouse or a family unit. If you have jointly owned assets, you have to declare the amount that corresponds to your share.

What does it tax?

In order to calculate a person's net wealth, the value of all the assets and rights the person owns is taken into consideration,  that is the total value of all the assets and the value of the charges and taxes deducted from those assets are subtracted from that amount, as well as the debts or personal obligations to which the person must respond, including the amount pending repayment on a mortgage. 

Broadly speaking, the assets and rights that are included are real estate, money held in banks, shares and/ or stakes in companies, cars, boats, jewellery, works of art, etc.  Certain debts are deductible, e.g. mortgage amounts outstanding at 31 December. 

If you are a tax resident in Spain, the Wealth Tax is applied to the goods and rights you have worldwide. 

However, if you are not a tax resident in Spain or if you qualify for the Beckham Act, it is only applied to the assets and rights that you have in Spain. Therefore, the assets and rights you have in other countries are not taken into account.

Although some autonomous communities have suspended the collection of wealth tax, in Catalonia it is still in force.

Is there a minimum amount exempt from taxation?

In general, tax residents in Spain whose net wealth is under €700,000 (€500,000 in Catalonia) do not have to present this tax return.

However, natural persons who are taxed under the IRNR or are subject to the Beckham Act will only pay the Wealth Tax if they have net worth located in Spain in excess of €700,000. This is the exemption limit for non-residents from both EU and non-EU countries.

In other words, non-resident taxpayers (whether EU or non-EU) can benefit from the state exemption of 700,000 euros and not the regional exemption (e.g. 500,000 euros in the case of Catalonia), which represents a tax saving.

It should be noted that only those considered tax residents are entitled to an additional reduction of up to €300,000 on the value of the property which constitutes their main residence.

What are the applicable tax rates?

On the basis of net assets, fixed rates plus tax rates expressed as a percentage are applied. These general rates vary between 0.2 and 3.5%. However, for residents in Catalonia, the applicable minimum rate is 0.21% and the marginal rate, i.e. the highest, is 3.48%.

Property tax (IBI)

The Property Tax (IBI) is also known as the council tax, since it is applied by city councils.

It is very important not to confuse this tax with the taxes on ownership of real estate, such as income tax for non-residents, which must be paid by non-tax residents for properties held in Spain and not rented out, or the personal income tax paid by tax residents under the income attribution rules for properties that are not rented out, with the obvious exception of the taxpayer's main residence.

Who has to pay the IBI?

IBI is paid by the owners of any real estate property or by those who have the right or title to use it (beneficial owner, concessionaires or titleholders). 

It is very important not to confuse this tax with the taxes on ownership of real estate, such as income tax for non-residents (IRNR), which must be paid by non-tax residents for properties held in Spain and not rented out, or the personal income tax (IRPF) paid by tax residents under the income attribution rules for properties that are not rented out, with the obvious exception of the taxpayer's main residence. In other words, IBI is paid alongside other taxes, and does not replace them.

What does the IBI tax?

The IBI is based on the cadastral or rateable value of the property, which is set by the Treasury Department through the Property Registry (Catrastre Immobiliari). It is important not to confuse the cadastral value with the reference value of the property.

The rateable value, which is usually lower than the market price of the property, is determined by taking into account various factors, including the size of the construction, the land-use classification, its proximity to public services and infrastructures, etc.

Every so often, the public authorities may update the rateable values.

A tax rate is applied to the rateable value, which may vary significantly according to the municipality concerned.

How often is the IBI paid?

The IBI is an annual tax, although most city councils allow it to be paid in installments during the year (quarterly payments).

Property transfer and stamp duty tax

The Property transfer and stamp duty tax is an indirect tax that is applied in the following three cases:

  • Taxable property transfer (TPO)
    This case taxes the taxable transfer between living people of all types of assets and rights that make up the wealth of natural or legal persons. It also taxes the constitution of some rights (leasing, royalties, loans, etc.).
    For example, the transfer of a second-hand dwelling between private individuals would be subject to TPO. New properties (new builds), on the other hand, are subject to Value Added Tax (VAT).
     
  • Corporate operations (OS)
    As the name suggests, this case taxes corporate operations (constituting companies, capital increase, dissolution of companies, etc.).
     
  • Document duties (AJD)
    The documents subject to this case include notarial deeds, the first copies of recorded documents and notarial acts when a series of circumstances coincide.

There is a system of incompatibilities between the various tax cases which means that the same act cannot be settled, for example, TPO and AJD may not be applied at the same time.

Value Added Tax

The Impuesto sobre el Valor Añadido (IVA) or VAT is an indirect tax on the general public's consumption of goods or services, regardless of their income.

There are currently three types of VAT:

  • General VAT, which is applied by default on all goods and services. The tax rate is 21%. For example, if you buy a watch, you pay 21% VAT.
     
  • Reduced VAT, with a rate of 10%. Reduced VAT is generally applied to food products, the hotel trade, catering, buying homes, etc. For example, if you stay in a hotel, you pay 10% VAT.
     
  • Super-reduced VAT, with a rate of 4%, is applied to basic commodities (medicines, bread, vegetables, milk, etc.). In addition, in order to address situations of social and economic vulnerability, certain consumption (such as oil) and the supply of electricity, natural gas and natural fuels are currently taxed at 5%.

However, there are some goods and services that are exempt from this tax, such as insurance, financial products and teaching in public and private centers.

VAT is paid by the end consumer. Companies act as tax collectors and pay the money to the Tax Office.

Consumers who are NOT resident in Spain or the EU can apply for a refund of the VAT paid on goods to be used/consumed by them outside the country (Tax-Free Shopping Service).

Vehicle tax

Owners of vehicles suitable for traveling on public roads must pay an annual tax on mechanically powered vehicles (IVTM, which stands for Impost sobre vehicles de tracció mecànica), commonly known as the road or vehicle tax.

The owners of registered vehicles must pay the IVTM every year, and the amount paid depends on the type of vehicle and its power.

This tax is managed by the local authority in the municipality where the vehicle is registered.

Registrations are managed by the Directorate-General for Traffic.

You can consult the formalities for registering vehicles and exchanging driver's licenses.

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: