If you have any source of income in Spain – whether you are an employee earning a salary, you run your own business, are retired or unemployed or whether you are a resident or non-resident in Spain you must submit a tax return called a Tax Declaration (Declaracion de la Renta).
However, you will not be required to file a declaration if you are a salaried employee earning less than a certain maximum (currently 21,135 euros) or have a total income of less than 8,000 euros.
As in the U.K. the responsibility lies with you and if your earnings are above these levels you must obtain a form from the tax office.
Tax Forms
There are three types of tax form:
Form 103
This is an abbreviated declaration (declaracion abreviada) and is used if you are required to declare earnings from pensions or investments that have already been subject to withholding tax.
Form 101
This is a simple declaration (declaracion simplificada) and is used if you have income from letting, certain business and agricultural income or a capital gain from the sale of a permanent home where the total gain is to be reinvested in another property in Spain.
Form 100
This is an ordinary declaration (declaracion ordinaria) and is for any source of income other than those stated above and covers all business and professional activities and capital gains. Although Form 100 is thirteen pages long, it is the one that is usually required. It is quite complicated to fill in and it is recommended that you obtain the services of a tax advisor to help you.
Your tax declaration should be filed at the nearest tax office to your residence.
The tax office has produced a computer programme called PADRE (Programa de Ayuda a la Declaracion del Impuesto sobre la Renta de las Personas) to assist you when filing the declaration online. To use the PADRE system you can go to the tax office where staff will assist you in completing the declaration or will complete it on your behalf. You can make an appointment by telephoning 901223344 and you may be able to make the appointment with an English speaking tax assistant. You will need to take all the relevant information with you.
Further information on the PADRE system can be found at www.aeat.es..
Banks also have access to the system and a member of their staff should help you make the declaration.
If you feel unable to complete the form yourself you should consult a tax advisor who will complete it on your behalf for a fee.
Deadlines
The Spanish tax year runs from the1st of January to the 31st of December each year and you must file your declaration between the following 1st of May and the 20th of June. This can be extended to the 30th of June if you think you are entitled to a tax refund.
Payment of Tax
Tax is paid in arrears and therefore tax will be due by the 20th of June for earnings for the year that ended on the previous 31st of December.
Surcharges and Penalties
As in the U.K. if you fail to file your declaration on time and pay the due tax you will incur a penalty. This penalty will usually be 20% of the tax due but you can officially request a payment deferral.
Statute of Limitation
Spain operates a five year statute of limitation which means that after five years any unpaid taxes cannot be collected. You should keep copies of your tax returns for at least five years during which time they are liable to be audited by the tax authorities.
Salaried Employees
As in the U.K. Spain operates a ’pay as you earn’ system. Your employer will deduct the relevant tax from your earnings, called ‘withholding tax’, throughout the year and at the end of the tax year will give you a certificado de retenciones which will show your earnings for the year and the amount of tax which has been deducted. The tax deducted should closely match the correct amount due and you should therefore have no further tax to pay. Even though tax has been deducted from your salary, you are still responsible for filing your tax return. The national tax agency calculates what you owe or have overpaid and will send you form 105. You should check this form and sign it and return it to the tax agency. If you are due a refund you should receive it by the end of April.
Self Employed
Before you commence self employment you should visit your local tax office and complete a Form 037. This form is stamped by the tax office and will confirm how you pay your taxes.
There are two types of self employed tax regimes:
- Modulus System – If you are a sole trader operating without a specific business entity, the tax office may decide that you should begin paying taxes under this system. This is decided by the tax office and under this system they will assess what your business income is likely to be and you pay tax on this amount each quarter irrespective of what your actual earnings are. You do not have to keep any accounts for this system or prepare VAT invoices. You then submit an ordinary return at the end of the financial year.
- Direct Estimation (estimacion directa) – If the tax office decides that you shouldn’t use the Modulus system you will use the Direct Estimation system. Under this system you must operate a double entry book-keeping system and make quarterly tax and VAT declarations.
You can change from the Modulus system to the direct estimation system after one year if you think it would be beneficial.
Under both systems you must pay the balance of the tax due at the same time as you make your declaration.
For more information please consult the Tax Agency (Agencia Tributaria) who can be contacted as follows:
- Website: www.aeat.es/
- Queries – telephone: 900 333555
- Appointments – telephone: 901 223344
- Online service – telephone: 901 336633