Winkworth Spain Real Estate Blog

Managing finances while abroad – understanding Spain’s taxes as an expatriate

Regardless of where you live in the world, the likelihood is that you will still need to pay taxes like the rest of us – and Spain is no exception.

Whether you wish to let your property to holidaymakers or simply aspire to become a resident of one of the many beautiful locales of the properties that we advertise here at Winkworth, it is highly advisable to familiarise yourself with Spain’s tax system.

Varying tax rates for non-residents

There are four main categories of taxpayers in Spain: residential or non-residential individual, and residential or non-residential company.

Every party is expected to pay Impuesto sobre la Renta de las Personas Fisicas (IRPF), which is a standard income tax varying between 19% and 45%, depending on the income of the individual.

Tax rates can differ significantly based on where non-residents reside. If your current residency is in the European Union, you will be expected to pay the average rate on all income and profits. Those from non-EU countries will pay a higher rate.

Tax on letting-based income

Those looking to make a rental profit from their villa or apartment in Spain will need to pay tax on all revenue from their lettings. The rates of payment differ greatly depending on your circumstances. Many factors can change how much you pay, such as where your property is located and whether you’re an individual or company. Landlords are required to pay Impuesto sobre Bienes Inmuebles (IBI), which is Spain’s name for property tax.

If you’re an EU-resident landlord, you can deduct costs on many forms of maintenance for the property. This does not include improvements to the home such as an extension, nor does it encompass such financial costs as interest on loans.

Tax payments for lettings from residents and non-residents also occur at different rates. Residents are expected to declare their income within an annual IRPF tax return and pay the tax required by June of the following year, while non-residents must pay their tax on a quarterly basis.

Don’t allow your finances to ruin your Spain experience

You’re not exempt from taxes when you rent or let property in Spain, nor if you choose to live there, and the penalties that come with avoiding or underpaying taxes can ruin your stay in Spain.

For advice on what to consider once you move to Spain, as well as to discover the latest highly desirable property for sale in the Costa del Sol, Marbella, Sotogrande and many other popular Spanish destinations, please get in touch with Winkworth today. Our dedicated UK and Spain-based teams are always available to answer any queries surrounding property and tax in Spain.