Understanding the Spanish Tax System
Taxes in Spain are regulated by the Agencia Tributaria, which is responsible for the management, inspection and collection of state taxes. The Spanish tax year covers the period from 1 January to 31 December.
If you are living or employed in Spain, it is essential to understand your tax obligations, including the specific taxes that apply to you and the amounts you are required to pay. Generally, this will depend on your residency status, whether you own property, and any other investments you hold.
If you have income from employment in Spain or operate a business, you are required to pay tax on your earnings or profits. For the majority of employees, tax is deducted automatically from their pay.
Income tax in Spain is distinctive because the applicable rate combines the rate established by the central government with the rate set by your regional government.
National, regional and municipal taxes
- National taxes in Spain include capital gains tax, corporate tax and VAT.
- Regional and local taxes include property taxes and wealth taxes
- Tax rates and inheritance tax obligations vary from region to region.
Recent tax changes in 2025
From 1st January 2025, savings income exceeding €300,000 will be subject to a personal income tax rate increase from 28% to 30%. This also applies to beneficiaries of Beckham's Law.
There have also been reforms to corporation tax for smaller companies in Spain, with government plans for a gradual reduction in tax rates for companies with turnovers below €1 million and those with turnovers between €1 million and €10 million. More information can be found in our dedicated article on corporate tax in Spain.
Small and medium size entities (SMEs) and micro-enterprises
The government plans to gradually reduce tax rates for companies with sales of up to €1,000,000, a tax rate applies: 21% on the first €50,000 of taxable income. This percentage will be 19% in 2026 and 17% in 2027.
With effect for tax periods starting on or after 1 January 2025, a reduction in the tax rate applicable to SMEs and to micro-enterprises (those with a net turnover in the previous tax period of less than EUR 1 million) is envisaged, although its implementation is expected to be carried out progressively, over a period of three years for micro-enterprises and five years for SMEs.
In addition, in the case of micro-enterprises, the tax rate is broken down into two brackets, with a lower rate being levied on the taxable income up to EUR 50,000, when the tax period is one year, or up to the corresponding proportional amount when the tax period is shorter. Specifically, the tax rates would be as follows:
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How do I know if I am resident in Spain?
You will be considered a tax resident if you meet one of the following three requirements:
- You live in Spain more than 183 days per year (note that the days do not have to be consecutive to count as effective).
- You have economic interests in the country, which means that you carry out your professional activity in Spain, either working for a company or working as a self-employed person.
- Your spouse and/or children live in Spain.
Spanish tax residents must pay tax on income obtained from employment and self-employment, rental properties, capital gains and savings. Their taxable income is after deductions for social security and contributions to pensions, personal allowances and professional expenses.
Do expats pay taxes in Spain?
Yes, expats in Spain need to pay taxes. If you reside in Spain for less than 183 days in a calendar year, you will be classified as a non-resident and will only be taxed on income sourced from Spain. Rather than the standard progressive rates residents pay, income tax for non-residents applies at a flat rate with no allowances or deductions.
Firstly, you need to know whether you are a resident for tax purposes or not, in order to determine exactly what specific taxes you will have to pay in Spain as a foreigner and how much they will be.
This distinction is purely fiscal and has nothing to do with the residence permit you may need to live legally in the country. This means that you may or may not have obtained a formal residence permit, but if you meet the requirements discussed below, you will still be considered a resident for tax purposes.
Non-residents will be taxed at a rate of between 19% and 24%, depending on the type of income and country of residence. The calculation is based on income obtained in Spain from economic activities, ownership of a second residence, pensions and income from capital gains on real estate, among other factors. Tax rates for income tax for non-residents
What taxes do non residents in Spain have to pay?
1 - Earnings derived from economic activity
2 - Earnings from work
3 - Pensions and other similar benefits.
4 - Remuneration of directors and members of the Boards of Directors, of the Boards that act in their place or of representative bodies
5 - Income from movable capital .
6 - Earnings from real estate (real estate assets)
7 - Income imputed to individual taxpayers who are titleholders of urban real estate not performing economic activities
8 - Capital gains
The most basic tax that expats must pay in Spain is the income tax. The income tax is calculated upon the expat’s worldwide income. However, if you are a Spanish non-resident, the income tax is calculated just upon the income generated in Spain.
In the following link you can see all in detail about the income obtained in Spain subject to Income Tax for Non-Residents Income Tax for Non-Residents
To avoid double taxation, Spain has signed numerous tax agreements with other countries.. These agreements ensure that individuals and legal entities do not pay taxes twice on the same income, both in Spain and in their country of origin. The Spanish Tax Agency keeps an updated list of these agreements.
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Do I need a Spanish tax identification number?
To register your obligation to pay taxes in Spain, you can fill in form 30 Modelo 30 as a resident or non-resident for the first time, or to update your details.
First you will need a ID numbers in Spain: NIE, DNI, NIF, and social security. You can obtain this from your local Foreigner’s Office (Oficina de Extranjeros) or police station within 30 days of arriving in Spain.
Types of Taxes in Spain
Spanish Income Taxes
Personal Income Tax, called Impuesto de Renta sobre las Personas Fisicas (IRPF), is a tax payable to the State by citizens resident in Spain. It taxes the income earned over the course of a year, taking into account the personal and family circumstances of each person. Spain operates a pay-as-you-earn (PAYE) system, where employers deduct tax from your salary and remit it directly to the tax authorities.
Who pays income tax?
In Spain, a natural person is considered a resident for tax purposes if they spend more than 183 days in Spain during a calendar year or if their main economic interests are located in Spain, regardless of their origin or nationality. Individual resident in Spain
Therefore, foreigners residing in Spain must pay income tax (IRPF), even if they do not have Spanish nationality.
Income Tax for Residents
Income tax rates for residents generally range from 19% to 47%, and the applicable rate is divided into six income brackets. The overall tax rate is a combination of the rate set by the national government and the rate determined by your specific region. Since tax rates vary by area, the total tax you will pay will depend on where you live in Spain.
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Residents can benefit from a series of deductions when filing their returns (e.g., having children, making pension contributions, or renovating properties).
Spanish tax personal allowance
If you are a Spanish tax resident you will receive a personal allowance for your Spanish income tax (from savings and general income).
The basic tax-free personal allowance for Spanish residents under 65 is €5,550, €6,700 starting at 65, and €8,100 from 75.
There are also a number of other allowances including married couple allowance, child allowance (dependent on the number of children under 25 you have living with you) and disability allowance.
As a basic overview, if you have children under 25 living with you, there is an additional personal allowance granted depending on the number of children you have:
- 1st child: €2,400
- 2nd child: €2,700
- 3rd child: €4,000
- 4th child: €4,500
- Each additional child (providing they are under 3 years of age): €2,800
There is also additional personal allowance if you have an elderly parent or grandparent living with you and your annual income is under €8,000 as follows:
- Parent/grandparent over 65: €1,150
- Parent/grandparent over 75: €2,550
Income Tax for Non-Residents
The standard income tax rate for non-residents is 24%, or 19% if you are a citizen of an EU or EEA country. Non-residents cannot benefit from any allowances or deductions against their tax bill.
Now you know that every year you must file Spanish taxes, and that you will have tax obligations no matter if you are a resident or not.
Filing Your Tax Return
In 2025, the deadline for completing your income tax return in Spain is between April 2nd and June 30th. Everyone is required to file a Spanish tax return in their first year of tax residency.
After the initial year, you are not obligated to file a Spanish tax return if your total income from all sources is less than €8,000 and you have less than €1,600 of bank interest or investment income.
The same exemption applies if your rental income is below €1,000 or if you earn less than €22,000 as an employee, as your employer will have already deducted your Spanish income tax.
Beckham’s Law
Beckham’s Law was introduced in 2004 to attract more foreign professionals and international companies to Spain.
This rule allows employees on assignment in Spain to pay a flat tax rate of 24% on income up to €600,000. Earnings exceeding this amount are taxed at 47%. Additionally, a 3% tax rate applies to income from dividends, interest, or capital gains over €200,000. This preferential tax treatment lasts for six years.
Income Tax for Self-Employed Workers
Tax residents who are freelancers or self-employed professionals (autónomos) pay income tax in Spain at the same rates as other taxpayers. However, unlike employed individuals, most self-employed workers are required to file tax returns quarterly and make advance payments to the tax office. Freelancers can claim tax deductions on various grounds, provided they have the necessary invoices and receipts.
Allowable deductions include social security contributions, accounting and tax service fees, professional subscriptions, office expenses, phone and internet costs, and expenses related to vehicles used for work.
Property Taxes in Spain
If you own property in Spain and live in it on January 1st of any given year, you are required to pay a local property tax known as Impuesto sobre Bienes Inmuebles (IBI). The amount due is calculated by multiplying the property’s rateable value (valor catastral) by a tax rate set by the local authorities.
This tax is per property, regardless of whether you are a resident or non-resident.
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There is also a tax on rubbish collection, known as tasas de basuras. In addition, you should bear in mind that if you earn income from renting out your property, you will also have to pay the corresponding tax.
When you sell a property in Spain, you must pay a property transfer tax, Impuesto Transmisiones Patrimoniales (ITP). Additionally, when a property is sold, the local authority charges a tax on the increase in the value of the land, known as plusvalía.
Capital Gains Tax and Tax on Capital Income
Spain’s capital gains tax (the tax on profits from selling property or other investments) is structured as follows:
- First €6,000: 19%
- €6,000 – €50,000: 21%
- €50,000 – €200,000: 23%
- €200,000 – €300,000: 27%
- €300,000 or more: 30%
If you acquired property before 1994, you might be subject to a higher tax liability than previously, as the taper relief on capital gains tax has been eliminated.
You may be eligible for an exemption if you are over 65 and selling your main residence, or if you are under 65 and selling your main residence to purchase another main residence in Spain.
The tax rates mentioned above also apply to income from savings.
Wealth Tax
Wealth Tax is levied on the net wealth of individuals, all the assets and rights of economic content of which they are the owner, less any charges and encumbrances that reduce their value, as well as the debts and personal obligations for which the owner is liable.
It is applicable throughout the national territory, without prejudice to the provincial tax systems of the Economic Agreement in force in the Historical Territories of the Basque Country and the Autonomous Region of Navarre, respectively, and to the provisions of the International Treaties or Conventions that have become part of the internal legislation of the State.
The Wealth Tax is a tax whose income is entirely transferred to the Autonomous Communities. As a result of the transfer, the Autonomous Communities will be able to take regulatory powers over the tax-free threshold, the tax rate, deductions and rebates.
Liability for Wealth Tax applies on 31 December every year and affects the assets the taxpayer holds on that date. People who died in the year on any day prior to 31 December are not required to file a return for this tax
Everyone is entitled to a standard tax-free allowance of €700,000. Homeowners also benefit from an additional €300,000 allowance against the value of their primary residence. Assets valued at over €10 million can be taxed at a rate of up to 3.5%.
Corporate Tax
The standard rate of corporate tax in Spain is 25%. Newly established companies may be eligible for a reduced rate of 15% during their first two years of operation.
New regulations introduced in 2025 offer reduced rates for smaller companies.
Small companies with a turnover of less than €1 million pay a rate of 21% on the first €50,000 of profit and 22% on the remaining profit. These rates are scheduled to gradually decrease to 19% and 21% (in 2026) and further to 17% and 20% (in 2027).
Small companies with a turnover between €1 million and €10 million are subject to a corporate tax rate of 24% on their profits. This rate will decrease by 1% each year, eventually settling at 20% in 2029.
Finance
Corporate tax in Spain
[Read more]
Companies are required to file their tax returns within 6 months and 25 days following the end of their accounting period. Corporate tax payments are made in installments in April, October, and December.
A new ‘Complementary Tax’ was also introduced in 2025 to ensure that large multinational companies with revenues exceeding €750 million pay a global effective tax rate of at least 15% wherever they operate.
This information is for informational purposes only. It is always recommended to seek professional advice regarding the specific circumstances of your company. Spanish financial expert LINK A ANUNCIANTES
VAT rates in Spain
VAT (Value Added Tax) is a type of consumption tax applied to the sale of goods and services. In Spain, the percentage of VAT you pay depends on the type of product or service you purchase. While the standard VAT rate is 21%, the reduced rate is 10% and the super-reduced rate is 4%. Read on to see how these rates apply.
- General: 21% on most goods and services. Appliances, cars, smartphones, etc.
- Reduced: 10% on passenger transport, toll roads, amateur sporting events, exhibitions, health products, non-essential foods, waste collection, pest control, and wastewater treatment.
- Super-reduced: 4% on essential foods like bread, milk, eggs or fruit and vegetables, medicine, books, newspapers and vehicles for people with reduced mobility Tipo impositivo reducido del 4 por ciento
In Spain, VAT on electricity is 21%. This tax rate applies to the total bill, including electricity tax. Although there was previously a reduction in VAT to 10% for a specific period, as of January 2025, VAT has returned to its usual level of 21%.
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VAT for Businesses
Companies required to pay VAT must submit a quarterly return using form Modelo 303. This return includes information on transactions carried out during the quarter, such as sales and purchases and the calculation of VAT payable. VAT is paid quarterly, and the deadline for submitting the return and making the payment is the 20th day of the month following the end of the quarter.
Companies with a turnover exceeding €6 million become large companies Gran empresa, which has significant tax implications that must be taken into account when dealing with the Tax Agency.
Inheritance Tax and Gift Tax
Inheritance tax in Spain applies to both residents and non-residents. The Spanish government treats inheritance tax and gift tax liability together. Tax rates vary considerably depending on the amount inherited and the relationship with the deceased.
Since 2015, non-residents from within the EU/EEA have been treated the same as residents regarding inheritance and gift tax. Before this change, non-residents often paid around 80% more than residents. The Spanish Supreme Court ruled that non-residents who paid the higher rate in the past are entitled to a refund.
Finance
Inheritance tax in Spain
Inheritance tax rules and rates differ from one autonomous region to another. In 2017, some regions, such as Andalusia, updated their inheritance and gift tax policies, resulting in many families being exempt from paying the tax. It is essential to check the specific laws of your region for detailed information.
Road Tax
Vehicle owners in Spain are required to pay an annual road tax (Impuesto Sobre Vehículos de Tracción Mecánica – IVTM). The amount is determined by the vehicle’s fuel type and your specific region. Visit your local council website for more information about taxes in your area.
Tax avoidance and tax evasion in Spain
Tax evasion (evasión fiscal) is a persistent issue in Spain, resulting in billions of euros in unpaid taxes annually. Evasion takes various forms, from large corporations not fully declaring their taxable income to workers being paid in cash without declaring it.
Penalties for tax fraud vary. For amounts up to €3,000, a fine of €1,500 is applied. More serious offenses can result in fines ranging from 50% to 100% of the undeclared tax. If the undeclared amount exceeds €120,000, prison sentences of up to five years are possible, along with significant fines.
The Spanish tax authority is increasing its efforts to combat tax evasion. In 2023, it announced a greater focus on investigating digital nomads and remote workers who claim non-resident status in an attempt to pay income tax at lower non-resident rates.
Tax Fines and Penalties
Failure to submit a tax return in Spain will result in fines and interest charges on any outstanding tax. Late filing can incur fees ranging from 5% of the tax due (for delays up to three months) to 20% (for delays exceeding one year).
The Spanish government can also impose additional penalties ranging from 50% to 150% of the tax owed for late submissions, particularly if the tax office has specifically requested the submission.
Typically, the minimum penalty is applied if there is no evidence of deliberate tax evasion. The most severe fines are reserved for intentional or repeated violations, such as underreporting income, inflating deductions, or failing to declare offshore accounts.
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Penalties also apply for late or incorrect corporate tax returns. The surcharge will be a percentage equal to 1% plus an additional 1% for each full month of delay in the filing of the self-assessment or declaration with respect to the deadline established for filing and payment. If the self-assessment or declaration is submitted after 12 months have elapsed from the end of the deadline established for submission, the surcharge will be 15% and will exclude any penalties that may have been imposed. For detailed information, please refer to Applicable surcharges
Tax Advice in Spain
Taxes in Spain can be complex. While the information provided offers a general overview, it is always advisable to seek professional guidance from a financial expert regarding your specific tax situation.
Useful Resources
1 - ID numbers in Spain: NIE, DNI, NIF, and social security
2 - How to file income tax in Spain in 2025
3 - Corporate tax in Spain