Income tax on natural persons (IRPF)

Are you a tax resident in Spain? Do you receive income from work (such as wages or pensions), interest or other income that would have to be declared on the Individual Income Tax Return (IRPF)? The taxable base of the IRPF is the receipt of income by a taxpayer who is tax resident of Spain.

Content overview

• Tax residency in Spain
• Income subject to income tax
• Worldwide income taxation and double taxation
• Calculation of the tax
• Tax procedure

Tax residency in Spain

Under current Spanish law, an individual is considered tax resident of Spain (for income and wealth tax purposes) if any of the following circumstances apply:

• The individual resides in Spain for more than 183 days during the calendar year. Sporadic absences are not excluded in determining this period, unless the taxpayer proves tax residence in another country.
• The main center or basis of their activity or economic interests is directly or indirectly in Spain.
• The taxpayer is presumed to be resident in Spain if the non-legally separated spouse and dependent minor children are resident in Spain (in accordance with either of the above criteria).

Under Spanish law an individual may be resident for tax purposes in only one country in a calendar year.

Income subject to income tax

The Income Tax Act provides for the following sources of income:

• Income from employment (e.g. amounts received as remuneration as an employee and retirement pensions),
• Income from movable capital (mainly dividends and interest from accounts, loans and bonds),
• Income from real estate (income from renting out real estate).
• Income from entrepreneurial activity,
• Capital gains and losses,
• Allocated income, and
• Income imputations (amounts notionally imputed as income to owners of unrented property other than the principal dwelling).

Worldwide income taxation and double taxation

Individuals resident in Spain are taxed in Spain on all their worldwide income, regardless of where it is earned. This may be interest from an account in Germany, the rental of a property in Switzerland or dividends from an investment fund deposited in the USA.

To avoid double taxation, there are several measures both in national legislation (Income Tax Act) and in certain European Union regulations and in the bilateral agreements that Spain has signed with most of our neighboring countries. In general, if the income is not tax-exempt in the source country, the tax paid in the source country is deducted from the tax payable in Spain.

Calculation of the tax

Tax can be assessed individually or jointly, the latter only being possible if both spouses are tax residents in Spain or an EU country. However, it is only fiscally advantageous to file the tax return jointly if one of the spouses receives an income of less than €3,400 per year, as otherwise the incomes of both spouses are added together and the tax progression leads to a higher effective tax rate.

For the calculation of the tax, the income is divided into two parts:

1. The general part, consisting of income from work, real estate capital and economic activities, income allocations and imputations of real estate income, to which a progressive tax rate is applied with a maximum rate of about 50%.
2. The savings portion, which is made up of income from movable capital and capital gains, to which a progressive tax rate of 19.00% to 26.00% is applied.

This is the applicable standard:

Tax procedure

Income tax is declared annually between April and June of the year following the year to which the income to be declared relates, using Form 100.

At Lozano Schindhelm we check whether you are obliged to file an income tax return and if so, we calculate, prepare and submit the tax return. All this in your language, with high quality standards and backed by more than 15 years of experience in providing tax advice to tax residents, non-residents, Spaniards and foreigners.