9 abril 2024

Taxation is the price which civilized communities pay for the opportunity of remaining civilized. ~ Albert Bushnell Hart

Life is about tradeoffs. In exchange for living in a safe, secure and beautiful country, you'll have to deal with complicated taxes in two countries. Spain, like the U.S., taxes its residents on worldwide income. Taxes in Spain can be complicated with high (painful) penalties for anybody who either doesn't declare or pay the correct amount. A little reminder: not knowing is not an excuse.

Port Soller boats and mountain copy 2

Spain is one of the most popular destinations for foreign nationals to relocate. Mallorca is the largest of the Balearic Islands, an autonomous region in Spain. This is not the least expensive place to live in Spain but is equal to Lisbon, Paris, and Athens. Staying current with tax regulations is made difficult because the Spanish government is regularly changing its tax rules, and usually those most affected are expats holding significant assets abroad.

This article is a comprehensive guide and also subject to change. We recommend seeking independent advice from our trusted advisor Maria Garcia of M Garcia Abogados.

The Tax Year #

Spain's tax year for individuals is the same as in the U.S. - January 1st through December 31st each year. Spanish tax residents are required to complete a Spanish tax declaration, or Modelo 100, between April 3rd and July 1st in the following year. In order to obtain the full credits allowable, your accountant or Maria can provide advice on the best timing but, in general, you may file an extension in the U.S. and then take the taxes paid in Spain off your current year.

Older couple

Spanish Income Tax #

In simple terms, Spanish tax residents are liable and obligated to pay income tax on their worldwide income, once the personal allowances have been taken into account.


As a non-resident of Spain, you are only required to pay tax on any Spanish income (such as rental income from a Spanish property). The income tax for non-residents is charged at a fixed rate with no personal allowances or deductions. It's important to understand whether or not you are a Spanish resident because this has a significant impact on taxes you are required to pay.

Two Categories

Under Spanish tax law, your income is split into two main categories:

  1. Income from general activities
  2. Income from savings

The total income from each category is classed as the base, after which deductions and allowances can be made. I'll share an insight here: Spain does not allow for as many deductions as the U.S. But the way of life is valued far higher to many people's peace of mind.

Polishing Speed Boat

Foreign Asset Law Reporting in Spain #

If you live in Spain and own assets in excess of €50,000 outside of Spain, you are required by law to declare those assets up and until December 31st of the previous year to the Spanish government by March 31st each year. Failure to correctly declare any assets outside of Spain usually incurs penalties or even a criminal charge if tax avoidance is in excess of €120,000.

Assets which are required to be declared include:

  • Assets held in any bank accounts
  • Property
  • Shares in companies or stocks
  • Life insurance policies

The assets may be able to benefit from a variety of tax-efficient vehicles which could help you reduce any unnecessary tax payments. If you are unsure of what you need to do, or you have failed to declare any assets, you should seek advice from our Spanish tax expert, Maria Garcia of MG Abogados.

Spanish Tax Rates

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). As an example, for Spanish tax years 2022 and 2023, there was a basic personal allowance of

  • €5,550 for people under 65 years of age.
  • €6,700 for people between 65-75 years of age
  • €8,100 for people over 75 years of age.

There are also other allowances including

  • married couple
  • children (depends on the number of children under age 25 living with you)
    • 1st child €2,400
    • 2nd child €2,700
    • 3rd child €4,000
    • 4th child €4,500
    • each additional child if under 3 years of age €2,800
  • disability

We recommend contacting Maria Garcia for clarity and to assist in filing to appropriate forms as needed.

Tax on Income on Savings

Your saving income includes any income from:

  • Interest
  • Dividend payments
  • Life Assurance Policies
  • Annuities
  • Gains from the sale or transfer of assets

Spanish tax rates on savings income (from 2023 and will be revised)

  • Income up to €6,000: 19%
  • From €6,000-€50,000: 21%
  • From €50,001-€200,000: 23%
  • From €200,001-€300,000: 27%
  • Over €300,000: 28%

Spanish Tax on US Pensions

Happy Elder Couple

Spain - Wealth Tax #

Much is discussed about the wealth tax. In the U.S., a wealth tax has never been implemented. We can argue the pros and cons but, for this article, we want you to understand that Spain, France, Norway and Switzerland do. This tax is designed specifically for people who hold significant worldwide wealth, but are resident in Spain. This has pushed wealthy individuals to live in Spain on the 90 day rule with no residency.

The tax amount is calculated against the declared worldwide assets held after a tax-free allowance of €700,000 is applied for non-resident in Spain. Spain does not recognize Foreign Trusts as a financial instrument, in most cases. You will need to understand your tax treatment in Spain.

The tax does not exceed 60% of your annual income but that can still take quite a chunk if you are not familiar with paying this every year. According to European Tax Blog, "A key difference in tax treatment is that non-residents cannot apply the so-called “tax shield”. Basically, the “tax shield” allows Spanish-resident taxpayers to reduce their Wealth Tax liability (by up to 80%) so that the sum of what they have to pay in Personal Income Tax and Wealth Tax does not exceed 60% of their annual income. In principle, this rule is not applicable to non-Spanish residents, who are not liable for Personal Income Tax in Spain. In a recent decision (appeal no. 432/2020), the High Court of Justice of the Balearic Islands ruled, based on the CJEU’s case law, that preventing non-residents from applying the joint limit for Personal Income Tax and Wealth Tax also constitutes unlawful discrimination that is forbidden by the EU law."

If you want to live in Spain full-time and want to structure your assets. Here's a link to see Spain's list of jurisdictions where you will have issues with the Spanish tax authorities if you hold any assets or interests in companies >> List of Non-Cooperative Jurisdictions. For a more comprehensive conversation, we recommend you reach out to Maria Garcia, a tax attorney who specializes in international tax law. She is able to provide reliable advice and file any paperwork needed in coordination with your US accountant. To learn more about Maria's law firm, click here >> MG Abogados.

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9 abril, 2024

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