You have probably just arrived in Spain or you are interested in moving to Spain soon. But when it comes to moving, it is important to know as much as possible about your new country. Customs, traditions, laws and, of course, taxes. Knowing what you will have to pay in taxes in your new destination is essential to avoid running into legal problems in the future. Do you know how taxes work in Spain? Stay with us because at People Global Relocation we have prepared a post to explain everything you need to know about them. Let’s get started!
Classification of taxes
First of all, we should know that taxes in Spain are divided into two different groups. There are direct taxes and indirect taxes, and all of them are managed by the Tax Agency.
Direct taxes
Direct taxes are those that are levied on the economic capacity of each individual. In other words, they are also known as personal taxes, as they will depend on each person’s situation. An example of this type of tax is personal income tax (IRPF), which we will discuss later.
Indirect taxes
Indirect taxes are taxes levied on goods and services. Of the indirect taxes, the most famous is VAT, which we will also explain later.
The main taxes in Spain
- Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas, IRPF): this is a tax levied on the income of residents in Spain for one year. This tax works by brackets, which means that the higher the income, the higher the amount of tax.
- Non-Resident Income Tax (IRNR): in the same way that the IRPF is applied to residents in Spain, the Tax Agency also imposes a tax on income obtained in Spain by people whose habitual residence is not in the country. In other words, for non-residents.
- Wealth Tax: it is a direct tax. In other words, it is levied on the net wealth of individuals. However, it works differently in each autonomous community.
- Value
Added Tax (VAT): undoubtedly the most famous tax. VAT is divided into
three different rates:
- General VAT – 21%: this is the VAT rate that is usually applied to most products: clothing, footwear, technology, health products…
- Reduced VAT – 10%: this VAT rate is applied to all foodstuffs, except those with a super-reduced VAT rate.
- Super-reduced VAT – 4%: this applies to products considered basic necessities. Examples are bread, milk, eggs, or some fruit and vegetables. It also applies to books, non-advertising newspapers and magazines, medicines for humans, wheelchairs or prostheses for disabled people and social housing.
- Donations and Inheritance Tax: this is a direct tax that people who receive an inheritance or a donation have to pay during the first 6 months. In Spain, it works differently in each autonomous community.
- Special taxes: these are indirect taxes and are applied to certain products such as alcohol or tobacco.
- Real Estate Tax: this tax is compulsory in all the autonomous communities and is managed by the local council of each municipality. As its name suggests, it is levied on the value of real estate and is paid annually.
We hope you have found this post useful and that it will help you in your future dealings in Spain. Remember that we are at your disposal for any questions you may have.
You can also read other interesting posts in our blog:
– Employment rights and obligations in Spain
No responses yet