The time is unfortunately approaching when Hacienda, the Spanish tax authority, will expect your annual income tax return for 2015 (“La Declaración de Renta”). For many this is a somewhat trying time but David Cook, owner of Spain Accounting in Barcelona, gives us some practical advice about what needs doing and may even save you some tax.
What has to be declared in this annual return? Before the deadline of the end of June a tax resident in Spain in 2015 has to declare all income earned over the year, even from abroad. Income includes salary from a job, freelance (autónomo) earnings, interest or dividends, property rental and capital gains
Do I have to file? Are there any exceptions? There are exemptions for very low incomes and, most importantly, filing is optional if your sole source of income is a salary from a single Spanish employer, amounting to less than €22,000. However, if you think you’ve paid too much tax you have to formally claim the refund. Hacienda doesn’t do this automatically - you have to ask for your money back!!
Will Hacienda prepare the return for me? Yes, if you queue up at a tax office or request a draft return (borrador) from Hacienda through their website. However, be warned that this “borrador” will only include the limited information that Hacienda has on their database for your Spanish income and property. And as they may not be aware of your full personal circumstances you could miss out on certain tax breaks and deductions if you rely on their figures
What deductions can be offset against my income? Apart from the personal/marriage allowance, deductions also exist for children and dependant relatives. Other important deductions may apply:
- mortgage relief on your main residence
- contributions to a “Plan de Pensiones”
- business expenses for registered autónomos
- rent paid by low-income earners
- time spent abroad for your employer
Less important ones include life assurance, certain improvements to your home and charitable donations
Does my husband/wife need to file too? If they had any income they’ll probably need to but if they don’t it’s always in your interest to include them as the marriage allowance will reduce your tax bill
How do I settle any tax due? You can pay in one go at your bank or caixa or choose to pay in two instalments by direct debit, end of June and in November. To take advantage of this however you must file before the deadline. In addition, you can make a formal request to Hacienda to pay off what you owe in several instalments
How long do they take to make refunds? In a simple case they’re normally transferred to your bank account within 3/4 months of filing. However this is not guaranteed and much depends on the complexity of the individual’s circumstances and sources of income
As an expat is the “David Beckham” law applicable to me? Only if you’ve applied formally to be taxed under this special non-resident regime. And Hacienda only grants this dispensation if you have an employment contract and very specific conditions are met
Does a non-resident need to file too? A non-resident only needs to file when they have certain income arising in Spain. Main income sources for a non-resident would be:
- an owned property in Spain (this will be either genuine income when rented or, if left empty, an imputed income based on the property’s tax value)
- capital gain on the sale of a Spanish property
- employment income under the “David Beckham” regime
- a Spanish pension
Note that the non-resident tax return is completely different to the normal Renta
Is the Wealth Tax applicable to me? The Catalan Government re-introduced the “Impuesto de Patrimonio” or Wealth Tax some years ago but fortunately the tax only hits the wealthiest. For residents in Catalunya the tax starts when the net value of your assets exceeds €500,000 (note however that in the rest of Spain important variations from this will exist). The amount taxed is computed after loans and mortgages and your main residence in Spain is very favourably treated. If you believe the tax may be applicable to you please consult Spain Accounting for more information
Can you advise me on how to file correctly? Spain Accounting specialises in helping foreigners with their personal and business tax issues and they’d be delighted to offer email advice in simple situations. For more complex queries a meeting would be advisable.
This article was prepared in March 2016 by David Cook of Spain Accounting.