Filing your annual income tax
The time has unfortunately come around again when Hacienda (the Spanish tax authority) expects your annual tax return for 2012 or '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 maybe save yourself some tax.
What has to be declared in this annual return? Before the deadline of the end of June, a taxpayer resident in Spain in 2012 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 you earned less than €22,000 from one single employer. 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. However, be warned that this 'borrador' will only include the limited information that Hacienda has on their data base for your Spanish income and property. And as they’re not aware of your full personal circumstances you may 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 dependent relatives. Other important deductions are:
· mortgage relief on your main residence
· contributions to a 'Plan de Pensiones' (pension plan)
· business expenses for registered autónomos (freelancers)
· 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 have 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? Normally you pay in one go at your bank or caixa; however, you can choose to pay in two installments by direct debit, end of June and October. To take advantage of this, you must file before the deadline. In addition, you can submit a formal request to Hacienda to make payment in several installments
How long do they take to make refunds? In a simple case they’re normally transferred to your bank account within 2/3 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 to be taxed under this special non-resident regime. And Hacienda only grants this special dispensation if very specific conditions are met and you have an employment contract with a Spanish firm
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:
1. from a property in Spain (this will be either genuine income from a sub-let or, if left empty, an imputed income based on the property’s tax value)
2. capital gain on the sale of a Spanish property
3. employment income under the 'David Beckham' regime
4. 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 Government has re-introduced the 'Impuesto de Patrimonio' or Wealth Tax for 2012 and 2013. Fortunately they intend to hit only the wealthiest and the tax starts for residents in Catalunya when the net value of your assets exceeds €500,000 (important variations do exist between the different autonomous regions of Spain, however). This is after loans and mortgages and the main residence 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 tax and business issues and we’d be delighted to offer email advice in simple situations. For more complex areas a meeting would be advisable
This article was prepared by David Cook of Spain Accounting. For more information on them and their services visit www.spainaccounting.com or email firstname.lastname@example.org. David will be delighted to advise on or prepare the return for you.