What are the Taxes for Foreigners in Spain?

Foreigners in Spain are subjected to various taxes based on their residency status. Understanding the tax system is crucial, particularly for British expats. Here are the main taxes a foreigner might be liable to pay:

1. Income Tax: Non-residents are generally taxed on their Spanish-source income at a flat rate of 24%. However, if you are a resident, you will be taxed on your worldwide income at progressive rates ranging from 19% to 47%.
2. Wealth Tax (Patrimonio): Non-residents are liable to pay wealth tax on their Spanish assets, whereas residents pay on their worldwide assets. Rates range from 0.2% to 2.5%, and there’s an individual allowance of €700,000. Residents also get a €300,000 allowance on their main home.
3. Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones – ISD): Both residents and non-residents can be subject to inheritance and gift tax on assets or rights located in Spain. Rates range from 7.65% to 34% and vary greatly based on the autonomous community and relationship to the deceased.
4. Property Taxes: If you own property in Spain, you’ll need to pay annual property taxes regardless of your residency status. These include the Impuesto sobre Bienes Inmuebles (IBI), a municipal tax based on the property’s cadastral value.
5. Capital Gains Tax: Non-residents pay a flat rate of 19% on Spanish capital gains, while residents are taxed at a progressive rate of between 19% and 26% on worldwide capital gains.
6. Value Added Tax (Impuesto sobre el Valor Añadido – IVA): The standard VAT rate in Spain is 21%, applicable to most goods and services. Reduced rates of 10% and 4% apply to certain goods and services.

Remember that Spain has double tax treaties with many countries, including the UK, to prevent double taxation. These treaties help determine where you need to pay tax on certain types of income and gains.

Understanding the Spanish tax system can be complex, particularly for foreigners. It’s recommended to seek professional advice tailored to your circumstances. At Chorus Financial, our experts are well-versed in both Spanish and UK tax systems, and we’re here to help you navigate the intricacies of the Spanish tax landscape. For any further questions or assistance, feel free to contact us.