Taxes In Spain

Sunny days, stunning beaches, happy people…

A low cost of living, tons of cheap property, and tasty food…

Healthy living, safe streets, and virtually free health care…

Spain offers the best bang for your buck in Europe—and the sun-soaked city of Valencia is our choice for the World’s #1 Retirement Haven for 2025.
Spain has high marginal tax rates but low costs of living, and even has expat tax breaks designed for the rich and famous that you may be able to avail of, too. Still, the Spanish tax system is complicated and can have significant implications if you become tax resident.

Spain taxes residents on their worldwide income. There are two types of taxable income: savings taxable income (including dividends, interest, capital gains from transfers of assets, and more) and general taxable income (including all other income that is not savings taxable income).
Savings taxable income is taxed at progressive rates between 19% and 28%. This includes capital gains arising from the transfer of assets. General taxable income is taxed at progressive rates between 19% and 47%.
Here are the qualifiers for tax residency in Spain—any one of the following means you are…
• Your Primary Residence is in Spain.
• Your Primary Activity / Majority of work is in Spain.
• You spend 183 days or more in Spain in any tax year.
• Your spouse and or dependent children live in Spain.
Next, some key points on taxes in Spain…
• Tax residents are taxed on foreign pensions at the normal marginal rates above but you can get a tax credit for any taxes paid to the IRS and deduct it from your Spanish tax bill.
• Spain has taxation agreements with the U.S. and Canada.
• Spain is an ideal snowbird destination, as non-residents’ income tax rates are generally lower.

And some of the benefits your tax dollars in Spain grant you…

• Free education at first and second level; greatly discounted third level fees.
• Free or very low cost health care.
• Maternity leave.
• Subsidized travel.
• Free entry to museums, archology sites, and cultural events.

Spain also imposes a wealth tax on residents’ worldwide assets. Exact rates vary by autonomous community (otherwise a scale from 0.2% to 3.5% applies). Several tax reliefs are available for this including The Beckham Rule…

Originally designed to enable pro footballer David Beckham make his move to Real Madrid, the law allows expats or skilled professionals who move to Spain for work to be taxed only on their Spanish source income for the first five years.

They can also avail of reduced tax rates of 24% on any employment income from a Spanish company up to a maximum of €600,000 per year. This is a huge concession for working folks.

Bottom line, Spain’s wealth taxes and tax residence rules make it one of the more complicated tax jurisdictions but for many it’s balanced out by the lifestyle, benefits, and legal loopholes that can keep your tax bill as low as possible.

Your best move is to seek the advice of professionals in the field… you’ll find them all gathered in Valencia this September for the Live And Invest In Spain Conference. More on that, here.

Sincerely,

Con Murphy
Contributor, Simon Letter