Tax Advice & Accountancy

/Tax Advice & Accountancy
Tax Advice & Accountancy2018-10-18T20:25:52+00:00

Looking for an English speaking tax lawyer or accountant
in Barcelona, Madrid or the Balearics?

Looking for an English speaking tax lawyer or accountant in Barcelona, Madrid or the Balearics?

Spain is by no means a tax haven, but there is always something you can do to pay less taxes.

To minimize the tax burden for you and your company, you need a good English speaking tax advisor to set it all up, and then a good English speaking accountant to carry on the great work on a daily basis.

We will be happy to tell you everything you need to know regarding the international tax planning, subsidies, government programs for reduced taxes for certain activities, tax residency, the wealth tax in Spain, the Beckham law, Spanish accountancy rules, and anything else that may be of interest to your business or you directly.

Watch our Tax Experts explain it all here

FAQs on Spanish taxes

Are there any special rules for companies investing in real-estate?2018-06-26T14:38:05+00:00

1.1. ITP reduction

In some autonomous communities a company operating in the real estate business may be entitled to ITP reductions. For example in Barcelona and the rest of Catalonia, you can get a discount of 70% of the property transfer tax if the following requirements are met:

– The property is acquired by a company, whose main activity is real estate development.
– The property is for residential use only.
– The property is sold within a five years’ term from the purchase.
– The property will not be rented out.
– The specific accountancy rules are followed (for example the property is defined as a current asset instead of a fixed asset).

1.2. Company tax reduction, if more than eight units for three years

For a company, that’s main business activity is renting out apartments located in Spain, the government offers the possibility for corporate tax reduction. If the following requirements are met, the company may be entitled to a discount of 85% of the company tax:

– The number of apartments to be leased must be eight or more
– The apartments remain leased for at least three years

1.3. SOCIMI

SOCIMI is a special tax regulation for listed real-estate companies in Spain. In order for SOCIMI regulations to be applied, the company must invest at least 5 million euros in real estate. Also, there are some other strict requirements that must be fulfilled. The SOCIMI regulations offer a 0 % company tax rate for these entities.

What taxes does a Spanish company need to pay?2018-06-26T14:36:03+00:00

1.1. VAT

Company that sells services and/or goods is liable to collect and pay the value-added tax. (Impuesto sobre el Valor Añadido, also known as IVA). Since the year 2012 the general VAT rate in Spain has been 21 %. However, the Spanish VAT regulations contain a number of exceptions to the general VAT rate.

The VAT is not applicable in the Canary Islands.

1.2. Company tax

The corporate tax rate in Spain is 25 % of the world-wide profits of the company. Also, other taxes may apply to your company’s operations depending on the business your company carries out.

As an exception to the rule of 25% company tax, if your company has been established after 1st of January 2015, your company is entitled to pay taxes for a 15 % tax rate for the first two tax years after starting to make profit.

What are the personal taxes for non-tax residents in Spain2018-06-26T14:33:23+00:00

1.1. Non-resident income tax

If you are in Spain for less than 6 months (183 days) a year, you are considered a non-resident in Spain and you would only pay your taxes in Spain for the income you receive from here and for the assets you have in the Spanish territory.

 

1.2. Inheritance tax and gift tax

When it comes to inheritance for a non-Spanish resident, the heir is liable to pay inheritance tax for the assets they receive as inheritance in Spain under the Spanish inheritance and gift tax (Impuesto sobre Sucesiones y Donaciones, also known as ISD). Also, non-Spanish residents are liable to pay gift tax in Spain when receiving assets located in Spain.

The Spanish inheritance and gift tax is determined on a national level and the scale is progressive, however, the regions have the right to increase or decrease the tax burden. Also, the amount of taxes to be paid depend on the relationship to the deceased.

 

1.3. The “Beckham law”

The special tax regime for people who move to Spain for work was nicknamed the “Beckham Law”, as the name suggests, this tax regime was set up at the time football player David Beckham was contracted by Real Madrid FC in 2003. He “miraculously” saved around 25% on income tax thanks to this new law. The aim of this regime was not just to attract football players, but in general highly valued employees, for example scientists, researchers, directors, etc. Actually, the sportsmen are currently excluded completely from the application of this law.

The essence of the law is that when you move to Spain to work here, you have the option of being taxed as non-tax resident in the tax year you acquire the tax residency and the following five years. Without the Beckham law, you automatically become a tax resident if you live in Spain for more than 6 months in a tax year.

If you opt for the Beckham regime, instead of being taxed as the locals with a tax rate between 19 and 45 percent of your worldwide income, you will be taxed in Spain under the Non-Resident Income Tax with a reduced tax rate. This rate is 25% for net-income up to 600,000 euros; and 45% for net income over 600,000 euros.

To summarise, the Beckham regime will be favourable if your net salary is between 60.000 and 600.000 euros per year.

Another advantage of the Beckham regime is that any wealth tax that may still exist in some parts of Spain would not be applied to any wealth you have outside of Spain. The Beckham regime also liberates you from the obligation of filling in the infamous form 720, that all the tax residents in Spain need to fill in to inform the authorities about any assets they have outside of Spain.

The main three requirements to obtain the Beckham regime and remain a non-resident are the following:
• You have not been resident in Spain during the past 10 years.
• You came to Spain to work in a Spanish company, where you or your family members do not own more than 25% in total.
• You apply for the regime at the latest 6 months after your work contract is officially registered.

 

1.4. Taxes when buying and owning a property in Spain

The property purchase: The type and amount of taxes to be paid at the moment of acquisition depend on the autonomous community where you buy, as well as the type of property you buy:
– dwelling vs. business premises;
– new vs. second hand;
– property for private use vs. property business use.

Each case is different, and instead of explaining all the details and variants here, we’ll be happy to calculate the taxes for you free of charge, feel free to contact us here.

Once you or your company are the legal owner of the property, you are required to pay annual real estate tax IBI (Impuesto Sobre Bienes Inmuebles). The tax rate differs regionally.
If you rent out the property, you will pay a tax on your rental income. For European tax residents the tax is 19% on the net income and for Non-European residents 24% on the gross income.

If you keep the apartment empty (do not live there and do not rent it out), a small holiday home tax of a few hundred euros annually (depends on a cadastral value of the property) applies to the property.

1.5. Wealth tax for assets located in Spain

In certain autonomous communities, if you possess assets in Spain of more than 700,000 / person the end of the year, you may be subject to the wealth tax (Patrimonio). As a non-resident, you are not liable on the assets located outside of Spain.

What are the personal taxes for Spanish tax residents?2018-06-26T14:29:45+00:00

1.1. Personal income tax

As in most countries, the most common tax to be paid in Spain is the personal income tax (la Renta de las Personas Físicas, also known as IRPF).

You must pay income tax from the income that includes among others:

– Income from work (salary, pension)
– Capital income (dividends, interests, etc.)
– Economical activities (mostly generated by self-employed persons)
– Patrimonial profits and losses (derivatives or patrimonial transmissions)

Person that resides in Spain is obligated to present the IRPF tax declaration, with the exception of the persons that have low income. The level of low income is determined annually, and in 2018 it is x euros.

When exceeding the low income limit, the amount of tax to be paid varies annually and is different in all the autonomous communities. It is always progressive (the higher the income the higher the tax percentage) and typically ranges between 20% (low income) and 50% (high income).

 

1.2. Taxes when buying and owning a property in Spain

The property purchase: the type and amount of taxes to be paid on the moment of acquisition depend on the autonomous community where you buy, as well as the type of the property you are buying:
– dwelling vs. business premises;
– new vs. second hand;
– property for private use vs. property for business use.

Each case is different, and instead of explaining all the details and variants here, we’ll be happy to calculate the taxes for you free of charge, feel free to contact us [here].

Once you or your company are the legal owner of the property, you are required to pay annual real estate tax IBI (Impuesto Sobre Bienes Inmuebles). The tax rate differs regionally.
If you rent out the property, you will pay a tax on your rental income. For European tax residents the tax is 19% on the net income and for non-european residents 24% on the gross income.

If you keep the apartment empty (do not live there and do not rent it out), a small holiday home tax of a few hundred euros annually (depends on a cadastral value of the property) applies to the property.

1.3. Gift tax

Are you planning to transfer money or buy an apartment in Barcelona for your son or maybe for your special friend? Just bear in mind that it is not free of charge in Spain, the gift tax may apply. These taxes are regional and depend on the autonomous community. In most communities, if you prepare the deeds correctly before a Notary Public, within the established timeframe, and following the rest of the procedure by the letter, you may get significant discounts. In Catalonia for example, reductions may apply when parents buy the first apartment for their daughter or son for her or him to live there.

 

1.4. Inheritance tax

Regarding the inheritance, you can carry out thorough tax planning now based on your current situation, but you should keep in mind, that the laws applicable to the inheritance are the ones in force at the moment when the inevitable happens. And yes, the inheritance tax laws change frequently. Also, the location of the assets, the country of residency of the deceased and the country of residency of the heir when the time comes, affect the taxes significantly.

There is one thing that does not change and that we warmly recommend you to do if you have properties in Spain: make a Spanish Will for your properties here. It can be an instrument for tax planning, and in any case greatly saves time, money and future headaches for your heirs when they try to register your properties in their names.

 

1.5. Wealth tax

In certain autonomous communities, if you possess assets worth more than 500,000 – 800,000 euros at the end of the tax year, you are subject to the wealth tax (Patrimonio). As a resident in Spain, you are liable on the worldwide assets.

 

1.6. The infamous “Modelo 720’’

If you are a resident of Spain, you are required to declare your assets outside of Spain using the Modelo 720 annual report in the event the value of the assets / category (bank accounts, shares, securities, properties, etc.) exceeds 50,000 euros.
The 720 does not involve any tax payments, it is purely an informative declaration to the Spanish government. If you are a tax resident in Spain and do not fill in the 720, the fines can be very high – so high that Spain was sued at the European Courts for charging abusive fines.

Tax residency – What does it mean and how can I use it – or the lack of it – to pay less?2018-06-26T14:28:25+00:00

The main rule is that you become tax resident in Spain when you live in Spain for more than 6 months (183 days) in a calendar year, and/or in general have the centre of your vital interests here, based on certain criteria.

There is no one that assigns the tax residency for you automatically. YOU will apply the residency rules as you deem convenient and declare where you are a tax resident. The country that is not content with your declaration (the one losing you as a tax resident), may request you to prove that your declaration is accurate.

If you live and work permanently in one country, you have a house there, your family lives there, and you have a local gym membership; there is nothing much you can do. Don’t get creative.

As an example, you may have the opportunity for tax planning in the following cases:

1. Regarding the tax year when you are moving from one country to another (should you move in June or July, before or after the 6 months limit?)
2. If you travel a lot, work in different countries, have houses or family in many places, etc.

Why does a tax adviser never give a straight answer to a simple question?2018-06-26T14:27:53+00:00

The most common complaint regarding tax advisors as a whole is that you never receive a clear, simple answer to a clear, simple question. The answer is always, “It depends”. Let’s clarify once and for all what does it depends on.

Risk profile
You may play it very safe and pay the maximum taxes – or in some circumstances, when the question depends on interpretation, you can choose more aggressive tax planning.
You often find tax advisors who are aggressive by nature, or tax advisers that are conservative by nature. A good one is neither – or can be both: they understand the CLIENT’s risk profile and make recommendations accordingly.

Geography
The rules for Spanish residents are different to those that apply to European residents, and different again to those that apply to people living in non-European countries. There are special rules for tax havens. In addition, with some countries we have double taxation treaties whilst with others we don’t have any.

In Spain we have 3 levels of taxes: the state level, the autonomous community level and the municipal level.

Example: a simple question: “I have an apartment in Spain and I rent it out. How much tax should I pay”. Well… a property owner living in New York with property in Madrid does not pay the same tax as a property owner living in London with a property in Barcelona.

True business or pleasure
Company assets often have more beneficial tax treatment than personal assets. So why not set up a company instead of having the assets in my name? This may have worked in the past, but over the last few years this has changed a lot in Spain and internationally. We really need to understand if what you do in Spain, for example purchase a property, is for business or pleasure. If it truly is for business, we can do a real tax planning for businesses. If not, setting up empty structures with no economical reason behind it, just for tax evasion, is a bad idea.

Personal circumstances
Taxes are related to the real-world, real businesses and real people, who have different objectives and personal situations.

An extreme example: how should I prepare the inheritance matters regarding my property in Spain? If you are a young and healthy student with a studio worth 100,000 euros, our advice would be completely different to if you were a 90 year old billionaire who owns a castle worth five million euros. Even if this is an extreme example, your personal situation always effects the answers and advice a good tax advisor gives you.

Another example: sometimes efficient tax planning is in conflict with other objectives of the client. For example certain types of residency permits oblige you to become tax resident, even if from the tax planning point of view we do not recommend that you become a tax resident. Which is more important to you: getting the residency or not paying taxes?

Client testimonials

“I have had the pleasure to work with Alejandro the past years. Technically he is a very solid worker. He is a great person and a true team player”

Stella Reventos-Clavo,

“Alejandro is an expert in the field of VAT, as well as being a conscientious and hard worker. In addition, he has gained great experience from working in prestigious international offices”

José Igancio Jiménez-Blanco,

“Alejandro is a thorough person with solid knowledge in the field of taxation and excellent skills in English. He is initiative and creative when it comes to solving the problems at hand”

Jose Ignacio Alemany Bellido,

Hi I’m Alejandro,

I’ll be happy to help you and answer your questions on Tax & Accountancy related matters.

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AvaLaw Barcelona
Rambla Catalunya 25, 1-1
08007 Barcelona, Spain
Tel:+34 934 814 349

AvaLaw Madrid
Pº Castellana, 141 19
28046 Madrid, Spain
Tel:+34 932 553 107