# Income tax rates



## serenajerome (Feb 1, 2014)

Hi all.
Hope all staying safe.
I will be moving to Malaga province December this year..
I have looked via our friend google at what the income tax rates are and get conflicting answers,some say you are allowed 5500e before you pay income tax and others say you pay tax on everything.Just trying to work out my financial situation and I will get professional advice when the time comes to submit my tax returns.
Can you enlighten me as to how much income tax I should expect to pay as a percentage. Thanks in advance


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## Lynn R (Feb 21, 2014)

The basic personal allowance for those aged under 65 is now €5550. In addition there is a general deduction against earned income (which includes pensions) of €2000. There is also an additional allowance for those on low incomes meaning that someone with an income of €14k does not pay any tax. That allowance tapers down gradually for incomes up to around €18k so that those earning over that amount don't get any additional allowance. That allowance was introduced a couple of years ago and has increased each year since, I don't know if it will next year though.

I can't find an explanation of that in English, but this article describes it in Spanish if you can run it through Google translate if necessary.

https://www.abc.es/economia/abci-si...-bajada-irpf-nomina-201807211125_noticia.html

The way tax allowances work in Spain is that the tax due is calculated on the total amount of your earnings and then the tax allowances are deducted from the total tax due.


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## serenajerome (Feb 1, 2014)

Thanks for reply I did see the 5500e allowance then another thread said yo pay from the first euro . That sounds a lot better


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## Juan C (Sep 4, 2017)

Non residents pay tax from the first euro. Example: income from a second home either actual or imputed (form 210).


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## serenajerome (Feb 1, 2014)

That’s maybe where I am getting confused .
I will be resident when I move over later this year


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## stevesainty (Jan 7, 2011)

Lynn R said:


> The way tax allowances work in Spain is that the tax due is calculated on the total amount of your earnings and then the tax allowances are deducted from the total tax due.


Also the tax allowances are calculated at the lowest rate of income tax, 19% at the moment, so (5,550+2000)=7,550 x 19% = 1,434.50 deducted from any income tax calculated. this compares with UK 12,550 x 20% = 2,510, so a difference of around 1,400 Euros with the exchange rate currently. This means you will pay about 115 euros per month more in Spain on rough figures.


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## Lynn R (Feb 21, 2014)

stevesainty said:


> Also the tax allowances are calculated at the lowest rate of income tax, 19% at the moment, so (5,550+2000)=7,550 x 19% = 1,434.50 deducted from any income tax calculated. this compares with UK 12,550 x 20% = 2,510, so a difference of around 1,400 Euros with the exchange rate currently. This means you will pay about 115 euros per month more in Spain on rough figures.


I've done my 2019 tax return online already and my bill is €168. It would be about 20 pounds for the year in the UK. But when I start to receive my UK state pension in 2 years' time my Spanish tax bill will shoot up because I'll no longer benefit from the low income allowance.
A lot depends on the exchange rate too, of course. Better exchange rate = more tax to pay!


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## Joppa (Sep 7, 2009)

Also while council tax in UK could be £2,000 or more for an average home, the Spanish equivalent IBI can only be a few hundred euro.


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## Barriej (Jul 23, 2012)

stevesainty said:


> Also the tax allowances are calculated at the lowest rate of income tax, 19% at the moment, so (5,550+2000)=7,550 x 19% = 1,434.50 deducted from any income tax calculated. this compares with UK 12,550 x 20% = 2,510, so a difference of around 1,400 Euros with the exchange rate currently. This means you will pay about 115 euros per month more in Spain on rough figures.


Have you got that right? 

Here in the UK you pay NO tax on the first £12.500 and then 20% on every £ earned thereafter up to 40k something then 40% on the difference. 

My wife has a low paid job here in the UK and doesn't earn £12.500 so she pays no tax or Ni. 

Im planning on taking the lowest amount from my Uk pension to keep me below the Spanish tax threshold and living off the difference we need from my savings. Once I get my Uk pension (in 2029) I will only use that money so would hope to pay no Spanish tax on it at all.


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## stevesainty (Jan 7, 2011)

Barriej said:


> Have you got that right?
> 
> Here in the UK you pay NO tax on the first £12.500 and then 20% on every £ earned thereafter up to 40k something then 40% on the difference.
> 
> ...


Yes, it is correct although the way the Spanish apply the allowances is different to UK. They work out the tax due with no allowances and then take off the value of the allowances at the lowest tax rate of 19%. In UK they take the allowances off the total income and then apply the tax at the appropriate rate.


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## stevesainty (Jan 7, 2011)

As a previous poster has already stated, the local taxes in Spain. are very much lower than in UK.
If you live in a country then I believe you should contribute to that economy by paying your dues. By all means mitigate the amount that you pay by making full use of the allowances, but not by evasion.
As the UK and Spain become more joined up tax wise, all your wealth and income will become more transparent. The fines for infringements in Spain are very draconian so be very careful.


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## mrypg9 (Apr 26, 2008)

I was under the impression that there will be less collaboration post-Brexit, maybe erroneously.

Yes, fines are horrendous. I had a fine of 36000 euros imposed for four years' alleged non-payment. Mistake on the part of TA. My accountant only told me about the one year 9000 euro fine until he had successfully resolved the matter. He said that as he knew it was a mistake on the part of TA I wouldn't have to pay a cent.


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## xabiaxica (Jun 23, 2009)

Joppa said:


> Also while council tax in UK could be £2,000 or more for an average home, the Spanish equivalent IBI can only be a few hundred euro.


Yes, swings & roundabouts on the IBI, but nothing to do with income tax, & only property owners pay IBI - unless a tenant agrees to on behalf of the owner - but it isn't the tenant's responsibility to pay it


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## Joppa (Sep 7, 2009)

Also in Spain there is an option of joint income tax declaration, which may cut your overall tax bill if, for example, your spouse has no or little income. Personal allowance is 5,550 euro, and if you file jointly, you get extra 3,400 euro. 5,550 euro rises to 6,700 euro for those aged 65+, and to 8,100 euro for 75+. There are further allowances for disability. Only one lot of 2,000 euro deduction for 'other expenses' can be made for joint declaration. So you need to work out if you are better off with either separate or joint declaration. You also get extra allowances for live-in children (even for adult if they earn 8,000 euro or less), and for elderly dependants. 
I strongly advise you to use an accountant or experienced gestor, as mistakes can be fined heavily (typically 150% of amount owed), until you become thoroughly familiar with Spanish tax law as it applies to your personal situation.


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## Lynn R (Feb 21, 2014)

Joppa said:


> Also in Spain there is an option of joint income tax declaration, which may cut your overall tax bill if, for example, your spouse has no or little income. Personal allowance is 5,550 euro, and if you file jointly, you get extra 3,400 euro. 5,550 euro rises to 6,700 euro for those aged 65+, and to 8,100 euro for 75+. There are further allowances for disability. Only one lot of 2,000 euro deduction for 'other expenses' can be made for joint declaration. So you need to work out if you are better off with either separate or joint declaration. You also get extra allowances for live-in children (even for adult if they earn 8,000 euro or less), and for elderly dependants.
> I strongly advise you to use an accountant or experienced gestor, as mistakes can be fined heavily (typically 150% of amount owed), until you become thoroughly familiar with Spanish tax law as it applies to your personal situation.


If you make an appointment and go to Hacienda for them to complete your return, they use the income figures you supply and then show you the comparison to allow you to decide whether it's more beneficial to submit a joint declaration or individual ones. We did a joint one the year after my husband had started to receive his pension as I still had no income at that stage, and individual ones thereafter. They ask you the questions about whether you have any children or elderly relatives living with you. I've always found them very helpful whenever I've had dealings with them.

Using an accountant or gestor is advisable if you have more complicated financial affairs, I think, but if someone just has pension income, for instance, either going to Hacienda or doing it yourself online is very simple and costs nothing. The only year I used a gestor was when I'd sold my house and bought another property and I wanted to make sure the capital gains part of the return was completed properly (above my pay grade!).


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## Lynn R (Feb 21, 2014)

mrypg9 said:


> I was under the impression that there will be less collaboration post-Brexit, maybe erroneously.


I don't think so, Mary. Hundreds of countries signed up to the automatic exchange of financial information agreement, it wasn't an EU thing.


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## serenajerome (Feb 1, 2014)

Thanks for all posts


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## mrypg9 (Apr 26, 2008)

Lynn R said:


> I don't think so, Mary. Hundreds of countries signed up to the automatic exchange of financial information agreement, it wasn't an EU thing.


Oh well, I have nothing to hide


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## marios (Apr 16, 2016)

Lynn R said:


> I've done my 2019 tax return online already and my bill is €168. It would be about 20 pounds for the year in the UK. But when I start to receive my UK state pension in 2 years' time my Spanish tax bill will shoot up because I'll no longer benefit from the low income allowance.
> A lot depends on the exchange rate too, of course. Better exchange rate = more tax to pay!


Lynn, can you tell me what conversion rate they used for pounds to euros average rate for 2019 thanks.


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## Lynn R (Feb 21, 2014)

marios said:


> Lynn, can you tell me what conversion rate they used for pounds to euros average rate for 2019 thanks.


I used 1.1393 when I did my declaration for 2019.


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## Juan C (Sep 4, 2017)

From CAB Spain:- 


For tax year 2019, so RENTA declaration 2020

Reference date is Tuesday 31st December. Reference rate for the day was £0.85080 per €1 or €1.1753 per £1.sterling

Average rate for 2019 was £0.87777 or €1.13925 per £ sterling

Rate for Modelo 720 is €1.1753 per £1


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## marios (Apr 16, 2016)

But you don't choose the rate it is surely the tax agencia?.


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## marios (Apr 16, 2016)

Juan C said:


> From CAB Spain:-
> 
> 
> For tax year 2019, so RENTA declaration 2020
> ...


Juan, so Income tax rate on my uk pension earnings is 1.1753 ?.


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## Juan C (Sep 4, 2017)

Mario. This is the web page


https://www.citizensadvice.org.es/faq/exchange-rate-renta-tax-declaration-2015-2016-2017-2018-2019/


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## marios (Apr 16, 2016)

Thanks Juan


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## noor1 (Apr 25, 2020)

hi
Marginal Rates: For tax year 2020, the top tax rate remains 37% for individual single taxpayers with incomes greater than $518,400 ($622,050 for married couples filing jointly). The other rates are: 35%, for incomes over $207,350 ($414,700 for married couples filing jointly


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## stevesainty (Jan 7, 2011)

The average UK/Eur exchange rate for 2019 to be used for tax returns in 2020 is 1.139727.
Tax rates in Spain are split, not a lot of people know this, between the state and the province.

In Comunidad Valencia the rates for 2019 (2020 declaration) are

State
0-12,450 9.5%
12451-20,200 12%
20,201-35,200 15%

Comunidad Valencia

0-12,450 10%
12,451-17,000 11%
17,001-30,000 13.9%

Others can be found here
https://www.spenceclarke.com/wp-content/uploads/guides/spanish-tax-guide-2019.pdf

Also, apart from the 2,000 Eur general tax allowance which is deducted from the annual income before calculating tax, all other allowances are deducted from the calculated tax at the rate of 19%.

The tax is calculated using all the bands, not just the highest rate for the income.

That is to say annual income-2,000 then calculate tax
all allowances added together x 19% then deducted from the calculated tax to pay.


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