# Spain tax allowances? And capital gains?



## Tortuga Torta (Jan 23, 2016)

I'm American, thinking of moving to Spain at some point (with my Spanish wife), but had a question about how taxes are done there. I found something about how allowances are done, and posted a question on the expat taxes forum, but a moderator suggested I also post it here. 

I have two related questions:

1) Has to do with verifying what I now suspect is _incorrect_ information about how "deductions and allowances" are done in Spain:

I found this (from Blevins Franks' website):



> *Deductions and allowances*
> 
> Various deductions and allowances are available for Spanish residents, such as payments into the Social Security system, contributions to a qualifying pension scheme and alimony and maintenance payments.
> 
> ...


So, first, just to understand this: Let's say my wife and I have €6,000 of income from capital gains. I am taxed at 19% on that (which is the current rate up to that amount), so the tax due is €1,140. But there is an allowance of €5,550 plus another €3,400 for the spouse, or €8,900 total, and that is a tax credit. Since €1,140 is well under the €8,900 allowance credit, if that were all our taxable income, we'd have no tax due, correct?

And we'd only have net tax due once our taxes surpassed that €8,900 allowance, correct?

As I said, that can't be correct, can it? Surely the €5,550 + €3,400 for the spouse is a tax _deduction _(meaning it reduces your taxable income) rather than tax _credit_, right? That is what other web sites seem to be saying.

If this is a mistake, it's a big one. Tax credits are far more helpful than tax deductions. Or maybe I'm just not understanding something here.

2) Does anyone know if Spain uses the (apparently common worldwide) "basis" + "capital gain" method in computing capital gains? That is, if you have €100k in an stock, and it gets 5% in gains, you now have €105k. If you sold that stock completely, you'd get €105k in cash. But you'd only pay taxes on €5k of it, which is 4.76% of it, because €100k of it was your money and you're just transferring your capital from a stock to a bank account. 

Thanks for any insight on these two issues you can provide.


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## Nomoss (Nov 25, 2016)

If you wade through this site you can get all the information from the horse's mouth, so to speak. You can select the language top right.

https://www.agenciatributaria.es/AEAT.internet/en_gb/Inicio.shtml

Actual tax forms are only in Spanish, but there are instructions on how to complete them together with basic details of how the taxes are calculated, which I am sure at least your wife can inderstand

EDIT: Sorry, had a quick look and it seems you can only get information if you have an electronic ID. Nothing is ever simple in Spain.

I think Blevins Franks means that the tax allowances (which in Spain are deducted form the initial calculation of tax due) are equivalent to the deductions for the figures they quoted (presumably for the UK)


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## Tortuga Torta (Jan 23, 2016)

Nomoss said:


> I think Blevins Franks means that the tax allowances (which in Spain are deducted form the initial calculation of tax due) are equivalent to the deductions for the figures they quoted (presumably for the UK)


Can you unpack this a bit with an example? Or corroborate or refute my example above?


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## Nomoss (Nov 25, 2016)

Sorry, I can't. Details for completion of the forms and of the tax calculations used to be sent with the forms. I hoped to give you a link to download these, but couldn't find one available without an electronic "key", and mine was discarded, with an old computer, when we moved to France permanently.

All I can say is that the allowances are nowhere remotely near those you quoted above.

I'm sure someone here can be more helpful.

EDIT: The allowances quoted by BF are the amounts of income which are totalled before Income Tax is payable. Nothing to do with CGT.

CGT is payable at a fixed rate on the gain made when the asset is sold, as in most other countries.


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## Williams2 (Sep 15, 2013)

Nomoss said:


> If you wade through this site you can get all the information from the horse's mouth, so to speak. You can select the language top right.
> 
> https://www.agenciatributaria.es/AEAT.internet/en_gb/Inicio.shtml
> 
> ...



Succession Tax or what we know in the UK as Inheritance Tax is missing from the English version of the Agencia Tributaria website.


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## Nomoss (Nov 25, 2016)

As no-one else has responded, this information might be more useful than my previous input.
https://www.expatica.com/new/es/finance/taxes/tax-system-471614/


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## Tortuga Torta (Jan 23, 2016)

Nomoss said:


> As no-one else has responded, this information might be more useful than my previous input.
> https://www.expatica.com/new/es/finance/taxes/tax-system-471614/



Thanks, but that site doesn't say anything about the allowances other than that they exist and the basic amount (5500 and 3400 for spouse...which _are_ the correct figures, I'd think, since every web site online uses these). 

I found a Spain tax calculator online and it corroborated my thought that the allowances are merely deductions, not credits, in contradiction of Blevins Franks. (It also indicated that capital gains tax was not reduced by the allowances, which is too bad). 

I may just write Blevins Franks and challenge their statement. If it's wrong, it really should be corrected on their website.


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## CapnBilly (Jun 7, 2011)

Tortuga Torta said:


> Thanks, but that site doesn't say anything about the allowances other than that they exist and the basic amount (5500 and 3400 for spouse...which _are_ the correct figures, I'd think, since every web site online uses these).
> 
> I found a Spain tax calculator online and it corroborated my thought that the allowances are merely deductions, not credits, in contradiction of Blevins Franks. (It also indicated that capital gains tax was not reduced by the allowances, which is too bad).
> 
> I may just write Blevins Franks and challenge their statement. If it's wrong, it really should be corrected on their website.


There’s no point in writing to Blevins as the information they provide is correct. This is because the credit is only given at the base tax rate. The calculation carried out by Hacienda works out tax on the taxable amount, which is calculated before any personal allowances, although it does deduct some allowances including those based on earned income. Any personal allowance is the credited AT the basic rate only.

So, in circumstances where the taxable amount is within the basic rate tax band (€12,450) then there is no difference whether the amount is credited or deducted. However, if the taxable amount is higher than the basic rate tax band, then some of it will be taxed at the higher rate, and consequently the calculation only works if it is credited. The net tax payable is calculated as a percentage of total taxable income.


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## Tortuga Torta (Jan 23, 2016)

CapnBilly said:


> There’s no point in writing to Blevins as the information they provide is correct. This is because the credit is only given at the base tax rate. The calculation carried out by Hacienda works out tax on the taxable amount, which is calculated before any personal allowances, although it does deduct some allowances including those based on earned income. Any personal allowance is the credited AT the basic rate only.
> 
> So, in circumstances where the taxable amount is within the basic rate tax band (€12,450) then there is no difference whether the amount is credited or deducted. However, if the taxable amount is higher than the basic rate tax band, then some of it will be taxed at the higher rate, and consequently the calculation only works if it is credited. The net tax payable is calculated as a percentage of total taxable income.


Sorry, I still don't understand this. For example, take this sentence from what you wrote: 



> So, in circumstances where the taxable amount is within the basic rate tax band (€12,450) then there is no difference whether the amount is credited or deducted.


So, let's say a person earned exactly €12,450. If I'm understanding it correctly, the tax rate for that income is the first band and is 19%. Let's run things first with the allowance as a _deduction_:

€12,450 - €5,500 = €6,950 taxable income. 
€6,950 * 19% = *€1,320.50 tax owed.*

Now let's run it as if the allowance were a tax _credit_: 

€12,450 in taxable income. 
€12,450 * 19% = €2365.5 in tax.
€2365.5 in tax - €5,500 tax credit = *€0 tax owed.*

€1,320.50 is a lot more tax owed than €0, right?


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## Lynn R (Feb 21, 2014)

None of the information from the links provided seems completely accurate, because they both fail to mention the €2,000 general allowance or the additional allowance for those on low incomes (which would affect someone whose income is exactly €12,450 as per Tortuga Torta's most recent example). Both of these are only applicable to earned income (including pensions), I believe, rather than investment income or capital gains.

The low income allowance presently means that people with an income of €12k per year pay no income tax (the allowance covers incomes up to approx €14.5k but tapers off gradually for incomes between €12k and €14.5k). This is to be extended next year (for 2018 incomes) to incomes of up to €14k being exempt from IRPF and those whose income is up to €17k paying less IRPF.

http://www.eleconomista.es/economia...a-rebaja-del-IRPF-a-su-salario-o-pension.html

Agencia Tributaria used to have a very handy tax simulator on their website which allowed you to input your personal details and income, and told you how much tax you would be liable to pay. It was scrapped last year, which is a pity.


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## Lynn R (Feb 21, 2014)

This link does include both the allowances I mentioned.

A guide to Spanish income tax in 2018.


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## Pesky Wesky (May 10, 2009)

Sorry, haven't read the whole thread...Has anyone given a link to this site?
Advoco : Free Advice Centre
Their articles are on the ball


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## Williams2 (Sep 15, 2013)

Pesky Wesky said:


> Sorry, haven't read the whole thread...Has anyone given a link to this site?
> Advoco : Free Advice Centre
> Their articles are on the ball


Looks good but found wanting again on Spanish Succession or Inheritance tax.


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## Pesky Wesky (May 10, 2009)

Williams2 said:


> Looks good but found wanting again on Spanish Succession or Inheritance tax.


But for the purposes of this thread?


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## CapnBilly (Jun 7, 2011)

Tortuga Torta said:


> Sorry, I still don't understand this. For example, take this sentence from what you wrote:
> 
> 
> 
> ...


The reason you don’t understand it, is that you are comparing different things. In the example you give you are trying to offset the personal tax allowance against tax payable on gross income. The correct calculation is to credit the tax amount on the personal allowance @19%, so the credit is €1,045, not €5,500 (and in fact the correct amount is €5,550). So, in your example the tax payable is the same.


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## Alcalaina (Aug 6, 2010)

Williams2 said:


> Looks good but found wanting again on Spanish Succession or Inheritance tax.


Possibly because each autonomous community has their own rules and rates. For example, here is the situation in Andalucia (I assume it's OK to link to Blevins Franks?)

https://www.blevinsfranks.com/news/article/spanish-succession-tax-reforms-andalucia-2018


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## uk03878 (Jul 4, 2018)

Alcalaina said:


> Possibly because each autonomous community has their own rules and rates. For example, here is the situation in Andalucia (I assume it's OK to link to Blevins Franks?)
> 
> https://www.blevinsfranks.com/news/article/spanish-succession-tax-reforms-andalucia-2018


Their book is quite good as well (costs £7)


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## Williams2 (Sep 15, 2013)

uk03878 said:


> Their book is quite good as well (costs £7)


Thanks and here's a little 'in joke' between me Stevesolar and uk03878 - The Royal Observer Corps,
marches on !! even though their ROC Posts have long since fallen into disuse or been snapped
up by Cold War enthusiasts.
HMRC are still preserving your allowances from the days you were defying Brezhnev's missiles
from a ROC Post, somewhere in the British Countryside.


HMRC - Tax treatment of members of The Royal Observer Corps


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