# Overview of Spain taxes, including wealth tax



## Timoteo7 (Feb 15, 2016)

This is a follow-up to a 2/22 post in the Spain general questions sub-forum:

http://www.expatforum.com/expats/sp...ons-potential-american-expat.html#post9505634

I am collecting paperwork for Spain's 'Residence Visa for Retirees,' and want advance information on the taxes I'm likely to pay after I move. My impressions so far:

(*) I'll have no Spanish tax bill at all if I don't live in the country for 183+ days per year. I don't know if that would allow me to rent a year-round apartment as a home base and then travel half the year (which I might very well want to do; I'm retired!) OTOH, Spain might think I qualify as a year round resident if I pay 12 months of rent on an apartment, even if absent from it often.

(*) Taxes vary from region to region. In 2015, the rates were:

Spanish income tax rates 2015 by region (comunidad)

(*) Madrid doesn't collect a wealth tax, according to this sentence from: Spanish Wealth Tax (Patrimonio) - Spanish Property Insight

_In Madrid, the tax rate for Patrimonio is currently set at 0%, so residents of Madrid do not have to pay any Patrimonio wealth-tax._

and this 2014 post: Wealth tax will be abolished next year, but IBI to go up – DavidJackson.info

... but other regions do.

(*) Spain and the U.S. have a treaty to provide relief from double taxation. This seems to be covered in Article 24 in: https://www.irs.gov/pub/irs-trty/spain.pdf , but I am here linking a document I haven't studied.

How am I doing so far? 

And finally:

Will it be tough to find capable, English-speaking tax help once in Madrid or Barcelona? I speak Spanish, but not well enough to deal with specialized tax matters.

Thanks in advance for all feedback!


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## Bevdeforges (Nov 16, 2007)

I believe there is a Spanish-US tax treaty. https://www.irs.gov/Businesses/International-Businesses/Spain---Tax-Treaty-Documents Ah, here it is!

You'll have to read through it - but usually somewhere around section 18 or so, there is something about pensions and the "usual" approach is that pensions (at least pension paid by the government, like US Social Security) are taxable only in the source country. Just be careful because there are a few exceptions. (Check the IRS publication on Social Security benefits - they generally list the countries with exceptional rules regarding tax treatment of Social Security.)
Cheers,
Bev


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## Tortuga Torta (Jan 23, 2016)

Timoteo7 said:


> This is a follow-up to a 2/22 post in the Spain general questions sub-forum:
> 
> http://www.expatforum.com/expats/sp...ons-potential-american-expat.html#post9505634
> 
> I am collecting paperwork for Spain's 'Residence Visa for Retirees,' and want advance information on the taxes I'm likely to pay after I move.


Wow, I was just going to post a similar question, though I am a mid-career American (married to a Spaniard), not nearing retirement. I, too, wanted to get a sense of what I might expect overall. Not just the tax rules, but the _rates_, of course. In 16 years of being together my wife and I have never had any detailed discussion of the exact tax rates involved (why would we? What a boring topic). So this is quite helpful for us. Thank you!



> (*) I'll have no Spanish tax bill at all if I don't live in the country for 183+ days per year. I don't know if that would allow me to rent a year-round apartment as a home base and then travel half the year (which I might very well want to do; I'm retired!) OTOH, Spain might think I qualify as a year round resident if I pay 12 months of rent on an apartment, even if absent from it often.


Interesting. I didn't realize that. We are thinking about a part-year-in-Spain/part-year-in-U.S. lifestyle anyway.



> (*) Taxes vary from region to region. In 2015, the rates were:
> 
> Spanish income tax rates 2015 by region (comunidad)


As an American, do these seem really high to you? Or am I misreading it? Our best year, we combined made over $75k, and if it used 2015's rates here in the U.S. we would have been taxed at the 25% (marginal) rate. In Spain, if I'm understanding that chart correctly, we would have been taxed on average at _46%?_ marginal rate? We'd be aiming for Madrid, so "only" 43%, but still, that's way more than 25%! 

And currently our sorry income  is on a trajectory to be in the lowest--10%--bracket for the U.S., but that would mean a 19--24% bracket in Spain? Really?

I also have no sense of what exemptions/deductions are like in the Spanish tax system. For 2015, the current standard deduction for married filing jointly is $12,600. No idea what it might be in Spain, if at all.



> (*) Spain and the U.S. have a treaty to provide relief from double taxation. This seems to be covered in Article 24 in: https://www.irs.gov/pub/irs-trty/spain.pdf , but I am here linking a document I haven't studied.


That one I had researched before, yes, you got it right. Spain is one of only 26 or so countries in the world that have a totalization agreement with the U.S. So for freelancers, you don't have to pay double social security tax (both U.S. and Spain), and instead you just pay it to Spain.

Thanks for your help. Perhaps Americans already there might have some more feedback. Or anyone, really.

May I ask what your motivation to move to Spain is, and roughly where you are thinking of going? Thanks!


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## Tortuga Torta (Jan 23, 2016)

It occurred to me that the 43% figure for Madrid would include both "federal" and "state" (in U.S. parlance). So I left all that out!

My current state has a ~6% income tax, and let's say a 3% local income tax, so that would bring total here to 25% + 6% + 3% = 34%. Then you have to also add in Social Security and Medicare tax. What's that? About 15% right now? So should I be adding 34% + 15% to get 48% total (_marginal_) tax for U.S? 

I have no idea what the effective tax rate is. So not there to comparing apples to apples yet.


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## Bevdeforges (Nov 16, 2007)

Be careful about comparing taxes based solely on a tax rate schedule. Every country has its own rules and ways of applying that tax table to your actual income.

In the US, you take gross income, subtract various allowances and deductions to arrive at "taxable income" and then you apply the tax table rates. Compare your gross income to your AGI to line 43 on the 1040 to see what I mean.

I don't know Spain's approach to taxes, but in other European countries, what they call "taxable income" is your gross income reduced for certain social insurances. And then, you subtract various allowances and deductions from that figure. 

In France, for example, you then divide the final income amount by the number of "parts" (based on the family size), apply the tax table rates, and then multiple that figure by the number of parts to come up with the actual tax due. So, you only pay the marginal rate on one-half or one third or one fourth of your net income figure. 

Other countries have other variations to give credit for family size, age, or source of income.

Just wanted to make sure you're comparing apples to apples. But comparing tax table rates is usually not a terribly accurate way of evaluating the level of taxes.
Cheers,
Bev


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## xabiaxica (Jun 23, 2009)

Timoteo7 said:


> This is a follow-up to a 2/22 post in the Spain general questions sub-forum:
> 
> http://www.expatforum.com/expats/sp...ons-potential-american-expat.html#post9505634
> 
> ...


Just one point - if they issue a resident visa, retiree or otherwise, Spain expects the holder to live in Spain full time, so questions would certainly be asked if you didn't do so, & therefore didn't submit a tax return.

In some circumstances the number of days you spend in Spain is immaterial as far as tax residency is concerned, & it's highly likely that Spain would consider you to be tax resident, since you would have been issued a residence visa. 

If you could then prove that you weren't in Spain at least half the year, it's then likely that the visa would be revoked.


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## Bevdeforges (Nov 16, 2007)

Another point to bring up is that the "183 days per year" thing that so many expats toss around isn't always how the law actually works. I don't know about Spain, but in many countries the actual rule in the law is that you pay taxes in the country if you are considered to be "tax resident" in the country.

The 183 days is usually a rule of thumb - meaning basically that if you spend more than half the year there that you "must" be resident there. However, nearly all countries will consider you to be tax resident if you have your "primary centers of interest" in the country. What that means is a bit more fluid, but usually extends to maintaining a home, having the usual sorts of financial "centers" as bank accounts, health coverage, advisers like doctors, lawyers, bankers, investment counselors, etc. It may also be as simple as a home you return to "regularly" or where you maintain the bulk of your possessions.
Cheers,
Bev


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## xabiaxica (Jun 23, 2009)

Bevdeforges said:


> Another point to bring up is that the "183 days per year" thing that so many expats toss around isn't always how the law actually works. I don't know about Spain, but in many countries the actual rule in the law is that you pay taxes in the country if you are considered to be "tax resident" in the country.
> 
> The 183 days is usually a rule of thumb - meaning basically that if you spend more than half the year there that you "must" be resident there. However, nearly all countries will consider you to be tax resident if you have your "primary centers of interest" in the country. What that means is a bit more fluid, but usually extends to maintaining a home, having the usual sorts of financial "centers" as bank accounts, health coverage, advisers like doctors, lawyers, bankers, investment counselors, etc. It may also be as simple as a home you return to "regularly" or where you maintain the bulk of your possessions.
> Cheers,
> Bev


Yes that's exactly how it works in Spain. 

I've known families leave once they realise that off-shore working dad, who might earn tax-free where he works, is actually tax resident in Spain because he is supporting his wife & children here - even if he is only physically here a total of a few days a month.


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## dancebert (Jun 4, 2015)

Timoteo7 said:


> (*) Spain and the U.S. have a treaty to provide relief from double taxation. This seems to be covered in Article 24 in: https://www.irs.gov/pub/irs-trty/spain.pdf , but I am here linking a document I haven't studied.


That IRS doc is dated 1991. In 2013 Spain and the US amended the treaty: https://www.treasury.gov/resource-c...Documents/Treaty-Protocol-Spain-1-14-2013.pdf


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## dancebert (Jun 4, 2015)

Bevdeforges said:


> I believe there is a Spanish-US tax treaty. https://www.irs.gov/Businesses/International-Businesses/Spain---Tax-Treaty-Documents Ah, here it is!


That link is to a page which links to an IRS doc dated 1991. In 2013 Spain and the US amended the treaty: https://www.treasury.gov/resource-c...Documents/Treaty-Protocol-Spain-1-14-2013.pdf


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## Valencia2016 (Jul 23, 2016)

Just be prepared to have to hire someone capable of filtering through both systems.. and this does come at a price. Whatever you do here.. do not invest in PFICs.


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