Tax Residence in Spain <<BACK

Spain applies a residence-based system of income taxation. All the Worldwide income or gains are taxable in Spain for the Spanish resident, even if they have not been remitted to Spain. The Spanish income tax returns should report the income of the taxpayer, spouse and dependants, although each member of the family can file independent tax returns. The residence position in Spain should be established after discussing carefully the UK situation.

Income and Wealth Tax

The Spanish Parliament passed the Non-residents Income Tax Act (Ley 41/1998, Ley del Impuesto Sobre la Renta de No Residentes). According to this Act and the Self-Assessment regime, non-residents receiving any income or owning any assets in Spain must file a return every year, including all Spanish taxable income calculated according to certain rules. The value of the property is to be included in the Return and will have a small tax charge calculated according to the Cadastral Value. Wealth Tax is also applicable to
non-residents assets located in Spain.

Capital Gains Tax

Transferring property located in Spain by a non-resident in Spain will be subjected to Capital Gains Tax in Spain, both according to Spanish legislation and to the provisions of the Double Treaty with the UK.

Council Tax (Impuesto sobre Bienes Inmuebles – “IBI”)

This is a local tax payable to the town council by all property owners, residents and non-residents alike, similar to the rates payable in the UK.

Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones – ISD)

The acquisition by inheritance or gift of a property situated in Spain carries a real obligation to IHGT payable by the inheritors or the receiver of the gift. The beneficiary position - and not the transferor’s estate – should be considered for tax planning purposes. A Spanish Will is also recommended in order to avoid further delays in dealing with the execution of the estate.

Social Security

By virtue of European Law, reciprocal agreements exist within the European Community member countries. It is possible for UK residents to enjoy the Health services provided by the Spanish Social Security Administration as well as to obtain other benefits if moving to Spain as a resident.