Spain Income Tax: File Your Declaration

You have to file your income tax declaration IRPF (Impuesto sobre la Renta de las Personas Físicas) in Spain if you have your habitual residence in Spain. That applies when any of the following circumstances occurs.

• Stay in Spain for more than 183 days during the calendar year. Your sporadic absences count, unless you prove your tax residence in another country. In the case of countries or territories thar are tax havens, the Tax Administration may require proof of permanence in that tax haven.

• The core or base of its activities or economic interests is located in Spain, directly or indirectly.

If a natural person is a tax resident in Spain, he or she is liable for Personal Income Tax. Besides, he or she must pay taxes in Spain on his world income. That is, he must declare in Spain the income obtained anywhere in the world.  Regardeless the provisions of the Convention to avoid international double taxation signed, you have to file the declaration.

Deduction for international double taxation

In the Spanish AEAT system this deduction for international double taxation happens in “cuota líquida”, or “net tax liability”. That means thay you deduct the amount you have already paid in your origin country according to their tax regulations. You can deduct the smallest out of these two amounts:

• What you have already paid in your origin country
• What you would have paid in Spain for that income had you got it in Spain (average effective tax rate)

*This is a basic calculator following the example below.

Filing your declaration

General deduction regime

In cases where, income or capital gains from abroad appear, the lesser of the following two amounts will be deducted:

1. The effective amount of what was paid abroad due to a tax of an identical or analogous nature to Personal Income Tax or the Non-Resident Income Tax.
2. The result of applying the average effective tax rate to the part of the taxable base taxed abroad.

Average effective general tax rate, determined by the following operation: Total liquid fee x (general full fee / total full fee) ÷ General liquidable base

Savings tax type, determined by the following operation: Total liquid installment x (full savings installment / total entire installment) ÷ Liquidable savings base.

Part of general taxable base taxed abroad, determined by applying the reduction that proportionally corresponds to the income obtained abroad and integrated into the taxable base. This operation follows the next formula:

General taxable base x income obtained abroad) ÷ Positive components of the general taxable base.

Example

In the income tax return for the 2024 financial year of Mr. ABT, 30 years old, single and resident in Malaga, the following figures appear:

• General tax base: 36,000
• Savings tax base: 12,000

Within the general tax base, whose components are all positive, there are 6,000 euros from abroad. The taxpayer has paid in the country of obtaining a tax of a nature analogous to Personal Income Tax the amount of 1,100 euros.

Similarly, the tax base of savings, whose components are all positive, includes net income from movable capital in the amount of 6,000 euros. It also includes a capital gain derived from the transfer of an asset element in the amount of 6,000 euros and for which paid abroad for a tax analogous to IRPF the amount of 1,080 euros.

Answer:

Deduction for international double taxation (the lesser of A or B)

A. Cash amount paid abroad

By performance: 1,100

For capital gain: 1,080

B.  Input tax in Spain

Part of the liquidable savings base (6,000 x 16.60%) = 996

Part of the general taxable base (5,200 x 17.10%) = 889.20

Amount of the deduction for international double taxation (the lesser of A or B)

For income (889.20) + For capital gain (996) = 1,885.20

It’s essential to maintain proper documentation, including proof of residency, details of income earned in each country, and evidence of taxes paid or withheld. This documentation may be required in case of an audit or inquiry by tax authorities. In summary, a tax treaty provides a framework for determining which country has the primary right to tax specific types of income. It helps to avoid or mitigate the impact of double taxation. Understanding the provisions of the relevant tax treaty is crucial when filing a tax declaration.

FAQS on International Deduction

Is it necessary for the income to pay taxes abroad?

The regulation only requires that in the territory where the taxpayer performs his or her job,

• applies a tax of an identical or analogous nature to this tax

• and it is not a country or territory that is a tax haven.

This requirement will be considered fulfilled when the country or territory where the work is performed has signed an agreement with Spain to avoid international double taxation that includes an information exchange clause.

It is not required, therefore, for the income to be effectively taxed in that country or territory

What is an identical or similar tax to the IRPF?

Taxes that aim to impose on income, even partially, will be considered as identical or analogous taxes, regardless of whether the tax base is the income itself, revenue, or any other indicative element of it.

Social Security contributions will also be considered as such. The conditions are in tax regulations.

It will be considered that an identical or analogous tax is applied when the relevant country or territory has signed an agreement with Spain to avoid international double taxation that is applicable, with the special provisions outlined in it.

Taxation regarding a pension paid to a resident in spain and accrued in Denmark.

According to the provisions of the treaty (*) to avoid double taxation signed with Denmark:

• if the pension is private, it can only be subject to taxation in Spain.
• if the pension is public, due to services rendered to the Danish state, it will only be subject to taxation in Denmark.

(*) Considering that since 2009, there is no international double taxation avoidance treaty between Spain and Denmark, all income originating in Denmark that is obtained by a tax resident in Spain is taxed in Spain. If such income is taxed in Denmark, the taxpayer can apply the deduction for international double taxation provided for in Article 80 of Law 35/2006, of November 28, on Personal Income Tax (IRPF).