Living In Spain - Tax, Wills & NIE


Is the tax system in Spain more complicated than the UK?

The tax system in Spain has recently been made a lot more 'user friendly' and the many of the rates have been reduced, especially for low incomes, however, it is still extremely complicated. However, it is not a problem most residents hire the services of a 'Gestor' for a small fee per annum, who will ensure that all relevant taxes and fees are paid.

What is a Gestor and do I need one?

A 'Gestor' is a specifically Spanish phenomenon and is essentially an agent (fiscal representative) who will deal with all the necessary bureaucracy associated with living in Spain for a reasonable fee. The 'Gestor' is not a lawyer but has knowledge of the procedures, taxes and fees payable and can save you the time and frustration of dealing with potentially complicated systems and also just as importantly, ensuring that no fines are incurred for non-payment of taxes that you were not aware of.

It is vital to be aware that when you stay in Spain for 183 days or more in one calendar year, you automatically become legally liable for Spanish income tax, whether you are a formal resident or not.

If you take out 'residency', you will become liable on your 'total world wide earnings', but however there are double taxation relief regulations which prevent you being taxed both in your country of origin and Spain.

(Pensioners will not have to pay tax on any income which has already been taxed in their country of origin).

Any income earned in Spain is also liable to be taxed even if you are not a resident and spend less than 183 days in Spain, such as income from work or rental income on property in Spain.

NIE Number

All foreigners with financial dealings in Spain must apply for an NIE (Numero Identificacion Estranjero) tax and identification number at the police station. You will need the NIE to open a Spanish bank account, arrange credit terms, use the National Health Service and for all tax matters.

Property Purchase Tax

All property purchases in Spain (with previous owners) are subject to 7% VAT (IVA) and 1% stamp duty and commercial properties and plots of land are subject to a higher rate of 16% and 1% stamp duty and a local tax.

Property Owners Tax (Rates)

Residents and non-residents alike are liable for property tax 'Impuesto Sobre Bienes Inmuebles' (IBA) which is similar to UK rates, which go towards local public services. The tax is calculated on the rateable value of your of your property. Property income tax is a flat 25% for non-residents and at the standard rate for residents.

If you own a second home, 2% of the value of your second home will be added to your total tax burden and if not a resident this tax will be paid on your first home.

Capital Gains Tax

Non-residents pay 35% on capital gains from the sale of property and as a resident you would also be liable for tax on top of this. There are some tax breaks, which can lesser the burden, such as reinvesting in another property as your principal residence, which would bring relief on the sum invested.

The remainder of the profit will taxed as a capital gain and as part of your income but the maximum percentage cannot exceed 20%. A non resident vendor is required to lodge 5% of the purchase price with the Hacienda (Agencia Estatal de Administración Tributaria, but still called "Hacienda") to ensure that he pays his capital gains tax.

Wealth Tax

There is also a tax (patrimonial) on both residents and non-residents of 0.2% of the property (after deducting liabilities). It is recommended to consult a tax advisor such as an 'asesor fiscal' or a 'gestor' which will cost from 60€ upwards depending on your case.

Inheritance Tax

Under Spanish tax laws both residents and non-residents are liable to be taxed on inheritance and gift tax (Impuesto Sobre Sucesiones y Donaciones) on any money bequeathed.


Should I make a Spanish will?

Regulations regarding foreign wills in Spain can become problematic for heirs therefore it is easier to make a Spanish will for your assets in the UK. Otherwise you would be tied to the Spanish law of compulsory heirs. Spanish inheritance will be liable on your estate. Inheritance tax is due after the first 16,000€ for each inheritor and there are exemptions in place for minors and immediate family under 21 years of age.

If you have officially resided in Spain for three years or more and leave your property to your spouse or child (who is also resident, there is a possible 95% reduction in the inheritance tax burden.

Please note that all information is given in good faith and correct at time of publishing. All individuals should ensure they carry out their own research to ensure they comply with all Spanish, Legal & Tax Requirements. Suncroft do not accept liability for any error contained within the above paragraphs.

map of Spain