Spanish Tax System: A Guide for Expats & International Residents

Moving to Spain, whether for its sunny coasts, vibrant cities, or cultural riches, comes with an important reality: understanding the tax system. This overview is for anyone living in Spain with an international footprint—digital nomads, visa-holding students, professionals under the Beckham Law regime, and retirees alike.

If you’re unsure where to begin, check out our comprehensive tax obligation strategy. Taxes in Spain Guide 2026.

The rules can seem complex, but they often contain beneficial regimes for new residents. The key is knowing where you fit in.

Golden Rule: Your Tax Residency is Everything

The most critical concept that defines your tax life in Spain is your residency status.

• If you live in Spain for more than 183 days in a calendar year, you are generally considered a Spanish tax resident. This means you are obligated to declare your worldwide income (from work, investments, or property abroad) to the Spanish tax authority.
• If you spend fewer than 183 days in Spain, you are typically a non-resident. In this case, you are only taxed on income earned within Spain (e.g., from a Spanish job or renting out a Spanish property).

The rest of this guide primarily focuses on the obligations for Spanish tax residents.

Key Taxes for Residents in Spain

Income Tax (IRPF – Impuesto sobre la Renta de las Personas Físicas)

This is the annual tax on your income. Spain has a progressive system, meaning the rate increases as your income does.

• Who Manages It? There are two levels:
  • State Tax Agency (Agencia Tributaria): Sets the base rules.
  • Autonomous Regions (Comunidades Autónomas): Regions like Catalonia, Madrid, Valencia, and Andalucía have the power to set their own rates and deductions. You will file your return based on where you live on December 31st.
• Tax Rates (Approximate 2024): Income is split into two categories:
  • General Income: From work, pensions, and rental income. Rates generally range from 19% to 47%.
  • Savings Income: Interest, dividends, and capital gains. These are taxed separately at 19% to 28%.

Special Note for Employees & High-Skilled Workers: If you qualify, the Beckham Law regime offers a huge advantage. For your first six years, you are taxed as a non-resident on your Spanish-sourced employment income at a flat, attractive rate (currently 24% up to €600,000), shielding your foreign income from Spanish tax.

Wealth Tax (Impuesto sobre el Patrimonio)

This is an annual tax on your net worldwide assets (what you own minus what you owe) if their total value exceeds a high threshold.

• Who Pays? Tax residents whose worldwide net wealth exceeds €700,000. A primary home exemption of up to €300,000 often applies.
• Regional Variation is Key: This is a major factor in choosing where to live. Popular regions like Madrid and the Canary Islands have a 100% relief, meaning you likely pay zero Wealth Tax if you reside there. Other regions have progressive rates (0.2% to 3.5%).

Modelo 720 (Worldwide Assets Declaration – Informative)

This is not a tax, but a mandatory declaration.

• Who Files? You must file this form if the total value of your assets outside of Spain in any of the categories below exceeds €50,000.
  • Bank accounts abroad.
  • Investments (stocks, bonds) held abroad.
  • Real estate located outside of Spain.
• When? You must file it once within the first year you become a resident, and then only if your foreign assets in a category increase by more than €20,000. Failure to file correctly leads to steep penalties.

Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones)

This tax applies to money or assets you receive from an inheritance or a substantial gift.

• Regional Variation: This tax is notoriously high at the state level, but the autonomous regions offer massive reductions. The rules depend heavily on where the beneficiary (the receiver) lives and their relationship to the giver. Regions like Andalucía and Madrid offer significant allowances, often making it minimal or zero for direct family members (spouses, children).

Local Taxes

Everyone living in Spain, regardless of residency status, will encounter these:

• IBI (Impuesto sobre Bienes Inmuebles): An annual property tax if you own a home. It’s based on the “cadastral value” and is generally modest.
• Basura: A garbage collection tax billed by your local town hall.
• Impuesto de Circulación: An annual vehicle tax paid to your local town hall, based on your car’s engine size.

Taxes for Those Planning to Start a Business

VAT (IVA – Impuesto sobre el Valor Añadido) – Crucial for the Self-Employed

If you are self-employed (autónomo) or have a business in Spain, you must deal with VAT. This is a consumption tax on most goods and services.

• How It Works: You don’t “pay” VAT in the traditional sense; you collect it and manage the difference:
  • You charge VAT (Output VAT) to your clients on your invoices.
  • You pay VAT (Input VAT) to your suppliers on your business expenses.
  • Quarterly, you declare the difference: Output VAT collected minus Input VAT paid. If you collected more, you pay the difference to the tax agency. If you paid more, you can request a refund.
• Key VAT Rates (2024):
  • General Rate: 21% (Most goods and services)
  • Reduced Rate: 10% (e.g., public transport, hotel accommodations, cultural events)
  • Super-Reduced Rate: 4% (e.g., basic food, books, medicines)
• International Nuance:
  • Services to EU clients: Often subject to the “Reverse Charge” mechanism, where your client handles the VAT in their country.
  • Services to non-EU clients: Are typically VAT-exempt (0%), which is a significant benefit for digital nomads serving clients outside the EU.

Corporation Tax (Impuesto de Sociedades – IS)

If you operate your business through a Spanish company (e.g., a Sociedad Limitada – S.L.), it will be subject to Corporation Tax on its worldwide profits.

• Who Pays? Legal entities resident in Spain, including limited liability companies (S.L.) and public limited companies (S.A.).
• The Tax Rate: The general rate is 25%. However, there are reduced rates for certain entities:
  • 15% for newly created companies in their first two profitable fiscal years.
  • Small and newly created companies may also benefit from a reduced rate of 23% under certain conditions.
• Key for Freelancers & Digital Nomads: Many self-employed individuals and freelancers (autónomos) operate as sole proprietors and are taxed via Income Tax (IRPF) on their personal returns. However, if you choose to incorporate an S.L., the company itself becomes a separate taxpayer and pays Corporation Tax on its net profit. You would then pay yourself a salary or dividends from the company, which are taxed again under your personal Income Tax.
• International Aspect: Spanish companies are taxed on their worldwide income. Special rules apply for foreign subsidiaries and to prevent profit shifting, in line with international standards.

Key Considerations for an International Life

• Double Taxation Treaties: Spain has treaties with many countries (like the US and UK) to prevent you from being taxed twice on the same income. You declare your worldwide income in Spain but can claim a credit for tax already paid abroad.
• Digital Nomads & Freelancers (Autónomos): Your business income is declared as general income. The new “Startup Law” offers a favorable tax regime for digital nomads, including a reduced income tax rate and a streamlined path for non-EU residency.
• Students: While often exempt from major taxes if on a limited-income student visa, you are still subject to non-resident tax rules if you have any Spanish-sourced income.

Your Essential Checklist

✅ Determine your tax residency status using the 183-day rule or the “center of vital interests” test.
✅ Research the specific tax benefits of your chosen Autonomous Region (crucial for Wealth and Inheritance Tax).
✅ Declare your worldwide income on your Spanish income tax return.
✅ File the Modelo 720 if your foreign assets exceed the €50,000 thresholds.
✅ Pay local taxes like IBI if you are a property owner.
✅ Hire a Professional Tax Advisor (Asesor Fiscal).

Final Word: A Tax Advisor is Essential

This cannot be overstated. The Spanish tax system is layered and complex, especially when dealing with foreign assets, multiple income streams, or special regimes like the Beckham Law. A gestor or asesor fiscal who specializes in expatriate and international taxation is a worthwhile investment to ensure you are compliant and optimizing your position.