Moving to Spain - Tax in Spain compared to the UK
The days of moving to Spain for tax evasion purposes are over. During the last decade, tax in Spain has increased dramatically, particularly income tax. It may be a worry if you are planning on buying Spanish property. Spain has several taxes relating to property sales.
If you are moving to Spain you may no longer have to pay UK taxes. However, if you spend a requisite number of days in the UK you will still incur tax on your income. More information on domicile and tax status can be obtained from the Inland Revenue
Spain imposes a wealth tax on your world-wide assets but you should be spared double taxation due to an agreement between the British and Spanish authorities. Any income generated through renting out UK property will attract a UK income tax charge
Moving to Spain - Who has to pay tax?
Anyone resident in Spain for more than 183 days in a calendar year must pay income tax and this will be automatically deducted by your employer. Income tax in Spain tends to be lower than the rest of the EU and the rate is calculated after allowing for various deductions, such as living expenses and social security payments.It starts at 10 %for the first €4,000 of taxable income, rising to 45 per cent on taxable income over €45,000.
Inheritance tax in Spain
This is a huge concern for anybody who owns property in Spain. Although foreign wills are valid it is advisable to have a Spanish will to avoid complications during the inheritance process. Under Spanish law two-thirds of an estate must go to the children, as compulsory heirs but Brits are allowed to choose their heirs. Foreigners moving to Spain are liable to pay inheritance tax in Spain regardless of the country in which the inheritance is situated. Non-residents are liable to pay inheritance tax only on property in Spain. Inheritors fall into four categories depending on their relation to the deceased and each category has a different tax-free inheritance allowance. Once this has been deducted the authorities apply tax rates on the remainder of the inheritance depending on its value. There are ways of avoiding and minimising inheritance tax in Spain. You should obtain expert advice on this, and other tax issues, before moving to Spain.
Spain´s property taxes
People moving to Spain and buying property often find the tax system bewildering. There are a number of property-related taxes in Spain and these are listed below:
- Transfer Tax - Buyers of re-sale property are required to pay transfer tax of 7%.
- Purchase tax on new property - Spain´s laws stipulate that buyers of new-builds must pay 7% IVA (VAT) and 0.5% stamp duty.
- Capital Gains Tax. A percentage of the profits made on the sale of property and other assets located in Spain. Currently this stands at 5% for non-residents and 3% for residents.
- Plusvalia tax - The local authorities determine the amount of plusvalía to be paid for each purchase of property in Spain. This depends on which area of Spain the property is located.
Moving to Spain means learning what you can about the financial and legal aspects of the country. The system of tax in Spain is confusing for newcomers so seek out professional advice to reduce the risk to you and your property. Spain is a fantastic country but you must be careful not to fall into any unnecessary property or tax traps.
