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Residents of Spain are subject to personal income tax on worldwide income. An individual is considered a resident for tax purposes if: (1) present in Spain (Spanish territory) for more than 183 days in any calendar year; or (2) Spain is the taxpayer's main centre or business base or the place where his/her professional activities or economic interests are located, either directly or indirectly; or (3) the taxpayer's spouse and dependent children habitually reside in Spain.

Non-resident individuals who are resident in an EU member state may elect to be subject to Spanish personal income tax if they demonstrate that their habitual residence is in another EU state and that at least 75% of their total income during the year was obtained as salary or business income in Spain. Foreign taxes paid may be credited against Spanish tax (up to the amount that would have been payable in Spain).

Taxable income and rates
Spain imposes personal income taxes at progressive rates ranging from 24% to 43%.

Determination of taxable income
Taxable income includes earned income (e.g. salaries, wages and business or professional income) and passive income (e.g. dividends, interest and capital gains). Specific expenses are deductible from each type of income. Social security contributions are the main allowable deductions.

Unemployment benefits are taxable, as is "irregular" income such as severance pay, sick-leave pay and other income earned over a period exceeding two years (including share options and receipts from life insurance policies collected as lump sums). In the case of stock options plans, a 40% reduction in the taxable base can be applied to an amount not exceeding the result of multiplying the annual average salary by the number of years over which the income will be generated (at least two and not more than five).

Capital gains on assets held for more than one year are subject to a flat 18% rate rather than the personal income tax rates.

Salary income for work performed abroad is exempt from tax up to EUR 60,101.21 per year if the income is subject to a tax similar to Spanish personal income tax in the other country.

Non-residents are taxed under a separate regime on Spanish-source income.

An individual with total annual household income of at least EUR 8,000 must file a tax declaration where income is paid by more than one employer. The minimum threshold to file a tax return is EUR 22,000. Married couples may choose to file jointly or separately.

Special expatriate tax regime
There is no special tax regime for expatriates. However, an individual who is assigned to work and live in Spain may opt to be taxed as a non-resident for the first six years of the assignment. Under such an arrangement, the individual is taxed at a flat rate of 24% and no deductions or allowances are permitted. To qualify for non-resident taxation, the individual must: (1) not have been a tax resident in Spain for the previous 10 years; (2) work in Spain for a Spanish tax resident company or a PE of a non-Spanish tax-resident company; and (3) not derive tax exempt income in Spain under the Spanish non-resident income tax law.

Tax benefits are also extended to income derived from employment by Spanish tax residents who work outside Spain for less than six months in a calendar year.

Capital taxes
Resident individuals are subject to net worth tax on their worldwide assets on 31 December of each year; non-residents are taxable only on property situated in, or rights exercisable in, Spain (subject to clarification under an applicable tax treaty). Certain assets are exempt and net worth tax is not payable on the taxpayer's normal residence if the property is valued at less than EUR 150,253.

The net wealth tax rates range from 0.2% on the first EUR 167,129 to 2.5% for amounts above EUR 10.7 million; rates may differ in some regions. Individuals must file a net wealth return once they have assets exceeding EUR 108,182. The amount payable each year for net wealth and income tax combined may not exceed 60% of total taxable income.

Spanish assets owned by non-residents and rights that can be exercised in the Spanish territory by non-residents are subject to the net wealth tax at a maximum rate of 2.5%.

Inheritance and gift taxes are imposed on all Spanish resident heirs, beneficiaries and recipients at rates of up to 34%.


Source: Deloitte

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