Spain

Social security contributions

Under the general regime, social security contributions are paid on wages and salaries. In Spain, the minimum monthly base is EUR 1,260 and the maximum is EUR 4,495.50 in 2023. 

The general contribution rates are 6.45% for employees, depending on the type of contract, and 30.40% for employers, plus a variable rate for occupational accidents (e.g. 1.50% office work).

Certain persons may be exempt from paying social security contributions, provided that the following requirements are met:

• There is a social security agreement in force between Spain and the person's home country that allows for this possibility.
• The employment relationship with the home country employer is maintained and the person continues to pay social security contributions to their home country social security system.
• The person's stay in Spain is limited to a few years (usually between one to five years, depending on the social security agreement in force between Spain and the home country).

To qualify for the exemption, nationals of EU countries must obtain a document certifying continuing liability in their home country and nationals from other countries must obtain a document certifying coverage by the social security authorities in their home country.

On the other hand, the contribution system for the self-employed is modified for 2023, 2024, and 2025, establishing a system whereby the self-employed will have to pay contributions according to the income they obtain. This system is made up of 15 economic brackets, and inclusion will vary depending on the income obtained by the self-employed. Within the bracket in which they are included, they will be able to choose the level of contributions they wish to pay. The minimum contribution for the lower bracket is set at EUR 751.63, while the maximum contribution in the upper bracket is set at EUR 4,495.50. Social security benefits would depend on the contributions paid by the self-employed, the general rate being 31.20%, which is applied on a monthly social security contribution base chosen by the self-employed.

From 1 January 2023, the intergenerational equity mechanism applies through which a 0.6% point contribution will be made, applicable to the contribution base for common contingencies in all situations of registration or assimilated to registration in the social security system in which there is an obligation to contribute for the retirement pension coverage. In 2024, the intergenerational equity mechanism will be 0.70 percentage points, with 0.58 attributed to the company and 0.12 to the employee.

Value-added tax (VAT)

Spanish VAT is payable on supplies of goods and services carried out in Spanish VAT territory and on imports/intra-EU purchases of goods and services. There are three rates of VAT for different types of goods and services, which are as follows:

• Ordinary rate of 21%, applied on regular supplies of goods and services.
• Reduced rate of 10%, applied on basic necessities (e.g. food and agricultural products not included in the 'super reduced' 4% rate, dwellings, and other qualifying services). Live cultural events and cinema tickets are also taxed at 10%.
• Super-reduced rate of 4%, applied on basic necessities other than those classified under the reduced rate (e.g. bread, milk, books, medicine).

In the Canary Islands, a specific tax is applied in lieu of VAT, called the Canary Island general indirect tax (IGIC). The ordinary IGIC rate is 7% and the other IGIC rates are 0%, 3%, 9.5%, and 15% (20% for tobacco). IGIC is similar to VAT although it has some significant differences, such as the exemption established for telecommunications services. Imports of tangible goods into the Canary Islands are subject to this tax. In Ceuta and Melilla, sales tax is applied instead of VAT.

Wealth tax

Wealth tax is levied on Spanish tax residents' worldwide net assets and on Spanish non-residents' goods and rights that are located, may be exercised, or should be complied with in Spain.

The tax is levied on the assets held by the taxpayer as of 31 December (accrual date).

Law 38/2022, of 27 December 2022, for the establishment of temporary energy taxes and taxes on credit institutions and financial credit establishments, which creates the temporary solidarity tax on large fortunes and modifies certain tax regulations has extended the individuals to which wealth tax applies.

For tax period 2022 onwards, shareholdings when at least 50% of the total assets of the company consists, directly or indirectly, of Spanish real estate assets are subject to wealth tax. For these purposes, the value of the real estate assets would not be the book value reported for accounting purposes by the company, but the value arising from specific wealth tax rules for real estate assets. This value would be the higher of the acquisition value, the cadastral value, and any other value assessed by the tax authorities for tax purposes.

The following tax relief is applicable for this tax:

• A minimum tax-exempt amount. All autonomous communities of Spain can establish their own minimum tax-exempt amount.
• If an autonomous community does not establish its own minimum tax-exempt amount, the amount established by Spanish law (EUR 700,000) will apply. For Spanish non-residents, the amount applicable will always be the amount established by Spanish law.
• Habitual dwellings are tax exempt up to EUR 300,000.
• Interests in family companies or business assets may also benefit from a tax exemption if certain requirements are met.

The tax liability is calculated by applying the progressive rates established by the autonomous communities in Spain to the net taxable base (i.e. after applying tax relief). If the corresponding autonomous community does not establish its own scale of progressive rates, the following scale will apply:

Autonomous communities may establish their own tax relief for wealth tax or an abatement of the tax. Several autonomous communities have already stated that they intend to establish a full tax abatement for wealth tax.

Taxpayers are required to file wealth tax returns if they have a tax liability or their wealth (exempt or not) exceeds EUR 2 million.

Solidarity tax on large fortunes

Law 38/2022, of 27 December 2022, for the establishment of temporary energy taxes and taxes on credit institutions and financial credit establishments, creates the temporary solidarity tax on large fortunes.

This was a temporary tax that, in principle, was established only for the tax period 2022 and 2023 and was applicable to residents whose net asset value on 31 December is equal to or higher than EUR 3 million. However, Royal-Decree 8/2023 envisages that its application will be extended until the review of wealth tax takes place in the context of the reform of the regional financing system.

The tax base is determined by the application of the wealth tax regulations. The same occurs with the exemptions except for the EUR 700,000 exemption, which applies to both tax residents and non-tax residents in Spain.

The tax liability is calculated by applying the following progressive rate:

This tax is complementary to wealth tax, so the wealth tax debt paid in relation to the same tax period should be deducted from the solidarity tax amount.

Gift and inheritance tax

Spanish gift and inheritance tax is levied on goods and rights acquired by Spanish tax residents by inheritance, legacy or other type of succession, or by donation or other inter vivos legal transfers with no charge.

Spanish gift and inheritance tax is also levied on goods and rights acquired by Spanish non-residents in the manners stated above, whatever their nature, which are located, may be exercised or should be complied with in Spain. However, if a DTT has been signed between Spain and the non-resident's country of residence, taxation will depend on the DTT applicable.

The tax is levied on the assets' net acquisition value.

The tax liability will depend on different matters such as the relationship between the taxpayer and the donor/deceased, or the taxpayer's previous wealth.

Spain's autonomous communities have extensive powers that enable them to pass their own laws regulating different aspects of this tax, and many autonomous communities have established significant tax relief.

Spanish gift and inheritance tax regulations have been reformed with effect from 1 January 2015 as a result of a judgement given by the EU Court of Justice on 3 September 2014, which established that these regulations are an obstacle to free movement of persons and capital and breach the Treaty on the Functioning of the European Union by allowing discrimination in the tax treatment of gifts and inheritances between resident and non-resident successors and donees and between gifts and similar disposals of property located in and outside Spain. The reform introduces several rules to equate the tax treatment for the discriminating situations listed by the EU Court of Justice.

The general tax rates are as follows (although they can be modified by autonomous communities):

Property tax

Property tax is a local tax levied on the owners of properties located in Spain.

The tax liability is a percentage of the rateable value of the property depending on the type of the property (i.e. rural or urban) and the municipality where it is located.

Rates can be fixed by each municipality, with a minimum and a maximum that can be increased slightly if certain requirements are met:

Tax on the increase of urban land value

When urban properties are transferred, a local tax is levied on the theoretical increase of the property's value (tax on the increase of urban land value). The taxable base for the calculation of the tax takes into account the rateable value of the property and the duration of ownership.

On 11 May 2017, the Spanish Constitutional Court stated that regulations laid down by law that tax where there is no increase in value of the urban property transferred are unconstitutional and, consequently, null and void. Consequently, taxpayers that have paid incorrect amounts of tax, where there was no increase in the value of the property, may claim a refund of the tax paid within the statute-of-limitation period by means of a special procedure that commences with the filing of a request with the tax authorities.

Later, on 9 November 2021, Royal Decree Law 26/2021, of 8 November, was published in the Official State Gazette, introducing a new case of non-taxation for these cases in which there is no increase in value in the difference between the values of said land on the dates of transfer and acquisition.

The tax is paid by the transferor of the property (provided that the transfer is not a donation).

Whereas Law 31/2022, of 23 December 2022, increased the maximum amount of the coefficients to be applied to the value of the land at the time of accrual, based on the period of generation of the value increase, Royal Decree-Law 8/2023, of 27 December 2023, decreased the aforementioned coefficients as follows:

Exit tax

Income not yet allocated 

If PIT payers cease to be PIT payers in Spain as they change their place of residence for tax purposes, they should declare any income not yet allocated in their last PIT return or file a supplementary tax return to declare this income (tax return filed without applying penalties, late payment interest, or surcharges).

When the taxpayer's place of residence is changed to another EU member state, the taxpayer may opt to include any income not yet allocated in one's last PIT return or to file a supplementary tax return to declare such income when each item of income to be declared is obtained (tax return filed without applying penalties, late payment interest, or surcharges).

Latent capital gains on qualifying shares or interests in Collective Investment Institutions (CIIs)

If taxpayers resident in Spain change their tax residence to another country during at least ten of the 15 tax periods prior to the last tax period for which a PIT return should be filed, in general, the taxation of latent capital gains on shares or interests in companies or CIIs classified according to their value (EUR 4 million) or the interest percentage (25% for EUR 1 million and over) is brought forward.

Payment may be deferred in the event of temporary relocation for work reasons or if the relocation is to a country or territory with which Spain has signed a DTT with an exchange-of-information clause. If, during the following five years (which may be extended for a further five years for cases of relocation for work reasons), taxpayer status is acquired again without any transfer of the shares or interests, the deferred debt and any accrued interest shall be waived by the tax authorities. In this case, the taxpayer may ask the tax authorities to rectify the self-assessment and claim a refund of tax paid.

Special rules are established for changes of tax residence to another EU member state or EEA country.

Special tax on gaming income

A special 20% tax is levied on the following prizes:

• Prizes received from lotteries and games organised by the State Lottery and Gaming Corporation and regional bodies or entities, draws organised by the Spanish Red Cross, and the types of games that the Spanish Organisation for the Blind is authorised to conduct.
• Income from lotteries, games, and draws organised by public bodies or entities that carry on social or welfare non-profit-making activities in other member states of the European Union and have the same business aims as the bodies or entities indicated above.

The tax-exempt net amount for lotteries and games organised from 2020 onwards is EUR 40,000.

The tax base for this special tax is the amount of the prize that exceeds the tax-exempt amount. The tax rate is 20%, which is applied on the tax base minus any withholdings and advance payments applied.