The Spanish system for direct taxation of individuals is mainly comprised of two personal income taxes: Spanish personal income tax (PIT), for individuals who are resident in Spain for tax purposes, and Spanish non-residents' income tax (NRIT), for individuals who are not resident in Spain for tax purposes who obtain income in Spain. Therefore, persons who obtain income in Spain are either liable to pay Spanish PIT or Spanish NRIT.
Residents in Spain are generally subject to PIT on their worldwide income, regardless of where it is generated, which is taxed, following statutory reductions, at progressive rates.
Non-residents are subject to NRIT only on their Spanish-source income.
There are two types of taxable income for Spanish PIT purposes: general taxable income and savings taxable income.
Savings taxable income is basically composed of the following:
- Dividends and other income generated from holding interests in companies.
- Interest and other income generated from transferring the taxpayer’s own capital to third parties. As an exception, when capital transferred to a related company exceeds three times the latter’s equity, the interest corresponding to the excess is taxed as general taxable income.
- Income generated from capitalisation transactions and life and disability income insurance.
- Capital gains generated from transfers of assets.
General taxable income includes:
- All income that is not savings taxable income.
- Capital gains not generated from transfers of assets (such as lottery prizes).
- Income allocations, attributions, or imputations, as established by law.
- Interest and other income generated from transferring the taxpayer’s own capital to a related company when the capital exceeds three times the latter’s equity and for the part corresponding to the excess.
Regarding NRIT, income not obtained through a permanent establishment (PE) is taxed on each individual total or partial accrual of income subject to tax. This means that losses cannot be offset against gains.
Taxable income for non-residents without a PE is generally the gross income stipulated in Spanish PIT law, and no reductions are applicable. As a special rule, in the case of provisions of services, technical assistance, installation and assembly work resulting from engineering contracts and, in general, economic activities or operations carried out in Spain without a PE, taxable income is the difference between gross income and the expenses generated by staff, or for the procurement of materials incorporated in the works and supplies, in accordance with the requirements established in the regulations implemented under Spanish NRIT law.
When calculating the net income of taxpayers without a PE that are resident in other European Union (EU) member states, a distinction is made between individuals and companies. In each case, the tax deductible expenses are established in accordance with the PIT and CIT legislation, respectively. In both cases, the taxpayer will need to prove that taxable expenses are directly related to the income obtained in Spain and that they have a direct and indisputable economic link to the activity carried out in Spain.
PIT is not levied on employment income obtained by persons who are tax resident in Spain for work effectively carried out outside Spain, up to the limit of EUR 60,100 euros, if the following requirements are met:
- The employee is resident in Spain for tax purposes.
- The work is effectively carried out outside Spain.
- The work is carried out for a company, entity, or PE that is not resident in Spain for tax purposes.
- A tax which is identical or similar to Spanish PIT is levied in the country where the employee carries out the work.
This tax exemption is incompatible with the tax regime for non-taxable excess amounts, in accordance with which the amounts paid to employees of companies who are assigned abroad above the total compensation that they would have obtained had they stayed in Spain are not subject to Spanish PIT.
In this case, the taxpayer may choose to apply the tax regime for non-taxable excess amounts instead of this tax exemption.
Personal income tax (PIT) rates
Savings taxable income is taxed at the following rates:
- 19% for the first EUR 6,000 of taxable income.
- 21% for the following EUR 6,000 to EUR 50,000 of taxable income.
- 23% for the following EUR 50,000 to EUR 200,000 of taxable income.
- 26% for any amounts over EUR 200,000.
For general taxable income, progressive tax rates are applied (which are the sum of the applicable rate approved by the state and the applicable rate approved by each autonomous community of Spain in their progressive tax rate scales). Tax liability may therefore differ from one autonomous community to another.
The following tables show the tax scale for withholdings approved by the state. This scale can be used as a guideline of the progressive tax rates applicable for the general taxable base. For the reasons stated above, the scale applicable in the corresponding autonomous community of Spain should always be consulted to calculate the total progressive tax rate.
Tax scale for withholdings applicable in 2021:
|Taxable base (up to EUR)||Tax liability (EUR)||Excess of taxable base(up to EUR)||Tax rate (%)|
Non-resident income tax (NRIT) rates
For non-residents, income obtained without a PE is taxed at the following rates:
- General rate: 24%. For residents in other EU member states or European Economic Area (EEA) countries with which there is an effective exchange of tax information, the rate is 19%.
- Capital gains generated from transfers of assets: 19%.
- Interest: 19%. Interest is tax exempt for EU residents. Double taxation treaties (DTTs) normally establish lower rates.
- Dividends: 19% (DTTs normally establish lower rates).
- Royalties: 24% (DTTs normally establish lower rates).
- Pensions are taxed at progressive rates (between 8% and 40%).