Every year, more and more foreigners decide to retire and settle in Spain to enjoy the good weather, tranquillity and quality of life that our country offers.
Obviously, this is a very carefully considered decision, which involves personal, legal and tax changes. One of the most frequently asked questions we get at MAM Solicitors is: ‘If I am retired and move to Spain, what taxes do I have to pay?’
If you are retired and want to live in Spain, you should know that your tax obligations will depend on your residence status and the type of income you receive. Even if you are not working, you may be required to file a tax return or pay taxes based on your pensions, capital gains or property.
In this article, we explain the key aspects you need to take into account.
Are you a tax resident in Spain?
The first factor that determines your tax obligations is whether you are a tax resident or non-resident in Spain. Spanish law establishes that a tax resident is a person who:
- Spends more than 183 days a year in Spanish territory, or
- Has their main centre or base of economic activities or vital interests in Spain.
If you meet any of these criteria, you are considered a tax resident, which means that you will be taxed in Spain on your worldwide income (i.e. all your income, wherever it comes from).
If you are not a resident, you will only be taxed in Spain on income generated in the country (e.g. rentals or the sale of property in Spanish territory).
Do I have to file an income tax return if I am retired?
Even if you are retired and not working, you may still be required to file an income tax return in Spain if you are a habitual resident here. It all depends on the type and amount of your income.
In this case, you must file a tax return in the following circumstances:
- Pensions (public or private, Spanish or foreign) above certain thresholds.
- Income from rentals, even if low.
- Dividends, interest or capital gains, even if they come from abroad.
- Bank interest or income from investments in foreign accounts.
There are certain exemptions that exempt you from paying income tax.
What if I am not a tax resident?
If you are not a tax resident but own property in Spain, you must file Form 210 annually to declare imputed income tax, even if you do not rent out the property.
If you do rent it out, you will have to declare your rental income quarterly and pay tax on it, even if the amount is low.
Other possible taxes and aspects to consider
There are a number of other variables that must be taken into account in terms of taxation.
These are as follows:
- Wealth tax: both residents and non-residents may be subject to this tax if their net wealth exceeds certain thresholds.
- Form 720: if you are a tax resident and have assets or accounts abroad exceeding €50,000, you must declare this information, even if it does not involve a direct payment.
- Double taxation agreements: Spain has tax treaties with numerous countries to avoid double taxation on the same income. It is important to check whether there is an agreement between your country of origin and Spain, as this can reduce or eliminate the double tax burden.
MAM Solicitors: specialists in taxation for foreigners in Spain
At MAM Solicitors, we can help you understand your specific situation and comply with Spanish regulations.
Contact us and we will provide you with personalised advice.
