Personal Income Taxation in Spain

Who is subject to the Spanish Personal Income Tax?

The Spanish Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas, or IRPF) is a progressive tax levied on individuals residing in Spain

To be considered a tax resident in Spain, an individual must meet one of the following criteria:

• Spend more than 183 days in Spain during a calendar year.  
• Maintain his domicile in Spain.
• Have the centre of his economic interests and activities in Spain.

Personal Income Taxation in Spain: Calculation of the taxable base.

The taxable base for IRPF is determined by subtracting allowable deductions from gross income. Key components of the calculation include:

Gross income: This encompasses all income derived from various sources, including employment, capital gains, rental income, and business profits.

Allowable deductions: These deductions are generally related to the generation of income and include expenses such as pension contributions, mortgage interest, and certain professional expenses. Some of the most common are the following:

1. Personal allowances: Taxpayers are entitled to personal allowances based on their family situation and other circumstances.
2. Deductions for housing: Mortgage interest, property taxes, and certain renovation expenses may be deductible.
3. Deductions for education: Expenses related to education, including tuition fees and school supplies, can be claimed as deductions.
4. Deductions for disability: Taxpayers with disabilities or dependents with disabilities may be eligible for additional deductions.

Imputable income: Certain types of income, such as capital gains and rental income, are subject to specific calculation rules and may be subject to different tax rates.

Personal Income taxation in Spain: Tax rates and taxable income categories.

The Spanish Personal Income Tax (IRPF) is a progressive tax, with higher income levels subject to higher tax rates. The tax rates are applied to different income brackets, and the specific rates may vary depending on the autonomous community where the taxpayer resides.

Generally speaking, there are two categories of income for IRPF purposes:

Capital gains and income from movable and immovable property, which may be subject to a taxation of up to 28% of the taxable base.

Any other income, which may be subject to a taxation from a 46% (in Madrid) to a 54% (in Navarre). This may include:

Income from work: Such as salaries, wages, bonuses, and other employment-related benefits.  
Income from economic activities: Such as profits from self-employment, professional activities, and business ownership.
Imputed income: This includes income deemed to be generated, such as the imputed rent of a self-occupied property.