Where taxpayers get caught out
New residents often keep declaring their pension or investment income only in their home country. Spain then treats the undeclared foreign income as unreported, and the penalties for unreported foreign income can be severe.
What goes into a Spanish return
| Income | How Spain taxes it |
|---|---|
| Salary and pensions | General scale, progressive state and regional rates |
| Rental income | General scale, with reductions for long-term housing rentals |
| Interest, dividends, gains on shares | Savings scale, from 19% upwards |
| Gain on the sale of property | Savings scale; exemptions for the main home in some cases |
| Foreign income already taxed abroad | Included, with a credit for foreign tax under the treaty |
General and savings income
Spain separates the general tax base (work, pensions, rentals, business income) from the savings base (interest, dividends and capital gains). Each has its own scale; the savings scale starts at 19%. See Spanish income tax rates and savings income tax.
Pensions from abroad
Private and state pensions received by a Spanish resident are usually taxed in Spain, but some government service pensions remain taxable only in the paying country. The answer depends on the treaty. See how pensions are taxed in Spain.
Deductions and allowances
Personal and family allowances, contributions to pension plans, donations, deductions for rentals of the main home in some cases and Balearic regional deductions can lower the bill. We review each one with you.
Joint or individual filing
Married couples may file individually or jointly. Joint filing is only advantageous when one spouse has little or no income; we calculate both options.
Your first year as a resident
The first return is where most mistakes happen. We check your residence date, your income before and after the move and any assets abroad. See tax residence and the 183-day rule and the modelo 720.
An illustrative example
Based on situations we commonly see; not a specific client. A retired British couple moved to Mallorca and kept their UK investment account. In their first Spanish return we declared the dividends and the UK pension, applied the treaty credit for UK tax withheld and filed the modelo 720 for the account, avoiding the double tax they feared.
This page is published by Castell.tax, the tax practice of Castell.law in Palma de Mallorca. It is general information; tax rules and rates change, so check your case with us before filing.
Not sure what you owe? Ask before the deadline
Send us your situation or the letter you received. A tax adviser will tell you what applies, what it could cost and what to file.
Questions about the Spanish income tax return
When is the Spanish income tax return due?
Usually from early April to 30 June for the previous calendar year.
Do I declare income from my home country?
Yes, as a resident you declare worldwide income, with a credit for foreign tax where the treaty allows.
Is filing compulsory for low incomes?
There are thresholds below which filing is not compulsory, but filing can be worthwhile to claim refunds.
Can you file for both spouses?
Yes, and we compare joint and individual filing to choose the cheaper option.