It’s time to think about doing your income tax return, the IRPF (Impuesto sobre Renta de Personas Físicas). You can do it yourself online, but The Crazy Guy much prefers to use a gestor. For a token charge, say 50€, a qualified gestor will do it with you in 20-30 minutes. Here’s more from The Crazy Guy.
By going to a gestoría you can save yourself a lot of worry and stress. My wife and I go to an excellent family gestoría in Ronda, where Daniel is the tax expert.
My wife typically ends up paying a few cents tax a year, plus Daniel’s fee. I pay nothing at all to Hacienda, because my income is below the tax threshold (my UK pension is taxed in the UK, so I don’t have to pay again in Spain, under the Spain/UK dual taxation agreement. Oddly, my wife, a German, pays tax on her German pensions in Germany, but is also required to pay tax on earned income in Spain – Spain and Germany have no dual tax agreement).
Daniel is also excellent when it comes to other tax matters. For example, when I sold a Spanish property four years ago I made a capital gain of 15,000€, and assumed I was going to get clobbered for tax. However, I sat with my Daniel, and by the time we’d deducted all the allowable off-sets, I ended up paying ….. 50€! Yes, 50€ tax, plus his fee of 50€. What a great outcome!
The Declaración de la Renta season has started and concludes on the last working day in June.
Basically, if you are tax resident in Spain, ie you reside here for more than 183 days per year, you are required to make an annual personal declaration of your worldwide income.
This can, of course, be either a source of dread or excitement, depending upon your situation.
If you've overpaid in the calendar year of 2022, you'll be due something back, but if you've underpaid, you'll need to hand over the difference.
If you are due a tax refund the State tax office, Agencia Tributaria or Hacienda, has until December 31 to pay it to you. If they pay after that date they must also add interest.
But the good news is that Hacienda does not normally stretch it out that long, especially if you get your declaration in early – sometimes, taxpayers get their rebates before May is out.
For those who need to pay to make up a shortfall, you would typically be expected to settle it in a lump sum before the end of June, but as long as you apply to do so before the close of the 'declaration window', you can arrange to stagger it in several payments.
Who is required to make a Declaración de la Renta?
Annual income tax declarations, in Spain, are not just for the self-employed. Almost everyone has to file one, even if they are retired or their income is from non-work-related activities – but there are some exceptions.
In general, if your income for the whole of the previous calendar year was from just one source, and was less than €22,000 in total, you are not required to make an annual declaration.
I was in this situation for years, as my only source of taxable income was the UK state pension which is way below the threshold. Now, I have one or two other sources, eg holiday rental income, income on bonds and bank savings account interest (my personal pension income, as described above, is already taxed PAYE in the UK and the net amount doesn’t count as income), so I must make a declaration. But as my total income from all sources comes nowhere near the threshold, I pay no tax anyway. All a bit futile, really. I just pay Daniel, my gestor, his 50€ fee. The whole thing is simple and free of pain.
What is classed as income?
Small amounts of money received as gifts or, for example, interest on a deposit account, selling a few second-hand personal effects at a car boot sale or on eBay or Wallapop, or a friend giving you €10 as a thanks for feeding their pets when they were on holiday, do not normally count as 'earnings' for tax declaration purposes.
However, if you are not sure whether you are exempt from making a declaration, check with your gestor, because if it turns out you should have made a declaration and you failed to do so, you could be fined.
There are other taxes, of course, that affect residents as well as non-residents, but I shall deal with those in another article.
In the meantime, further reading of possible interest is:
HOW TO ..... pay less tax in Spain? (eyeonspain.com)
HOW TO ….. Dodge the Tax Man (or not): Catastral Values and Tax in Spain (eyeonspain.com)
The taxmen are after you! - Secret Serrania de Ronda
Foreigners who pay tax in Spain stand to cash in from next year (eyeonspain.com)