Spain - Tax Guide for Freelance Contractors

Tax residents in Spain:          are liable to pay Spanish tax on their worldwide income,
Non tax residents in Spain:   are liable to pay tax on Spanish-source income and on capital gains realised in Spain only.

Individuals will be regarded as tax residents:

• if they spend more than 183 days in a calendar year in Spain,
• if their centre of vital interests (economic interests, business or professional activities) is in Spain.

Residence:

• is assumed if an individual’s family lives in Spain in the absence of proof to the contrary.

Married persons may elect to file a single or a joint tax return. The joint tax return does not allow splitting of income.

Taxable income includes:

• employment income,
• all compensation received for personal services,
• salaries and wages,
• payments for certain business-related expenses,
• pensions,
• housing allowances,
• other allowances paid in cash or in kind.

Certain deductions applicable to residents only are permissible for 2010 including:

• social security contributions,
• personal allowance of EUR 5’151 per year,
• employment allowance of EUR 2’652 for yearly earnings above EUR 13’260,
• allowance for children of EUR 1’836 for the first dependent under 25 years old,
• contributions to Spanish pension plans made by employer and employee up to certain limits,
• certain travel allowances paid by the employer to the employee may be exempt in specific circumstances.

Income tax rates for residents are progressive, for 2010:

• 24% on income up to EUR 17’707.20 for a single person without dependent children,
• 28% on income between EUR 17’707.20 and EUR 33’007.20,
• 37% on income between EUR 33’007.20 and EUR 53’407.20,
• 43% on income over EUR 53’407.20.

A tax rule for expatriates in Spain who are employed by a Spanish company or by a foreign company with a permanent establishment in Spain has been in force since 1 January 2004. These expatriates may choose to be subject to tax either at progressive rates with deduction of certain expenses and allowances, or as non-resident taxpayers at a flat tax rate of 24% with no deduction of expenses or allowances.
 

Miscelleanous

Further to the approval of the budget by the government, some of the amendments applicable to individual income tax as from January 1st, 2010 are as follows:

Progressive taxation of savings income is introduced.

• 19% on the first EUR 6’000,
• 21% above EUR 6’000.

Tax credit of EUR 400 for taxpayers receiving employment and business income is abolished.

Filing date:

Tax returns are usually filed from the 1st of May to 30th June following the end of the calendar year.