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Spanish Taxation In 2016
Friday, 05 February 2016
It is important to review your tax planning from time to time, to check that it is up to date and that you are using all the opportunities available in Spain to reduce tax liabilities for yourself and your heirs. 

So far there have not been many tax changes for 2016, and income taxes are just a little lower than last year. 

Income taxes

The Spanish “Personal Income Tax Act” was significantly amended for income received in 2015.  This lowered tax for all taxpayers, but does more for those on low and medium incomes. The government then shaved half a percentage off tax rates in last July, and they are reduced by around another half a percentage again for 2016 income. The general state income tax rates for 2016 are –

 

Income €

Tax rate

0 – 12,450

19%

12,450 – 20,200

24%

20,200 – 35,200

30%

35,200 – 60,000

37%

Over 60,000

45%

 

However these rates are made up of equal part state rates and regional rates, and each Autonomous Community can amend their local rates.   This can make for higher tax rates in some regions, including Andalucía.  The local government here has reduced its regional rates by 2% for 2016, but only for income up to €60,000.  The lowest income tax rate for Andalucía is now 19.5%, while at the top end of the scale we have 46% for income over €60,000 and 48% for income over €120,000.

The above rates only apply to general income (employment, pension, rental income, etc).  Savings income is taxed at different rates.  The 2016 rates are –

 

Income €

Tax rate

0 – 6,000

19%

6,000 – 50,000

21%

Over 50,000

23%

 

Savings income covers interest, dividends, income derived from life assurance contracts, purchased annuity income and capital gains on the sale or transfer of assets.

Note that when it comes to tax on capital gains, with effect from 2015 all gains are taxed at the savings tax rates, even those arising on assets held for less than a year.  The depreciation relief on capital gains was removed, but on assets acquired before 31st December 1994 taxpayers may be entitled to a reduction provided that the sales proceeds do not exceed €400,000.

For those residents who benefit from the “special tax regime” for inbound assignees (‘Beckham law’), the tax rates for 2016 are 24% for income up to €600,000 and 45% after that.

Non-residents who earn any kind of Spanish income will pay tax at fixed rates of 19% for EU residents and 24% for everyone else. 

Wealth tax

When wealth tax was reinstated in 2011, it was meant to apply for 2011 and 2012.  However it keeps being extended, and remains in place for fiscal year 2016.

Spanish residents pay wealth tax on the value of their worldwide assets as at 31st December. Rates rise progressively from 0.2% to 2.5% (3.03% in Andalucía).  There are however reductions available, ranging from €700,000 to €2m, depending on whether you own your home and if you are single or a married couple.

This is a tough tax for wealthy residents, but steps can be taken to limit it.

Succession tax

There have been no changes to succession tax this year. 

How damaging this tax is depends on whom your beneficiaries are (rates, allowances and exemptions vary according to how they are related to you), how much the inheritance is and how much they are worth.  There is no blanket exemption between spouses in Spain.

UK nationals need estate planning to cover both Spanish succession tax and UK inheritance tax. 

Form 720

Do not forget that Modelo 720 needs to be submitted by 31st March, reporting on the assets you owned in 2015 if you were resident in Spain.  You need to declare all overseas assets worth over €50,000. If you have submitted this form before, you only need to report again if the value of an asset increased by more than €20,000, or you sold an asset or closed an account, or you obtained a new asset.

Although the European Commission is investigating whether Modelo 720 (the disproportionate penalties and lack of statute of limitations) infringes on EU law, you still need to file your form as usual, at least for the time being.

Tax planning

With specialist advice you can often use compliant arrangements to reduce tax on your savings, investments, pensions and assets - with the right tax planning Spain can be very tax efficient for retired expatriates.  Blevins Franks has decades of experience advising British expatriates and in-depth knowledge of Spanish taxation.  We specialise in reducing tax on invested capital, pensions, wealth and inheritance, and have saved our clients a substantial amount of tax over the years.

To keep in touch with the latest developments in the offshore world, check out the latest news on our website www.blevinsfranks.com

David Bowern, Partner, Blevins Franks
Email:
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Tel: 952 809 212

 Tax rates, scope and reliefs may change.  Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change.  Tax information has been summarised; an individual is advised to seek personalised advice. Blevins Franks Financial Management Limited (BFFM) is authorised and regulated by the Financial Conduct Authority in the UK, reference number 179731. Where advice is provided outside the UK, via the Insurance Mediation Directive from Malta, the regulatory system differs in some respects from that of the UK.  Blevins Franks Trustees Limited is authorised and regulated by the Malta Financial Services Authority for the administration of trusts and companies. Blevins Franks Tax Limited provides taxation advice; its advisers are fully qualified tax specialists.  This promotion has been approved and issued by BFFM.  

 

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