We continue to publish articles on the specifics of moving , studying and living in Spain. The topic of the new publication is taxes. The system of treasury and taxation of countries is perhaps the most ingenious structure in the government. Spain is no exception.
Citizens and residents of the country pay taxes for everything: for the consumption of goods and services, for the water they drink, for the real estate in which they live, and so on. The goal pursued by the government is to
Types of taxes in Spain
Starting from the basics, the concept of taxation in Spain is defined as “the economic contribution that citizens are required to make by law to maintain government revenue and guarantee the operation of the public service system”. That is, taxes are not only a source of well-being of the public service system for the population, but also a direct factor in the country's wealth and prosperity.
There are three types of payments in the Spanish tax system:
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Any person who receives income pays the Spanish public financial system, depending on the level of their economic opportunities. The basic principle: the more a person earns, the more he pays to the state treasury.
In Spain, 38% of taxpayers pay 72% of total government taxes. These are citizens, whose income ranges from 21 to 150 thousand euros per year.
The economic capabilities of each tax resident are determined depending on:
- movable and immovable property that he owns;
- the income he receives;
- the amount of money he spends;
- personal circumstances (large families, disabilities, etc.).
Types of taxes in Spain
Taxes in Spain are classified by type - for example, direct or indirect. You also need to know that the tax system is a three-tier one, when payments are collected at the state, regional or local levels.
Direct taxes include:
- income tax;
- non-resident income tax;
- corporate tax;
- inheritance and gift tax;
- wealth tax.
Indirect taxes include:
- VAT;
- property transfer tax and legal documentation;
- customs revenue;
- special taxes.
Main taxes paid by Spaniards and residents
The largest taxes are paid to the treasury by small and medium-sized enterprises, as well as by private entrepreneurs and self-employed workers.
Personal Income Tax (IRPF)
This tax is the most important from the point of view of the source of collection of the Spanish tax system. The monthly income of the Spaniard is taxed, and it is also paid every month. The balance is calculated at the end of the year. If it is negative, the taxpayer returns to himself part of the amount paid, if positive, he will have to pay the difference.
Self-employed professionals declare their income every three months according to a special progressive contribution system established by the Internal Revenue Service.
In order to determine the payment ability of a Spanish citizen or resident, various factors are taken into account - for example, personal and family circumstances. Therefore, together with the principle of progressiveness (you get more, you pay more), a system of exemptions, reductions and deductions is also used. Thus, there are categories of citizens who are exempt from paying taxes, pay at a reduced rate or receive benefits. These include, for example, people with disabilities, unemployed people, students, etc.
Non-resident income tax
This is a tax paid by residents of other countries on income earned in Spain. In order to avoid double taxation or tax evasion, international conventions signed by Spain with other countries are used.
Business tax (IS)
This is a type of direct tax that is paid by businesses and companies throughout Spain, except for the Basque Country and Navarra, which have their own company taxation system. IS is paid by all types of legal entities - from commercial companies to associations and foundations. But there are also exceptions. There is a category of legal entities that either pay tax at a reduced rate of 25%, or do not pay it at all. For example, no-profit enterprises, unions, federations, Royal Academies, Bank of Spain, state and autonomous communities.
Value Added Tax (VAT)
Unlike other types of tax, VAT is paid not because the Spaniard receives income, but because he spends it. VAT is paid by all autonomous communities, excluding the Canary Islands, as well as Ceuta and Melilla - enclaves of the Spanish kingdom in Africa.
In short, the amount of VAT is formed on the basis of three tax rates. For example, a low rate of 4% is set for basic necessities. The 10% rate, or reduced, is set on certain food, passenger transport, health products, hospitality, and construction. The general VAT rate of 21% is set for all other goods and services.
VAT is an indirect tax that companies do not pay, but “accumulate” in the process of producing goods and services for the state. For this reason, VAT is taxed only on the turnover of tangible assets without taking into account personal circumstances, as well as income tax on individuals. Companies must declare paid and collected VAT monthly or quarterly.
Property transfer tax and legal documentation
This type of charge includes three taxes that do not overlap with VAT and with each other:
- Property transfer tax. All property transfer transactions are taxed here if both parties benefit from it.
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Of the other taxes that the Spaniards pay in their country, it is also worth noting the tax on real estate (from 100 euros per year) and on vehicles (from 80 euros per year).
The greatest tax burden falls on the citizens and residents of the country, who receive between 30,000 and 60,000 euros per year. They are only 18% of the total mass of taxpayers, but their taxes make up 36% of the total amount of taxes received by the state. At the same time, the average income per capita in Spain is just over 23,620 euros per year.
By the way, in 2020, Spain became the first in Europe on such a basis as social inequality. The reason is the pandemic and the accompanying economic crisis. At the same time, the government has been changing tax laws since January, introducing new types of fees. In addition, taxes such as income taxes, "wealth" taxes are being increased, VAT increases on certain types of products (for example, on drinks with a reduced sugar content), on vehicles, on insurance premiums, etc.
