Tax guide for expats in Spain 2026

Spain’s tax system can be daunting for expats unfamiliar with its complexities. Understanding your tax residency status, income obligations, and opportunities for deductions is crucial for staying compliant and optimising your finances. This guide covers key aspects, including residency, income tax, property taxes, and wealth tax, offering clear explanations to help you make informed decisions.

Do foreigners pay taxes in Spain?

Yes. Foreigners are subject to tax based on their residency status.

• Non-residents are taxed only on Spanish-sourced income, such as rental earnings from Spanish properties or capital gains on local assets.
• Expats who become residents are taxed on their global earnings, though Double Taxation Agreements (DTAs) often prevent being taxed twice on the same income.

Who pays tax in Spain? Understanding tax residency

Your tax obligations in Spain depend on whether you are a resident or non-resident for tax purposes. This is why it is important to identify in which cases you would be considered in one category or another in order to identify the type of tax obligations you would have to face.

You are classified as a tax resident in Spain if:

• You spend 183 days or more in Spain within a calendar year.
• Your primary economic activities or interests are in Spain.
• Your immediate family (spouse or minor children) resides in Spain.

For individuals splitting time between multiple countries, Spain may still classify you as a resident if these criteria are met, making you liable for taxes on worldwide income. Non-residents are taxed only on Spanish-sourced income, such as rental earnings from Spanish properties or capital gains on Spanish assets.

Do I need a Spanish tax ID number?

Yes, all foreigners—both residents and non-residents—must obtain a Spanish tax identification number to conduct any financial or legal activity in Spain.

Depending on your status, you will encounter the following terms:

• NIE (Número de Identidad de Extranjero): This is the identification number assigned to foreign nationals. It is essential for opening a bank account, buying property, signing work contracts, and paying taxes.
• NIF (Número de Identificación Fiscal): The general term for a tax ID in Spain. For foreigners, your NIE typically serves as your NIF for tax purposes.

When is it required?

You are required to have a tax ID number for:

• Filing taxes: Both residents (paying income tax on worldwide earnings) and non-residents (paying tax on Spanish-sourced income) need it to file their returns.
• Real Estate: It is mandatory for purchasing or renting property and paying associated property taxes like IBI.
• Employment: You need it to sign an employment contract or register as self-employed (autónomo).
• Banking and utilities: Most banks and utility companies require an NIE to open accounts or set up services.

How to obtain it?

• In Spain: You can apply at a local police station (Policía Nacional) or a Foreigner's Office (Oficina de Extranjería).
• Abroad: You can apply through the Spanish consulate or embassy in your home country.
• Validity: Once issued, the NIE number is permanent and valid for life.

How much can you earn without paying tax in 2026?

In reality, it isn't very much. Spain has a system of personal and family allowances (mínimo personal y familiar) that effectively acts as a tax-free threshold for residents. This portion of your income is considered necessary for basic needs and is not subject to taxation.

For the 2026 tax year, the standard tax-free allowances for residents are as follows:

1. Personal allowances (Age-based)

The basic allowance increases as you get older:

• Under age 65: €5,550.
• Age 65 to 74: €6,700 (€5,550 base + €1,150 additional).
• Age 75 and over: €8,100 (€5,550 base + €2,550 additional).

2. Family and dependent allowances

If you have dependents living with you, you can claim additional tax-free amounts:

• Children (under 25): * 1st child: €2,400.
  • 2nd child: €2,700.
  • 3rd child: €4,000.
  • 4th and subsequent: €4,500.
  • Note: If the child is under 3 years old, the allowance increases by an additional €2,800.
• Elderly parents (over 65): Between €1,150 and €2,550 depending on their age and income.
• Disability: Additional allowances range from €3,000 to €12,000 depending on the degree of disability.

3. Filing thresholds

Even if your income exceeds the personal allowance, you may not be required to file a tax return if your earnings stay below certain "reporting thresholds":

• Single source of income: You generally do not have to file if you earn less than €22,000 annually from a single employer.
• Multiple sources of income: This threshold drops to €14,000 if you have more than one payer (and the second payer paid more than €1,500).

Regional tax variations in Spain - Be aware

Spain’s autonomous communities can impose their own tax rules for certain categories, including wealth tax, inheritance tax, and income tax surcharges. These regional differences can significantly impact your overall tax liability. For example:

• Madrid and Valencia provide generous tax incentives, including an almost full exemption on wealth tax, making them attractive for high-net-worth individuals.
• Catalonia and the Basque Country tend to have higher tax rates for inheritance and wealth taxes, adding financial complexity for residents of those regions.

Understanding how regional differences influence your tax burden is essential, especially if you are deciding where to live or invest.

When should I pay taxes in Spain?

The tax year in Spain runs from 1st January until 31st December. You need to file your tax return between April 6 and June 30 of the following year.

What taxes do you pay in Spain?

Spain employs several types of taxation that affect expats, ranging from income and wealth to consumption.

If you own, purchase, or sell property in Spain, several taxes and fees may apply. Understanding these taxes is essential for effective financial planning and compliance.

1. Property purchase taxes

The taxes you pay when buying a property in Spain will depend on whether the property is new or a resale.

• Resale properties:
  • Transfer tax (Impuesto sobre Transmisiones Patrimoniales - ITP): Rates range from 6% to 10% of the purchase price, depending on the autonomous community. Reduced rates may apply for first-time buyers or younger individuals in some regions.
• New properties:
  • Value-added tax (VAT or IVA): Charged at 10% of the purchase price for residential properties. For commercial properties or land, VAT may increase to 21%.
  • Stamp duty (Impuesto sobre Actos Jurídicos Documentados - AJD): Ranges between 0.5% and 2%, depending on the region.

If you are selling your property, you will be required to pay the municipal capital gains tax (plusvalía municipal), based on the increase in the value of the land during your ownership.

2. Annual property tax (IBI)

The Impuesto sobre Bienes Inmuebles (IBI) is an annual municipal tax charged to property owners.

• Basis of calculation: IBI is based on the cadastral value (valor catastral), a value determined by local authorities. This value, usually lower than the market value, considers the property’s location, size, and condition.
• Rates: Rates typically range from 0.4% to 1.1% of the cadastral value, with urban properties often subject to higher rates than rural ones.
• Payment deadlines: Payment schedules vary by region, and property owners are notified by the local municipality. Late payments may result in penalties.

3. Income tax in Spain

Spain has a progressive income tax system, with rates increasing as income rises. Residents are taxed on worldwide income, while non-residents are taxed only on income earned in Spain.

Income tax rates vary slightly by region, but the general national rates are as follows:

Regions with higher surcharges, such as Catalonia, may exceed a combined rate of 50%. Deductions for dependents, mortgages, and charitable donations are available to residents, potentially reducing taxable income.

Non-residents pay a flat rate of 24% on Spanish-sourced income. EU/EEA residents may qualify for a reduced rate of 19% under certain conditions.

4. Taxation of pensions and investment income

Pensions and investment income often form a substantial part of expats' financial resources. Understanding how these income streams are taxed in Spain is critical for compliance, avoiding double taxation, and minimising tax liabilities.

Foreign, Government and private pensions

Expats receiving pensions from abroad should be aware of the following details:

• As a general rule, residents of Spain are taxed on their worldwide income, which includes both private and state pensions. This means that all pension income—regardless of its source—is subject to Spanish income tax regulations.
  • Government pensions: Typically include pensions for public servants, such as civil service, police, or military pensions. These are often taxed only in the country of origin and not in Spain, provided a DTA is in place.
  • Private pensions: Generally taxable in Spain, even if they originate from another country.
• Double taxation agreements (DTAs): Spain has signed treaties with many countries to prevent double taxation. These agreements specify which country has the primary right to tax certain types of income, including pensions.

Tax credits and deductions

Expats can often claim credits or deductions in Spain for taxes already paid on pensions in the country of origin. For example, if you’ve paid income tax on a private pension in the UK, you may receive a credit to avoid being taxed twice on the same income. Special provisions under DTAs may provide partial or full exemptions for certain types of pension income.

Consulting a tax advisor is essential to understand the nuances of how your specific pension type is taxed. This includes considering factors such as lump-sum withdrawals, annuities, or periodic payments and how they interact with DTAs.

Investment income

Spain taxes investment income under its savings tax regime, which includes income from dividends, interest, and capital gains. Understanding the tax treatment of each type of income is essential for compliance and tax optimisation.

5. Capital gains tax in Spain

Capital gains tax (Impuesto sobre Incremento del Valor de los Terrenos) applies to profits from selling assets, including property, shares, and other investments. Gains are calculated by subtracting the purchase price (adjusted for inflation and eligible expenses such as transaction fees, legal costs, and renovation expenses) from the sale price.

Certain exemptions and reporting requirements can influence how capital gains are taxed, especially for property sales and foreign assets:

• Residents selling their primary residence may qualify for an exemption if the proceeds are reinvested into another primary residence in Spain within two years.
• Residents aged 65 or older who sell their primary residence can also benefit from a full exemption, provided specific conditions are met.
• For foreign assets, such as overseas properties or investments, gains must be declared in Spain even if they were taxed abroad. Relief under double taxation treaties can reduce liabilities and ensure fair taxation.

Proper planning and accurate reporting of capital gains, particularly for property sales, can minimise liabilities and help avoid penalties. Consulting a tax advisor ensures you maximise available exemptions and remain compliant with Spanish regulations.

6. VAT (Value-Added Tax) in Spain

VAT (Impuesto sobre el valor añadido or IVA) is a consumption tax applied to most goods and services in Spain. It affects both residents and expats when making purchases or conducting business.

VAT rates:

• 21% Standard rate: Most goods and services.
• 10% Reduced rate: Public transport, hotel stays, and tourism services.
• 4% Super-reduced rate: Basic necessities like staple foods, books, and medicines.

Non-residents can claim VAT refunds on eligible purchases, such as personal goods exported to their home country, including electronics, clothing, and luxury items. The goods must be exported within three months, and receipts or official VAT refund forms are required.

Understanding VAT is particularly important for expats running businesses or making major investments in Spain. Reduced VAT may also apply to renewable energy projects, such as solar panel installations.

7. Dividends Tax

Dividends are payments made to shareholders from a company’s profits. The income from dividends is subject to taxation. Double taxation relief may apply if the dividends are from foreign companies, ensuring you’re not taxed twice in Spain and the source country.

8. Interest income

Interest income includes earnings from savings accounts, bonds, and other fixed-income investments. This income is taxable in Spain, regardless of whether it is earned domestically or abroad. Residents are taxed on their worldwide income, meaning all interest must be reported.

9. Wealth tax in Spain

Spain levies a wealth tax on residents and non-residents with substantial assets in Spain. It is calculated on your net wealth, including property, savings, and luxury items.

• Exemption threshold: €700,000 per person, with an additional €300,000 for a primary residence in most regions. . Some regions may be above or below the national standard. (Valencia applies an exemption of €1,000,000).
• Rates: Range from 0.2% to 3.5%, depending on the value of assets and your region of residence.
• Regional variations: While Madrid and Andalucia exempt residents from paying the wealth tax, other regions, such as Catalonia, impose higher rates. While those regions have a 100% rebate on the standard Wealth Tax, the central government's "Solidarity Tax on Large Fortunes" has effectively neutralised these exemptions for net wealth exceeding €3 million. If you are a high-net-worth individual in Madrid, you may still be subject to the state-level "Solidarity Tax."

This tax primarily affects high-net-worth individuals, and exemptions vary widely across Spain’s regions.

10. Inheritance and gift tax (Impuesto sobre sucesiones y donaciones) in Spain 2026

Inheritance and gift taxes apply to the transfer of assets, such as property or financial holdings, to heirs or recipients. Rates and exemptions vary by region and depend on the relationship between the donor and recipient.

Tax rates typically range from 1% to 34%, depending on the value of the inheritance or gift. Higher rates may apply to distant relatives or unrelated recipients and immediate family members often benefit from higher exemptions or lower rates.

Regional variations:

• Madrid and Valencia: Generous exemptions often result in little to no tax for immediate family members.
• Andalusia: Close relatives may also pay minimal or no tax under specific thresholds.
• Catalonia and the Basque Country: Generally impose higher rates, especially for distant relatives or unrelated recipients.

Key additional considerations for expats

In addition to the primary taxes, expats in Spain should also be aware of the following key obligations and opportunities. Proper planning can help you navigate these requirements effectively and optimise your financial position.

Modelo 720 and 721

• Modelo 720: Residents must declare foreign assets exceeding €50,000, including bank accounts, properties, and financial investments. Failure to comply may result in severe penalties, potentially exceeding the value of undeclared assets.
• Modelo 721: Introduced for tracking cryptocurrency assets held abroad, this model follows similar reporting thresholds and penalties as Modelo 720.

Exit tax in Spain

This tax applies to individuals leaving Spain who have been tax residents for at least 10 of the previous 15 years. It is imposed on global assets exceeding €4 million and significant shareholdings (25% or more ownership in a company) valued over €1 million. The tax is calculated based on unrealised capital gains of the affected assets.

Social security contributions in Spain

In Spain, social security contributionsare automatically deducted from the employee's gross salary, amounting to approximately 6.35%. In the case of being self-employed (autónomo), contributions are based on declared income, starting at €200/month in 2026, with adjustments based on monthly invoiced income. Minimum and maximum contribution ranges are established to account for variable earnings.

Green tax incentives in Spain

Spain provides tax breaks for environmentally friendly investments, including:

• Solar panels: Deductions for installing solar panels on properties.
• Electric vehicles: Reduced registration taxes and other incentives for purchasing eco-friendly vehicles.
• Energy Efficiency upgrades: Potential rebates for upgrading properties to meet energy efficiency standards.

Cryptocurrency taxation in Spain

Spain recognises cryptocurrency as a digital asset and taxes related income accordingly. Whether you’re trading, mining, or holding cryptocurrency, understanding the tax implications is essential for compliance.

• Capital gains: Profits from selling or trading cryptocurrencies are taxed progressively (19%–30%).
• Mining income: Treated as general income and taxed at progressive rates (up to 54%).
• Reporting obligations: Cryptocurrency holdings over €50,000 abroad must be reported via Modelo 720 or 721. Non-compliance results in heavy penalties.

Strategies to minimise tax burdens in Spain

Proper tax planning can help expats significantly reduce their liabilities while ensuring compliance with Spain’s tax laws. Here are some effective strategies to optimise your taxes:

• Use deductions and allowances: Claim deductions for pensions, private health insurance, family dependents, and charitable donations to lower taxable income.
• Time income and investments strategically: Plan income or asset sales to align with lower tax brackets, stagger capital gains over multiple years, or offset gains with losses.
• Optimise property transactions: Take advantage of exemptions, such as reinvesting proceeds from a primary residence sale or exemptions for sellers over 65 years old.
• Leverage special tax regimes: Consider applying for the Beckham Law or using Double Taxation Agreements to reduce tax on Spanish and foreign-sourced income.
• Seek expert advice: Consulting a tax professional ensures you take full advantage of deductions and exemptions while staying compliant with Spanish tax laws.

What is the Beckham Law?

The Beckham Law, officially known as the Special Expat Regime, is a tax incentive for high-net-worth individuals relocating to Spain. Introduced to attract talent, it offers significant benefits:

• Flat Tax Rate: Qualifying individuals pay a flat 24% tax rate on Spanish-sourced income up to €600,000 for up to six years: The year of arrival plus 5 further years.
• Eligibility: You must apply within six months of arriving in Spain and cannot have been a Spanish resident in the five years prior to arrival. The law is no longer just for "executives and researchers", and ironically, it no longer applies to professional athletes. It has now been expanded to include:
  • Digital Nomads: Remote workers for non-Spanish companies.
  • Entrepreneurs: Those moving to start innovative businesses.
  • Highly Skilled Professionals: Providing services to startups or R&D.
  • Family Members: The benefit can now often be extended to the spouse and children (under 25) of the main applicant.

The Beckham Law is often most beneficial for people with high foreign investment income (like dividends or rental income from a home in the US or UK). Under the Beckham Law, foreign passive income is exempt from Spanish tax. If you were a "standard" resident, you would have to pay Spanish tax on every cent you earn globally.

Common tax pitfalls to avoid in Spain

Spain’s tax system can be challenging for expats, and mistakes may result in fines, penalties, or unanticipated back taxes. To ensure compliance and avoid financial and legal issues, expats should be aware of common pitfalls and the options available for regularising their tax affairs.

• Failing to register as a tax resident: If you meet the criteria for tax residency but fail to register with the authorities, you may face fines and retroactive tax liabilities.
• Non-reporting of foreign assets: Spain’s strict reporting requirements for foreign assets, including Modelo 720 and Modelo 721, carry severe penalties for non-compliance.
• Overlooking regional variations: Tax rates and exemptions can vary significantly between Spain’s autonomous communities. Miscalculating taxes based on national rates alone can lead to unexpected liabilities.

Tax amnesty and regularisation options in Spain

For expats who have failed to meet their tax obligations, Spain provides mechanisms to rectify their status and minimise penalties:

• Voluntary disclosure programmes: Spain occasionally offers programmes allowing individuals to report unreported income or assets. Acting proactively before enforcement actions begin can result in reduced or eliminated penalties.
• Professional advice: Expats with unresolved tax issues, such as unfiled returns or undeclared assets, should seek help from a specialised tax advisor.

Taking advantage of these options not only ensures compliance with Spanish tax laws but also reduces stress and financial uncertainty, providing a fresh start for expats aiming to rectify past oversights.

Spain's tax system can seem overwhelming, but understanding residency rules, tax rates, and deductions is crucial for compliance and financial optimisation. Determine your residency status, research tax policies in your autonomous community, use available deductions, file declarations on time and seek expert advice. Whether managing property, pensions, or green investments, careful planning and professional advice can help minimise liabilities. For more on property taxes, explore our article on the expenses involved in the purchase of a property in the country.