Taxes you need to know about when retiring to Spain

Retiring to Spain as a foreign national comes with a set of tax obligations that are worth understanding before you make the move. Some taxes will feel familiar, while others may be new. Knowing what to expect allows you to plan ahead and avoid unwelcome surprises.

Spain operates a decentralised tax system: some taxes are set nationally, while others vary by autonomous community. In certain cases, where you choose to retire can make a genuine financial difference.

How your residency status affects your taxes

Before anything else, you need to establish whether Spain will consider you a tax resident — as this determines everything about what you owe and to whom.

Tax residents: worldwide income

If you spend more than 183 days in Spain in a calendar year, the Spanish tax authorities consider you a tax resident. As a resident, you pay income tax on your worldwide income — your pension, rental income from properties abroad, investments, and any other earnings, wherever they arise.

Non-residents: Spanish-source income and Modelo 210

If you spend fewer than 183 days per year in Spain, you are a non-resident and only taxed on income generated within Spain. However, owning a property here creates its own obligation that catches many foreign retirees off guard.

Even if your Spanish property is not rented out, Spain assumes a small notional rental value based on the cadastral value of the property and taxes it accordingly. This must be declared each year using Modelo 210 — the non-resident income tax return, filed online through the Agencia Tributaria's official portal. The amount is modest, but the obligation is real and failure to file can result in penalties.

Note that Spain may also consider you a tax resident if your spouse and dependent children are permanently based there, even if you personally do not meet the 183-day threshold.

If you are still planning your move, our guide to what you need to retire in Spain covers the key requirements in full.

Income tax, pension tax and wealth tax

For most foreign retirees, income tax is the most significant obligation. Spain taxes pension income as general income under IRPF (Impuesto sobre la Renta de las Personas Físicas), using a progressive scale. Your exact rate depends on the autonomous community where you live.

Tax allowances for retirees

Spain provides a general tax-free allowance of €5,550 per year. Pensioners over 65 qualify for a higher allowance, which increases again at 75. Most state and occupational pensions are taxed as general income; some foreign private savings schemes not recognised as pensions by Spain may qualify for the more favourable capital gains rates.

Spain has double taxation agreements with many countries, including the United Kingdom and the United States, so you will not be taxed on the same income twice. Under the UK–Spain agreement, for example, your UK state pension is taxable only in Spain once you become a Spanish tax resident.

For a full breakdown of how different pension types are treated, read our article on how much tax you will pay on your pension in Spain.

Wealth tax

Spain levies an annual wealth tax on net assets exceeding €700,000, with an additional €300,000 exemption for a primary residence. Rates range from 0.2% to 3.5% depending on the total value of your assets and the region where you live. Madrid currently offers a 100% regional allowance, effectively eliminating the tax for its residents, while other communities apply it in full. If you have significant assets, this is worth factoring into your choice of where to retire.

Property purchase taxes in Spain

Buying a property in Spain triggers a one-off tax, the type of which depends on whether the property is new or a resale.

New properties: VAT and stamp duty

• VAT (IVA): 10% of the purchase price
• Stamp duty (AJD): a regional tax, typically between 0.75% and 1.5%

Resale properties: transfer tax

For a previously owned property you pay Impuesto de Transmisiones Patrimoniales (ITP) instead — a regional tax generally between 6% and 11% of the purchase price, depending on where you buy and the value of the property.

On top of these taxes, allow a further 1–2% for notary, land registry, and legal fees.

Our guide to how much money you will need to retire in Spain covers purchase costs alongside ongoing living expenses.

IBI: the annual property tax every owner pays

Once you own a property in Spain, you pay an annual municipal tax called Impuesto sobre Bienes Inmuebles (IBI). This applies to all owners regardless of residency status, and regardless of whether the property is occupied or empty.

How it is calculated

IBI is based on the cadastral value of your property — an administrative figure typically 30–60% lower than market value. Each municipality sets its own rate, generally between 0.4% and 1.3% for urban properties. The bill is usually modest, but it is a fixed annual cost to budget for.

Key rules to know

• The owner on 1 January of the tax year is liable for the full year, even if the property is sold later
• Payment deadlines vary by municipality, typically between May and October
• Unpaid IBI blocks property sales and prevents filing your non-resident tax return (Modelo 210)
• Setting up a direct debit with your local town hall avoids missed deadlines when you are abroad

Inheritance and gift tax in Spain

Spain taxes each beneficiary individually on what they inherit, rather than taxing the estate. This applies to both residents and non-residents inheriting assets located in Spain.

The national rates

National rates range from 7.65% to 34%, applied progressively. However, autonomous communities set their own reliefs — and in several of the most popular regions for foreign retirees, the effective tax burden for close family members has been dramatically reduced.

Why your region matters

Regional rules change; always confirm the current position with a local tax specialist.

These reliefs generally do not extend to more distant relatives, unmarried partners, or stepchildren. If you plan to leave assets to anyone outside the immediate family, early planning is strongly recommended.

If you have assets in Spain, it is also worth understanding how Spanish inheritance law works and why having a will in place matters. For full details, read our guide to Spanish inheritance laws and why you should have a will.

How to register and file your tax return in Spain

Before registering with the Spanish tax authorities, you will need a foreigner’s identity number — the Número de Identificación de Extranjero (NIE). This is required for almost every official process in Spain, from buying a property to opening a bank account.

For residents: Modelo 100

Residents file their annual return using Modelo 100 via the Agencia Tributaria's Renta WEB platform, between 6 April and 30 June of the following year. A return is required if your worldwide income exceeds €15,000 per year, or if investment income or bank interest exceeds €1,600. If you hold foreign assets worth more than €50,000 in total, you must also declare these via Modelo 720.

For non-residents: Modelo 210

Non-residents with a property in Spain must file Modelo 210 annually to declare imputed income on the property, even if it is not rented out. If the property is rented, the rental income must also be declared through the same form.

For your first return in either case, we strongly recommend working with a qualified tax adviser — known in Spain as a gestor. The cost is almost always less than the risk of filing incorrectly.

Planning ahead makes the difference

Understanding your tax position before you retire to Spain gives you the opportunity to make informed decisions — about where to live, how to hold your assets, and when to take certain financial steps. These decisions are far harder to reverse once you are already resident. If you are still in the planning stage, it is worth reading up on what you need to retire in Spain, what visa applies to your situation. It is also worth considering whether private health insurance is right for you before you make the move.