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spanish income tax 2010

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Notes on income tax in Spain for the year ended 31st December 2010

Personal Allowances for Spanish income tax

Capital Gains and Losses

Allowable expenditure

Tax credits

Double tax relief

Personal Allowances for Spanish income tax- minimo personal

General allowance   5,151 euro
Age allowance (65+) 6,069 euro          (75+) 6,273 euro
Disabled allowance   2,316 - 7,038 euro depending on degree of incapacity

Child allowance

First child               -      1,836 euro
Second child         -      2,040 euro
Third child              -      3,672 euro
Each further child -      4,182 euro

Elderly relative living with family whose income is less than 8,000 euro pa:

65+     918 euro
75+ 1,122 euro

Maternity allowance (Reduccion por cuidado de hijos)

2,244 euro pa per child under three years old.

Earnings related Personal Allowance (for employees)

Earnings not more than 9,180:       4,080 euro
Earnings 9,180 to 13,260:                4,080 - 35% x (Earnings - 9,180)
Earnings 13,260 + :                          2,652 euro

Capital Gains and Losses - Ganancias y Perdidas Patrimoniales

An indexation allowance is given for the sale of real estate, but not for other assets.

The rate of taxation is 19%.

In order to comply with EU non-discrimination regulations, the capital gains tax rate for both residents and non-residents has been equalised from 1st January 2007.

Reliefs

There is no capital gain if all the proceeds of sale of the taxpayers main residence are reinvested in a new main residence.

There is an optional rollover relief regime for capital gains made by business. This is similar to company tax rollover regime. Capital gains on fixed assets are not taxed immediately as far as proceeds are reinvested in fixed assets of the same type. The deferred gain is taxed over the following seven years.

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Trading income - Rendimientos de actividades empresariales y profesionales

Estimacion directa normal

Calculated according to usual accounting rules

Estimacion directa simplificada

Straight line depreciation (within normal limits)

Following calculation for allowable provisions and expenses of doubtful allowability:

5% * (Total income - allowable expenses)

Estimacion objetiva

Based on fixed rate according to nature of activity, adjusted by various
coefficients.

Optional

Gross income can not exceed 451,000 euro

Loss Relief

Trading losses can be set off against income from other regular sources in
the same year, and likewise in future years

Rental Income - Rendimientos del Capital Inmobiliario

Deemed income for non-residents

The deemed rental income for urban real estate not rented out or used as a second
residence is:

2% * cadastral Value (valor catastral)
1.1 % if cadastral value revised after 1st Jan 1994

If the cadastral value can not be determined, then the value used is 50% of value for the purposes of the Wealth Tax. The percentage applicable us 1.1%.

Deductible expenditure (residents only)

Normal repairs and renewals
Replacement of central heating, lifts, security doors etc
3% annual depreciation allowance on higher of cost of property / cadastral value (land
not included) *
All necessary expenditure

* Any depreciation claimed reduces the cost base for calculation of capital gain on subsequent sale

Allowable expenditure can note exceed rental income (i.e. it is not possible to have negative net rental income in any tax year).

There is a possible 40% deduction for irregular rentals.

Savings Income- Rendimientos del Capital Mobiliario

Savings income includes interest on savings accounts and dividends received

As of 1st January 2010, savings income is taxed as follows:

First 6,000 Euros: 19%
Remainder: 21%

These rates also apply to non-residents.

Employment Income- Rendimientos del Trabajo Personal

Taxable income

Wages and salaries
Redundancy pay over the current threshold.
Reimbursements over the current threshold.
Employer contributions into employee's pension scheme.
Benefits in Kind - Retribuciones en Especie.

Exempt Benefits in Kind

Shares in company or other group company with value not exceeding 12,000 Euros.

Subsidised canteen food to a maximum of 7.81 Euros per day.

Subsidised sports and social facilities.

Work accident, civil liability insurance paid by employer on behalf of employee.

Health insurance paid by employer up to 500 Euros per year.

Provision of education to the children of employees.

Taxable Benefits in Kind

-

Valuation of taxable benefits in Kind

Provision of accommodation

10% of cadastral value (5% if cadastral value revised after Jan 1994)

Provision of motor vehicle

- Vehicle gifted to employee: Cost plus associated taxes less Benefits in Kind previously assessed for use by employee.
- Vehicle provided temporarily to employee: 20% of cost annually

Beneficial loans

Difference between interest paid and the interest that would be paid under assuming the official interest rate.

Deductible expenditure

- Social Security contributions
- Membership of trade organisations

Administration

The Spanish tax year is the same as the calendar year. The Spanish tax system is based on self-assessment.

Allowable Expenditure

Pension contributions by the employee and employer of up to 20% of employment income are allowable. The maximum allowed deduction against taxable income is 8,000 euro if the taxpayer is under 53 with a higher allowance if they are 53 or over.

Tax Credits - Deducciones en Cuota

Tax credits can not produce a refund.
Payments on account and tax withheld at source can produce a refund.

Investment Tax credits (assets must be kept for 3 years)

15% (max base 9,015) on payments to acquire, maintain and exhibit assets
of cultural interest

Payments to acquire or renovate main residence (Deduccion Vivienda Habitual)

Home owners

The maximum allowable expenditure is 9,015 euro, with 15% tax relief. The following payments are allowable:

Cash payments.
Mortgage interest paid.
Deposit in cuenta vivienda.

Tenants

Conditions:

- Earnings do not exceed 21,035 euro (single tax return) or 30,051
(family tax return)
- Rental expenditure exceeds 10% net income
- Must have been under rental contract for at least 5 years

The tax credit 10% with a maximum of 601 euro

Donations

25% tax credit for donation of goods of cultural interest
10% for other donations to legally recognised entities

Base for calculating deduction can't exceed 10% of taxable income.

Double Tax Relief - Deduccion por Doble Imposicion Internacional

This applies to income and gains taxed abroad
The relied given is the lower of the foreign tax suffered and Spanish tax (calculates at the average rate)

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These notes are intended as a guideline to income tax in Spain and should not be used as a substitute for proper professional advice. Please contact us and we will be happy to assist you.

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