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Agencia Tributaria update: Hacienda gets unreasonably tough.

The Spanish Tax Office, La Agencia Tributaria (colloquially known as Hacienda), has never been known for being helpful or approachable to the taxpayer, however in the last few months things seem to have taken a turn for the worse. They seem to be looking for any excuse to punish the taxpayer with fines for even the smallest unintentional errors, or to disallow perfectly legitimate tax deductions and leaving the taxpayer in a “guilty before proven innocent” situation.

Here’s a couple of examples that we have come across recently:

Unintentional error in tax return- sanctions payable even after the error has been corrected

In this case, there was an unintentional error in an autonomo‘s annual tax return, where the payments on account of income tax during the year were overstated. The Agencia Tributaria, as is routine, checked the figures on their system and identified the error. They issued a corrected assessment, and added late payment interest. All of this is perfectly reasonable of course. However the letter also mentioned that penalty (known as sancion) proceedings had been opened.

The autonomo paid this bill straight away, we wrote to the Agencia Tributaria stating that it was not justifiable to charge a penalty because the error in the return had been unintentional. They did not accept this, and a month later the client received a bill for the penalty of more than 200 Euros. The client had no option but to pay this, or face an increased penalty,

Our assessment: the penalty was entirely unfair, and this new policy whiffs of an effort by the State to make money at the expense of the honest small businessperson.  They cannot argue that there is any tax evasion taking place because all the data for the payments on account made during the year are on their system and any errors are picked up systematically.

Our conclusions:

1. The taxpayer and their accountants need to be even more vigilant from now on that not even the smallest error is made in tax returns.

2. The Agencia Tributaria is even less of a friend of yours than it was before.


Disallowed pension contributions- payments made in another EU country

In Spain, there is a generous tax allowance whereby private pension contributions are deductible for income tax purposes, up to 10,000 Euros per annum. Tax Law states that contributions made to pension funds in other other EU countries can be included.

One client of ours made payments into a French pension fund which exceeded 10,000 Euros, so we claimed the maximum in his annual Spanish income tax return (Renta).  A year or so later, he received a letter from the Agencia Tributaria with a revised assessment based on the premise that the pension payments were not deductible because they were not in their database (which is, of course, only for Spanish pension funds).  

The taxpayer had just ten days to appeal and we did so on his behalf, stating the relevant Spanish tax law and attaching proof of payment of the pension contributions. The Agencia Tributaria accepted our argument and cancelled their revised assessment.

A couple of years later, the client received a similar letter from them querying his latest tax return, and only after we wrote another letter to point out that they had already accepted the deduction for him two years previously, did they accept that the client’s return was correct.

Our conclusion:

1. When there is an Agencia Tributaria query into a tax return which has been correctly prepared, the taxpayer is guilty unless proven innocent and the lack of a prompt reply to them will result in the overpayment of tax.

2. The Agencia Tributaria conveniently do not look into past judgements made in favour of the taxpayer when there is the opportunity for them to overtax them again.









Foreign companies: registering for VAT in Spain

Foreign companies wishing to offer their services or goods here in Spain are generally required to register for Spanish VAT here: known as IVA – Impuesto sobre el Valor Añadido.

Compared to setting up a free-standing Spanish company, this process is straightforward and quick.  On presentation of all of the required documents  at a local tax office in Spain, your company’s Spanish tax/ VAT number is issued immediately.

The key, therefore, is to ensure that you prepare the correct documentation at your end. This is as follows:

1. A certificate produced by the Company Registry in the country where your company was incorporated. This document should state the registered address of the company and a list of directors.

The certificate must be issued recently as the Spanish Tax Authorities will wish to have evidence that the company is still in good standing.

2. Two notarised representation documents:

a) A Power of Attorney to your Spanish representatives to obtain your company’s Spanish tax code on your behalf.

b) A letter authorising them to represent you in future communications with the Spanish tax authorities.  This letter is, in general, required at the outset, however it is a simple process for you to change representatives at a later date.

All of these documents should be legalised in your country with the Hague Apostille and then translated into Spanish by a sworn translator.

Registered Office in Spain

From a tax point of view, it is not necessary for you to have your own registered office here, as all Tax Office correspondence will automatically go to your representatives.

Of course, as you expand here and wish to have your own people on the ground in Spain, you will most likely require your own office. This will be considered as a Permanent Establishment for Spanish tax purposes, and your company will be required to submit annual company tax declarations.

If your company wishes to take on Spanish employees, it will need to be registered at the Spanish Social Security Office, by presenting Form TA6 along with supporting documentation.

For further information and assistance, please visit our website at . 

2014 residents tax returns

The Agencia Tributaria system for filing the 2014 annual residents’ tax returns opens in late April, so now is a good time to start to prepare ! Here’s an overview of the Spanish online tax filing system for residents, including how to pay your tax bill and claim any refunds due.

The tax year to be filed is 1st January – 31st December 2013, and returns must be filed by 30th June 2014.

Spanish tax returns are prepared using a software known as PADRE, which is produced by the Agencia Tributaria and can be downloaded from their website,  from late April onwards.  This is an offline program into which you enter details of your taxable income, which creates a file to be submitted online via the Agencia Tributaria website.

The return consists of the following principal sections:

1. Work-related income (Rendimientos de Trabajo): Employment, occupational pensions;

2. Savings income (Rendimientos del Capital Mobiliario): Interest, dividends, annuity pensions;

3. Rental income (Rendimientos de Bienes Inmuebles);

4. Self-employment income (Actividades Economicas);

5. Capital gains and losses (Ganancias y perdidas patrimoniales);

6. Reductions in taxable income (Reducciones de la base imponible): pension contributions.

7. Tax credits (Deducciones en cuota):  For tax withheld on all sources of income and tax paid abroad.

Tax for married couples

The PADRE software  has very useful function which calculates the tax due if spouses claim separately and jointly, and allows you to choose the option which gives the least total tax payable.

Tax payments

Where there is tax due, you have the option of paying all of it at once, or to make split payments (pagos fraccionados): 60% on 30th June and 40% at the beginning of November. There is no interest charged for this option.

The tax can be paid by presenting the return at your bank, or by specifying direct payment in the actual tax return. The latter option is very convenient but note that in order for it to be accepted, you need to file your return at least one week before the 30th June deadline.

Tax refunds

If the return shows that a tax refund is due, you simply need to enter your bank account number into the program before filing online. No supporting documentation needs to be included at the time of filing of the return, however this may be requested later in writing by the Agencia Tributaria. Tax refunds in Spain, especially where there are multiple sources of income, can be very slow to arrive.

For further information and assistance, please visit our website at .

Modelo 720- Declaration of Foreign Assets (Declaración informativa sobre bienes y derechos situados en el extranjero).

“In this world nothing can be said to be certain, except death and taxes”.

Benjamin Franklin, 1789

Even Benjamin Franklin could never have forseen Modelo 720,  this unpopular, perplexing and even frightening tax declaration that has been in force in Spain for a year now.

This is not a tax declaration as such because no tax is payable. It is a requirement for all residents of Spain to declare their foreign assets which exceed 50,000 Euros in any of three categories.

Why, you might ask yourself ? Is it meant to target those naughty rich tax evaders who hide their assets in offshore accounts and other complex structures ?

Well, I can’t see how. With a low declaration threshold of 50k Euros, it would seem to be targeted at the tens of thousands of more modestly-endowed residents of Spain who have savings, life insurance or a property abroad, normally in a country which an information-sharing agreement in Spain.

The real tax evaders won’t be scared by this declaration. They with the help of their well-paid tax advisers will find a way to hide their assets in an offshore structure where the Agencia Tributaria will never find them.

Meanwhile, the common law-abiding citizens will make this tax declaration including full details of all their assets, in fear of making even the slightest unintentional error, knowing that this could lead to a fine of thousands of Euros.

Whether Modelo 720 is a clumsy attempt to raise government revenue in tax penalties or a misguided effort to target tax evaders, it is unfortunately here and we have to deal with it.

This blog post is about the general requirements of this declaration.

For further information and specific guidance please visit our website .

Obligation to declare

Spanish residents with foreign assets or income in any of the following categories exceeding 50,000 Euros on 31st December.

  1. Accounts in any kind of financial institution e.g. banks, building societies.
  2. a) Investments/ rights of representation in foreign companies or other entities.                                                                                                                   b) Investments in foreign collective investment institutions (e.g. unit trusts).                                                                                                                         c) Foreign life/ invalidity insurance; income from foreign annuities.
  3. Property and rights to property.

Note that the threshold is for the total value of each of the three categories.

Where assets are jointly held (e.g. with a spouse), it is the total value of the asset which is relevant. A separate return must be submitted for each person.

Presentation deadline

This tax return must be submitted by 31st March following the end of the year in which the taxpayer is obliged to declare.

Frequency of declarations

The Agencia Tributaria guidelines state the following:

After the initial return is presented, a new return must be filed when the total of any category of assets/ income increases by 20,000 Euros or more, either at 31st December or during the last quarter of the year.

Valuation of assets

Property: purchase price;

Investments which are traded on the open market: market value as at 31st December;

Other investments: value on last published balance sheet.

Penalties for non-disclosure

The guidelines mention “minimum” penalties of 30,000 Euros for non-disclosure ! I can’t envisage how such big penalties could be applied, or even if they would be enforceable if challenged under EU law.

Information is, in principle, shared very easily between financial institutions and Tax Offices in both EU and non-EU countries these days; this means that, in theory at least, the figures that you declare can be checked by the Agencia Tributaria.

The Agencia Tributaria FAQ’s imply that even the slightest error, even unintentional (e.g. in a bank account number) will be punished by a minimum fine of 10,000 Euros !

This would appear to be nothing more than scaremongering.  But the fact is, we don’t know.  To date we have not heard from any prospective clients who have received a fine,  so at this point we can only conjecture.

For more information and guidance, please visit our website.

2014 tax updates

Now our January busy season is over, I have had some time to digest the Spanish Tax Office’s updates for the year 2014.  Below is a summary;  you will find all of up-to-date rates and allowances on our Spanish tax database starting at

1. Wealth Tax (Impuesto Sobre el Patrimonio) has been effectively abolished again. The actual wording of the law is that everyone has a 100% deduction in their tax payable. There is therefore no need to submit Spanish Wealth Tax returns from 1st January 2014 onwards.

This abolition was expected, as Wealth Tax was only re-introduced in 2012 and 2013 on a temporary basis.

2. State income tax rates remain the same as last year.  Regional income tax rates have changed in certain Comunidades Autonomas, please see the tax rates and allowances page on our website:

3. Income tax retentions remain the same as last year. For instance on self-employment income (21% / 9% for new businesses) and rental income (21%).   Toward the end of last year, some commentators were anticipating these retentions to be reduced back to their pre-2012 rates, but this has not happened.

4.  Tax rates on capital gains and savings income, and tax rates for non-residents remain the same.

5.  Company tax rates and payments on account remain the same.

6. VAT (IVA) rates remain the same.

7. Personal, family and employment related tax allowances remain the same for the third year in a row.  Presumably the Spanish government feels that this is fair given the lack of cost inflation in Spain over the last few years. Let’s hope that they start to increase these allowances next year once the economy starts (we hope !) to grow again.

8. The 20% reduction in taxable income for employment-creating sole trader businesses has been extended for at least another year. In short, if you are an autonomo (with turnover less than 5 million Euros) who employs between 1 and 24 Euros, only 80% of your profit is taxable.

And that’s pretty much it !  The income tax increases that were introduced to try to reduce the budget deficit are still in place.  We will see what happens this time next year when the Spanish economy should be growing moderately and the budget deficit reduced further.

Notificaciones Electronicas/ Dirección Electrónica Habilitada (DEH)

For the last couple of years, the Agencia Tributaria has been rolling out a service by which Spanish companies and Spanish establishments of overseas companies are required to register for Electronic Notifications (NotificacionesElectrónicas Obligatorias). This involves applying for an Electronic Certificate for the company and once registered, all Tax Office correspondence for the company is received electronically rather than by post. This electronic mailbox system is known as Dirección Electrónica Habilitada (DEH).

All Tax Office correspondence can then be viewed by logging in at a website dedicated to this service: or in the Agencia Tributaria’s online service at

Given that is is a compulsary requirement, the Tax Administration is certainly not encouraging companies to register by making it easy.

So here’s a guide that we hope will make the process a little less stressful for you.

The easy part- reserving an appointment with the Agencia Tributaria

1. Go to the website of the FNMT (Fabrica Nacional de Moneda y Timbre), the official department which issues electronic certifcates, at the follow address:

Enter your company CIF and click on “Enviar peticion”. The system will then give you a code (Codigo de Solicitud) which you should print out.

2. Go to the Agencia Tributaria website at the following address and find the Cita Previa option:

Enter your company CIF (referred to here as NIF), company name in the first two boxes.

Then below select the first option: (Solo para acreditar la identidad para obtener el certificado electronico de la FNMT) and click on “Enviar”.

Further text will then display and you should click on “Ya dispongo del codigo de solicitud”. Click on “Enviar” and then make an appointment (Cita) at the nearest branch of the Tax Office which deals with this matter. It is likely to be the main Tax Office (Delegacion de Hacienda) in your province. The system will confirm the appointment and you should print this out.

The difficult part- knowing which documents to take along to the Tax Office

1. Printout of the Codigo de Solicitud and appointment confirmation.

2. A copy of your NIE, passport and company CIF card.

3. The Mercantile Registry certificate:

This is where most people come unstuck, and this is the fault of the Agencia Tributaria, whose guidance documents do not mention exactly what is required or how to obtain it.

The documentation they insist on you having is confirmation issued by the Mercantile Registry (Registro Mercantil) where your company is registered, of:

– The company registration details.

– The current administrators. This must issued within 10 days preceeding the appointment.

In Spanish, these requirements are Constitución y personalidad jurídica y administrador vigente.

Now just to make things difficult, a normal Mercantile Registry printout, obtained online, is not accepted. You need to contact your Mercantile Registry with a special request for these certificates.

For instance, in Barcelona this can be done by sending an e-mail to with your completed application form which can be found at

The Registry will then reply to you within around 7 days, notifying you that the certificate is ready for you to pick up in person and pay at the desk. As per December 2013 the charge is around 25 Euros.

Each Registry has its own way of operating. For instance the Malaga Registry website gives no information about how to obtain this certificate, and the Cadiz Registry does not even have a website ! In such cases, in order to avoid a potentially long journey to your provincial Registry, you can sign up at the central Mercantile Registry online portal, where you can order and pay for the certificates online.This portal does have an English option, although the translations are sometimes less than accurate.

Visit to the Agencia Tributaria and downloading your company’s electronic certificate

On arrival at the Tax Office, you should select Cita Previa at the ticket machine and enter the details required (probably your company CIF) and you will be given a ticket to the correct queue. Assuming all goes well and they process your application, you should wait a day or so then download your Electronic Certificate at the FNMT website at the following address, entering your CIF and the same Codigo de Solicitud obtained at the outset.

Important: you must install the certificate on the same computer from which you obtained the original Codigo de Solicitud !

You will then be able to access the Agencia Tributaria’s electronic notifications for your company at either of the websites detailed in the first section above.

Non-residents with Spanish property: Calculating and paying the tax due

Annual income tax: for non-residents with no rental income

If you own a Spanish property which you do not rent out, then you are still obliged under Spanish tax law to submit an annual tax return and pay the tax due.

The tax is calculated in reference to the official rateable value of the property, valor catastral in Spanish. This value is issued by a branch of the Tax Office known as the Oficina del Catastro, and is updated periodically. In the vast majority of cases, the valor catastral is significantly less than the purchase price of the property.

So an imaginary (or “deemed”) rental income is due on your property. This is calculated as a percentage of the valor catastral, currently 1.1%.

The actual tax payable is then calculated by multiplying by the general tax rate for non-residents, which is currently 24.75%.

In the year that you purchase the property, the tax payable is reduced according the the number of days that you own the property in that year.

The tax is payable by the 31st December following the end of each tax year (equal to the calendar year in Spain), and the form to use is Modelo 210.  If you have obtained an electronic certificate from the Spanish Tax Office (Agencia Tributaria) then you can complete and submit this form online.

The tax due can paid in advance at your Spanish bank, by presenting to them a printout of the tax return. They will then process the tax payment and either forward the return to the Tax Office, or give you a payment reference number (NRC) which will allow you to the submit the tax return online subsequently.

However nowadays a much more simple option is available, which is to submit the return online along with the order for the tax to be debited directly to your Spanish bank account (know as domiciliacion). The tax payment will be effected on 31st December.

Quarterly income tax: for non-residents with rental income

If you rent your Spanish property out, then a quarterly tax return is due for every quarter when you have rental income.

The tax return is also Modelo 210 and the tax is payable within 20 days after the end of the quarter.

The instructions for tax return presentation and payment details are exactly the same as with the annual tax return detailed above. At the date of writing of this article, the online version of Form 210 has a peculiarity (or rather an error !) which means that the income cannot actually be declared as quarterly- it must be declared as annual income. However our clients have recently commented to us that, in such cases, tax payments made by direct debit are leaving their bank account promptly, and not at the end of the following year as was the case previously.

Please click here for further information on our tax return filing services for non-residents.

Non-residents: Claiming the tax refund on the sale of your Spanish property

Over the twelve years that I have been practising in Spain, I have taken on work from several non-resident clients who wish to reclaim the overpaid tax on the sale of their Spanish properties. Over that time, the tax rates and returns have changed, while one thing has stayed the same: it’s an awfully slow process !

Over this period, the average time for refund payment is between 12 and 18 months; but recently the payment of all refunds has slowed down even further. A useful option for a Spanish government with a cashflow problem !

However there is a way to make your refund application more user-friendly to the Spanish Tax Office (Agencia Tributaria), which I will outline here.

Firstly, the basics.  When a non-resident sells their Spanish property, they do not receive the full sales proceeds. Instead, the purchaser is required to withhold a percentage of the sales price, currently 3%, and pay this over to the Tax Office on behalf of the vendor. The vendor then has three months from the date of sale to submit a final tax return (Form 210) along with which they either pay the extra tax due on the sale, or claim the refund due to them. Of course if there is extra tax due then this is payable immediately; whereas if there is a refund due, the vendor is in for a long wait !

Since 2007, a vendor who makes a gain on the sale of their Spanish property has been relatively happy, because the capital gains tax rate for non-residents (which used to be 35%) has been equalised to that of Spanish residents.  The universal rate, which was 18% just a couple of years back, has now been increased significantly to the following percentages:

First 6,000 Euros:          21%
6,000 – 24,000 Euros    25%
24,000 + Euros              27%

However,  in many cases where a non-resident sells their Spanish property, a final refund will be due. As we all know, property prices in Spain have fallen quite dramatically over the last few years, and even if the vendor sells the property at more than they purchased it for- after taking into account the allowable costs of purchase and sale (e.g. agency, legal and Notary fees) the final gain is often less than the 3% tax that they pay on the sale of the property.

So in such cases, how do you get your money back from the Tax Office ? Well, there used to be a form specifically for this purpose, Form 212, however recently that was abolished and now the generic non-residents’ tax return, 210, must be used. This can be submitted in person at the local Tax Office here in Spain, or online through the Agencia Tributaria website. We prefer to do everything online where possible; one of the reasons for this being that we know that the return is definitely “in the system” as opposed to a manual return which could be left gathering dust in some forgotten in-tray in your local Tax Office !

In order to submit returns online, it is necessary to obtain an electronic certificate from the Agencia Tributaria. We have an accountants’ certificate which means we can submit returns on behalf of our clients, however any individual can also obtain an electronic certificate by pre-booking a visit (cita previa) to their local Tax Office and taking along proof of their identlty (passport and NIE).

Now onto the actual refund reclaim. Most of the details required are basic such as the name, NIE and address of the vendor(s), the address of the property that was sold, the sales proceeds and allowable purchase cost. The most important part of the return, however, is the proof of the original payment of tax when the property was sold. It is vital that you obtain this from the purchaser or their representative as soon as you can. The actual return that they are required to file is Modelo 211 and you should ask them for a copy of this. They key reference number in this document, which you must state in your refund reclaim, is the numero de justificante.  Your return will only be accepted online is this number is in the correct format.

Having submitted your return online, is there anything that you can do except wait (without holding your breath) for around 18 months or more ? Well yes, there is. In almost all cases, the Tax Office require actual proof of the sales and purchase price of the property; and normally they request this in writing, to the Spanish notifications address that you specified on your refund claim return. Remember that if you are no longer in Spain then you will need to arrange either someone to act on your behalf or have a Spanish address that can be used for at least two years for the reception of post.

In this letter, the Agencia Tributaria normally ask for a copy of the Deeds (Escritura de Compraventa) of both the sale and original purchase of the property, as well as invoices for any other costs that you have claimed such as refurbishment work. It is therefore vital that you keep these documents after the sale of your property.

Now you can actually preempt this letter from the Tax Office by scanning these documents and sending them online. You will find this option under aportar documentacion complementaria of the Form 210 section of the Agencia Tributaria website.This is an easy process and just requires an electronic certificate as with all online returns. Although it can take a couple of months from the online submission of these documents until they are actually reviewed by the relevant local Tax Office, you can follow the submission status online so you know when they have been read.

Of course, submitting these extra documents online early is not going to guarantee that your tax refund is paid any quicker. However it will make the official in charge of reviewing your claim happier because it saves them having to spend the time drafting the initial letter to write to you. And a happy official is the kind that you want to be dealing with.

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