In today’s world, where international transactions are increasingly common for both businesses and individuals, it is essential to have specialized advice on international taxation. In this area, our expert international tax attorneys in Spain offer comprehensive assistance to manage the tax complexities arising from the globalization of business and investment flows.
What is International Taxation?
International taxation refers to the set of rules and regulations governing the taxation of individuals and companies operating in more than one country. International transactions can create complex tax situations that require detailed analysis and the application of different national and international tax regulations. Proper tax planning in this area allows for optimizing taxes owed and avoiding situations of double taxation or tax penalties.
International Taxation Services
Our lawyers specializing in international taxation offer a wide range of services aimed at optimizing the taxation of businesses and individuals operating or residing abroad, both for Spanish investments abroad and foreign investments in Spain. Among the services we provide are:
- Spanish Investments Abroad Tax Planning We advise Spanish companies on the best way to structure their investments abroad to minimize their tax burden.
- Foreign Investments in Spain Tax Planning We facilitate the process for international investors who wish to optimize their taxation when entering the Spanish market.
- Optimization of Taxation on Capital Gains, Dividends, Interest, and Royalties We help reduce the tax burden on international financial flows and optimize the repatriation of dividends and other international payments.
- Double Taxation Advice We ensure that our clients do not suffer from double taxation by identifying tax treaties that may benefit them and applying the appropriate mechanisms for their reduction.
- BEPS Compliance Advice We provide advice based on the OECD’s BEPS (Base Erosion and Profit Shifting) actions to ensure our tax planning strategies are fully compliant with international regulations and to avoid the abuse of tax laws.
- International Transfer Pricing Policies We assist with compliance in transfer pricing regulations, which govern transactions between related entities in different jurisdictions.
- International Indirect Taxation Advice (VAT) We advise on the treatment of VAT in international transactions and how to comply with applicable transnational regulations.
Additional Services Related to International Taxation
In addition to the services mentioned, we offer planning and design of efficient corporate structures at an international level, aimed at maximizing tax benefits both locally and globally. We also advise on the taxation of expatriate workers and the movement of individuals between different countries. Other services we provide include resolving international tax disputes and representing clients in appeals before tax authorities.
Tax Advice in Spain
The tax system in Spain is one of the most complex in Europe, and understanding the applicable taxes—whether you’re a resident or a non-resident—is key to complying with tax obligations and avoiding penalties. Taxes in Spain are primarily supervised by the Tax Agency (Agencia Tributaria), which regulates income tax filings for citizens and companies.
- Income Tax: If you’re a tax resident in Spain, you’re required to declare your global income, which includes income earned both inside and outside the country. Non-residents, on the other hand, only need to declare income generated within Spain’s territory.
- Tax Residency in Spain: To be considered a tax resident in Spain, you must meet one of the following criteria:
- Spend more than 183 days a year in the country.
- Have economic interests in Spain (e.g., work, assets, or business).
- Have your spouse or dependent children residing in Spain.
How to Determine if You Are a Tax Resident
Determining whether you are a tax resident in Spain is a crucial aspect of understanding your tax obligations. Being a legal resident in Spain does not automatically mean you’re a tax resident. To be considered a tax resident, you must meet specific conditions set out by the law, which have significant implications for the taxation of your global income.
What Happens if You Don’t Comply with Tax Regulations?
Failure to comply with international tax regulations can lead to a range of negative consequences, such as financial penalties, the application of coercive measures, and even the revocation of residence or work permits. On a global scale, measures against tax evasion are becoming increasingly stringent, so it is essential to seek specialized advice to avoid legal issues.
Taxation in Spain: Taxes and Contributions
Social Security Contributions in Spain
In the context of Spanish taxation, foreign workers must comply with Spain’s social security contributions unless they have a certificate of coverage from their home country. This is crucial for both employees and self-employed individuals.
If you’re an employee, the corresponding social security deductions are made directly from your gross salary, meaning you won’t need to make additional payments when filing your annual tax return. However, if you’re self-employed, you’ll need to make monthly contributions. During your first year of activity, you can benefit from the flat-rate system established by law.
It’s important to note that the distinction between tax residents and non-residents affects deductions. While tax residents can deduct these contributions, non-residents are not entitled to do so.
Beckham Law: Tax Exemption for Expats
The Beckham Law is a special tax regime that allows expatriates to pay an income tax rate of just 25% for the first six years of their residency in Spain. This regime is advantageous as it contrasts with the progressive income tax rate, which can reach up to 45%. To qualify for this benefit, applicants must meet certain requirements, such as not having been tax residents in Spain during the five years prior to the application, having a work contract, and being employed in Spain.
Double Taxation Agreements
Spain has double taxation agreements with many countries, meaning that if you’re a tax resident in Spain and earn income from abroad, you won’t have to pay taxes on the same income in both countries. These agreements are vital to avoid double taxation and optimize your tax situation, allowing income generated abroad to be taxed in only one of the involved countries.
Wealth Tax
Wealth Tax is another key tax in Spain. It applies to individuals who own significant assets in the country, whether residents or non-residents. Assets subject to this tax include properties, vehicles, savings, art, and others, and their total value determines if you’re obligated to pay the tax.
In general, if the total value of your assets exceeds €700,000 (or €500,000 in Catalonia), you must pay this tax. However, exemptions exist, such as an additional allowance of €300,000 for homeowners. The tax rates range from 0.2% to 2.5%, depending on the value of the assets. In some regions, like Madrid, a 100% exemption is offered, meaning no wealth tax is applied.
Capital Gains Tax
When you sell properties or financial assets like stocks, the Capital Gains Tax applies. Tax residents in Spain are subject to a tax rate ranging from 19% to 23%. Non-residents are taxed at a fixed rate of 24%, though this can be reduced to 19% for those residing in the European Union.
Value Added Tax (VAT)
VAT is a consumption tax levied on the purchase of goods and services. The standard rate is 21%, although reduced rates apply to certain products and services. For example, educational products are exempt from VAT. If you buy a new property, VAT of 10% is typically applied, while if you purchase a second-hand property, the Transfer Tax (ITP) is applied, usually ranging from 8% to 10%.
Understanding the Spanish Tax System: Implications and Opportunities
Understanding Spanish taxation is essential for anyone living, working, or investing in the country. Spain’s tax system is complex, with different taxes applicable depending on whether you are a resident or non-resident. These taxes include Income Tax, Wealth Tax, Capital Gains Tax, and VAT, among others.
Knowing the tax laws and international double taxation agreements will allow you to make informed decisions about your financial situation in Spain. Additionally, with the right advice, you can optimize your tax burden and ensure compliance with tax obligations without incurring penalties.
If you have any doubts about your tax situation or need specialized advice, it is recommended to seek support from a lawyer who specializes in Spanish taxation. Whether you benefit from the Beckham Law, need help with income taxes, or have questions about Wealth Tax or capital gains, our lawyers can help you find the best solution for your specific case.