The Spanish tax system isn’t especially complicated, but it does have a lot of layers. There are national, regional, and local taxes, and the same person can pay all three in the same year without realizing it. The good news is that almost everything falls into place once you answer two questions: whether you’re a tax resident or not, and whether you operate as an individual or through a company.
Everything else depends on those two answers: how much you pay, what returns you file, and what you can deduct. The same 60,000 euros of profit is taxed very differently depending on whether it’s earned by a self-employed worker, a newly created company, or an established business.
Here you have the complete map with the rates in force: what an individual pays, what a company pays, how a self-employed worker’s taxes work, which calendar you shouldn’t skip, and what special regimes can legally change your bill.
Do you want a expert consultation? Contact us and we will help you.
First Things First: Being a Tax Resident Changes Everything
You’re a tax resident in Spain if you stay more than 183 days of the calendar year in the country, if the main center of your activities or economic interests is located here, or if your non-separated spouse and dependent minor children reside in Spain.
The consequence is enormous. A resident is taxed on their worldwide income: everything they earn, wherever it is. A non-resident is taxed only on Spanish-source income, at flat rates and with its own return, something we detail in the guide on taxes in Spain for non-residents.
And one clarification that spares you unpleasant surprises: tax residency isn’t chosen and isn’t reported with a form. It happens through the facts, and whoever crosses the 183-day threshold becomes a full taxpayer even if they keep a residence card from another country or continue to be paid abroad.
The Taxes an Individual Pays
Personal Income Tax: The One That Affects You Most
Personal income tax (IRPF) taxes the income of resident individuals and has two tax bases with different rules, something almost nobody explains properly:
The general tax base includes salaries, pensions, income from economic activities, and rental income. A progressive scale applies to it, resulting from adding the national bracket to the regional one. Under the national scale and the reference regional scale, the rates run from 19% for the first 12,450 euros to 47% from 300,000 up, passing through 24%, 30%, 37%, and 45%. Each autonomous community sets its own half, so the final rate varies depending on where you live: the difference between the most and least burdensome communities exceeds four points in the upper brackets.
The savings tax base covers dividends, interest, and capital gains from the sale of real estate, shares, funds, or cryptocurrencies. Its scale is gentler and has no regional component:
- 19% up to 6,000 euros.
- 21% from 6,000 to 50,000 euros.
- 23% from 50,000 to 200,000 euros.
- 27% from 200,000 to 300,000 euros.
- 30% from 300,000 euros up, the bracket raised by Law 7/2024.
The return is filed with form 100, during the campaign that runs from April to June of the following year, under the Personal Income Tax Act. Among the recent changes are a specific deduction for low employment income, designed so that someone earning the minimum wage doesn’t end up paying income tax, and the obligation for all recipients of unemployment benefits to file, regardless of the amount.
Wealth Tax and Large Fortunes
Wealth Tax taxes net wealth as of December 31, with a general tax-free threshold of 700,000 euros plus the exemption for the main residence up to 300,000. There’s an obligation to file when gross assets exceed 2,000,000 euros, even if the liability comes out at zero. It’s a ceded tax, so the real bill depends enormously on the community: there are territories that grant an allowance for almost the full amount and others where it’s paid in full.
Above that, the Solidarity Tax on Large Fortunes reaches assets over 3,000,000 euros, with a deduction for what was paid in Wealth Tax to avoid double taxation.
Inheritances, Gifts, and Housing
Inheritance and Gift Tax is the levy with the widest variation between communities in the whole system: the same inheritance from parents to children can cost a few hundred euros or tens of thousands depending on where the deceased resided. The details by community are in the guide to inheritance tax in Spain.
And around housing several taxes pile up that are worth budgeting for together: when buying, Transfer Tax of between 6% and 11% on a resale home or 10% VAT plus Stamp Duty on a new build; while you’re the owner, the municipal IBI every year; and when you sell, the capital gain in your income tax plus the municipal capital gains tax.
The Taxes a Company Pays
Corporate Income Tax: The Rates Have Come Down
This is the most relevant development for any small or mid-sized company. Law 7/2024 opened a schedule of progressive reductions that sets the rates as follows:
| Type of entity | Applicable rate |
|---|---|
| Micro-enterprises, with turnover under 1 million euros. | 19% on the first 50,000 euros of tax base and 21% on the rest. |
| Small-sized companies, between 1 and 10 million. | 23%, with a progressive reduction to 20% over the coming years. |
| All other companies. | 25% general rate. |
| Newly created entities and startups. | 15% in the first years with a positive tax base. |
| Patrimonial entities. | 25%, with no access to the reduced rates. |
An example with numbers: a micro-enterprise with a tax base of 80,000 euros pays 9,500 on the first 50,000 and 6,300 on the remaining 30,000, that is, 15,800 euros against the 20,000 the general rate would have cost it. Watch one detail that causes errors: the 50,000-euro limit refers to the tax base, not to turnover, and it’s prorated if the financial year lasts less than twelve months.
The return is filed with form 200, within the 25 calendar days following the six months after the close of the financial year, with installment payments through form 202 in April, October, and December. The full framework is in the Corporate Income Tax Act, and the breakdown by type of company is in our guide on how much taxes a company pays in Spain.
VAT and Withholdings: The Money You Handle That Isn’t Yours
VAT isn’t a cost for the company, it’s a tax you collect from the customer and settle quarterly with form 303. Three rates: 21% general, 10% reduced for food, transport, hospitality, or new housing, and 4% super-reduced for bread, milk, fruit, medicines, books, and olive oil. Large companies and groups also operate under the Immediate Supply of Information, sending their records almost in real time.
Withholdings work the same way: you withhold income tax from your employees’ payroll and from your professionals’ invoices, and you pay that money over with form 111 every quarter, plus form 115 if you pay rent. The classic confusion for a first-time entrepreneur is treating the VAT collected and the withholdings applied as available cash. They aren’t, and that confusion explains a good part of the cash-flow problems in young businesses.
On top of all that comes an operational change already underway: mandatory e-invoicing and the Verifactu regulation, which require changing software and whose deadlines we explain in the guide on mandatory e-invoicing in Spain.
Do you want a expert consultation? Contact us and we will help you.
The Self-Employed Worker: Halfway Between the Two Worlds
A self-employed worker is taxed as an individual but operates like a business. Their obligations:
- Personal income tax on their business income, under the general scale, plus quarterly installment payments with form 130 where applicable.
- Quarterly VAT with form 303 and an annual summary, except for exempt activities.
- Withholdings with form 111 if they have employees or hire professionals.
- The RETA contribution, which isn’t a tax but weighs like one.
On that contribution, the current benchmark: the system of contributions based on real income works with fifteen brackets according to net earnings, with a minimum contribution of around 200 euros a month in the lowest bracket, and the amounts have been held without an increase following the negotiation with the sector’s associations. New self-employed workers still have the flat rate of 80 euros a month for the first year, extendable for another twelve months if net earnings stay below the minimum wage, and several autonomous communities top it up with grants that bring the real cost down to zero.
An example to bring it down to earth: a self-employed worker with net earnings of around 1,950 euros a month falls into a bracket with a minimum contribution close to 380 euros. They can choose to contribute on a higher base within their bracket if they want to improve their future pension, and change brackets up to six times a year as the business evolves. The full detail of their obligations is in the guide on the tax obligations of the self-employed worker.
The Tax Calendar You Shouldn’t Skip
- January: annual summaries of withholdings (form 190) and VAT (form 390), and the fourth quarter of all periodic forms.
- February: the informative return on transactions with third parties (form 347) for anyone exceeding 3,005.06 euros with a single client or supplier.
- March: the return on assets and rights held abroad (form 720) and its equivalent for cryptocurrencies (form 721), mandatory above 50,000 euros.
- April: the first quarter of VAT, withholdings, and installment payments, and the start of the income tax campaign.
- June: the close of the income tax and wealth tax campaign.
- July: Corporate Income Tax for the previous year for companies with a calendar financial year.
- October and December: the remaining quarters and the Corporate Income Tax installment payments.
Filing late on your own initiative generates surcharges that increase with the delay, with reductions if you pay when you receive the assessment. Doing it after a formal request opens the door to the penalty regime, with fines starting at 50% of the liability. The difference between the two situations can be thousands of euros for the same mistake.
Special Regimes That Can Change Your Bill
Spain has a demanding general system and, at the same time, a catalog of regimes that substantially reduce the tax burden of specific profiles. The most relevant ones:
- The impatriate regime, the well-known Beckham Law: taxation at 24% on employment income up to 600,000 euros for six financial years for anyone relocating to Spain, with the conditions we analyze in the guide on the Beckham Law in Spain.
- Holding companies, with a 95% exemption on dividends and capital gains from subsidiaries, which leaves the effective taxation at 1.25% for profit reinvested within the group, as we explain when detailing the holding company in Spain.
- Startups under the Startups Law: 15% Corporate Income Tax for four financial years and better treatment of stock options.
- R&D and innovation deductions, among the most generous in Europe, and the capitalization reserve, which allows you to reduce the tax base by the profit retained in the company.
- Territorial regimes such as the Canary Islands Special Zone, with a 4% rate for entities that meet investment and employment requirements.
None of these regimes applies automatically. They all require meeting requirements, reporting on time, and documenting how you operate, and most of them are lost through formal errors, not through substantive breaches.
Understanding the Spanish tax system is, above all, knowing which box you’re in: resident or non-resident, individual or company, general or special regime. From there, almost everything is predictable and can be planned, and the important decisions (where to live, whether to set up a company, when to distribute profits, how to transfer your assets) have answers that can be calculated in advance. At Illay Legal we support individuals, self-employed workers, and companies through that whole architecture with fully online service in your language: analysis of your tax situation, compliance with the periodic returns, application of the special regimes you qualify for, and representation before the Tax Agency. Our tax planning in Spain service always starts from the same place: your real numbers and your plans. Tell us your situation and we’ll tell you how much you’d pay today and how much you could pay with a well-designed structure.
Frequently Asked Questions About Taxes in Spain for Individuals and Businesses
When am I required to file an income tax return?
The general rule exempts anyone whose only income is employment income from a single payer below the general threshold, but with two payers the threshold drops substantially and many taxpayers end up obliged without knowing it. In addition, there are scenarios that always require filing regardless of the amount: self-employed workers registered for an economic activity, recipients of unemployment benefits, and anyone who wants to apply certain deductions. When in doubt, check your tax data on the Tax Agency’s electronic office before assuming it doesn’t apply to you.
Am I better off as a self-employed worker or setting up a company?
The break-even point usually sits where stable profits exceed 40,000 or 50,000 euros a year, because beyond that the marginal income tax rate exceeds the Corporate Income Tax rate. But the comparison isn’t only about rates: a company involves incorporation and accounting costs, more formal rigor, and the need to take the money out through payroll or dividends, with its own taxation. With modest or irregular profits, being self-employed usually wins on simplicity and cost. The right answer depends on your figures, on whether you reinvest or spend the profit, and on your plans three years out.
What happens if I make a mistake on a return I’ve already filed?
It gets corrected, and the sooner the better. If the error worked against the tax authorities, you file a supplementary self-assessment and take on the late-filing surcharge, which is considerably cheaper than waiting for an audit. If the error worked against you, you can request a rectification of the self-assessment and a refund of the excess, within a four-year window. What’s never worth doing is letting it ride and hoping it won’t be detected: the Tax Agency cross-references data from banks, notaries, registries, and platforms, and the cost of waiting is always higher.
How long do I have to keep invoices and supporting documents?
Four years as a general rule, which is the statute of limitations for tax debts. That said, there’s documentation worth keeping much longer: purchase deeds for real estate and shares prove the acquisition value when you sell, and a company’s negative tax bases can be reviewed over a far longer period. In practice, keep everything related to significant assets for as long as you hold them, plus four years.
Do residents have to declare assets held abroad?
Yes, through form 720 when the total of accounts, securities, or real estate outside Spain exceeds 50,000 euros in each category, and through form 721 for cryptocurrencies. It’s an informative obligation, not a tax: nothing is paid for filing it. After the penalty regime was corrected by the Court of Justice of the European Union the fines stopped being disproportionate, but the obligation remains fully in force and the information is cross-referenced automatically with dozens of countries.
Can I deduct car or home expenses if I work from there?
With important caveats. A self-employed worker who works from home can deduct utilities in the percentage resulting from applying 30% to the part of the home assigned to the activity, provided that assignment has been declared. The car is more restrictive: to deduct the full VAT and the expenses you have to prove exclusive assignment to the activity, something the Administration only accepts readily in activities such as transport, sales, or driving schools. In all other cases, the usual VAT deduction is limited to 50% and deducting the expenses requires solid justification.
