Taxes in Spain: everything you need to know as a Dutch citizen

When are you liable for tax in Spain?

You are considered a tax resident if you spend more than 183 days per year in Spain, if your centre of economic interests is in Spain, or if your spouse and/or minor children live in Spain. As a tax resident you are liable for tax on your worldwide income. This applies to all income: salary, pension, rental income, dividends, capital gains and more. It is important to know that the Netherlands and Spain have a tax treaty to prevent double taxation.

Income tax (IRPF)

Spanish income tax (Impuesto sobre la Renta de las Personas Físicas) is progressive. Rates range from 19% for income up to €12,450 to 47% for income above €300,000. Additionally, the autonomous communities (such as Valencia/Alicante) levy their own percentage, so the effective rate can differ by region. The return must be filed annually between April and June. Deductions are available for mortgage interest (for purchases before 2013), charitable donations, pension contributions and more.

Modelo 720: mandatory asset declaration

Modelo 720 is the informative declaration of assets held abroad. You are required to file it if you hold more than €50,000 in any of the three categories: bank accounts, securities/investments, or real estate outside Spain. The deadline is 31 March each year. Although the European Court struck down the disproportionate fines, the filing obligation remains. Non-compliance can lead to sanctions. It is crucial to file this declaration correctly and on time.

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Wealth tax (Impuesto sobre el Patrimonio)

Spain has a wealth tax levied on your net assets above a certain exemption (usually €700,000, plus €300,000 for the primary residence). Rates range from 0.2% to 3.5%. Some regions, such as Madrid, have effectively abolished this tax. In the Comunidad Valenciana (where the Costa Blanca is) the national scheme applies. It is important to optimise your asset structure to limit the tax burden.

The Beckham Law (Régimen de Impatriados)

The Beckham Law offers newcomers to Spain the option of paying a flat tax rate of 24% on Spanish income for 6 years (instead of the progressive rate up to 47%). Foreign income is exempt, except from employment. Conditions: you must not have been a tax resident of Spain in the past 5 years, and you must be employed in Spain (as an employee or director). The application must be submitted within 6 months of registration with the Seguridad Social.

Tax on pension and state pension

Dutch pension is in principle taxed in Spain if you are a tax resident there. There are exceptions for government pensions (ABP), which remain taxed in the Netherlands. State pension (AOW) is taxed in Spain. The tax treaty between the Netherlands and Spain prevents double taxation. It is essential to have your pension structure analysed by a specialist to determine where you pay tax and which treaty provisions apply.

Tips for tax optimisation

Some important tips: 1) Submit the Beckham Law application on time if you qualify. 2) Keep your assets accurately recorded for Modelo 720. 3) Make use of available deductions. 4) Consider the timing of your move (before or after 1 July). 5) Engage a Dutch-Spanish tax advisor who knows both systems. 6) Keep all documents for at least 4 years. Costa Assist works with experienced tax advisors specialised in the Dutch-Spanish situation.