Taxation of Foreign Nationals with Long-Term Residence in Spain and Income from Countries of Origin
1. Tax Residence in Spain
Tax residence is mainly determined according to the Personal Income Tax Law (Law 35/2006):
- Staying more than 183 days during the calendar year in Spanish territory.
- Having in Spain the main nucleus or the base of your activities or economic interests.
- Your spouse and minor children habitually reside in Spain (unless there is proof to the contrary).
Having long-term residence in Spain and habitually living here implies, in most cases, that you are considered a tax resident.
2. Worldwide Income Principle
Once considered a tax resident in Spain, the citizen is subject to the principle of worldwide income taxation, i.e. he/she is taxed in Spain on all his/her income:
He/she must be taxed in Spain on all his/her income obtained both in Spain and abroad.
3. Personal Income Tax (IRPF)
All foreign source income must be declared: salaries, dividends, interest, rents, economic activities and capital gains.
They are included in the personal income tax return by applying the progressive tax rates according to the nature of the income.
4. Double Taxation Treaty
Spain has signed agreements to avoid double taxation with numerous countries.
When a person earns income abroad, that country may withhold tax on this income.
Subsequently, this income must be declared in Spain.
Thanks to the agreement, it is possible to apply a deduction for taxes already paid in the country of origin. This prevents the taxpayer from paying tax twice on the same income.
5. Formal Obligations and Informative Declarations
5.1. Form 100 - Personal Income Tax Return: compulsory if the established minimums are exceeded.
5.2. Form 720 - Declaration of Assets Abroad: compulsory if there are assets abroad for more than €50,000.
Failure to do so may result in severe penalties.
6. Documentation and Testing
It is essential to have:
- Certificates of taxes paid in other countries.
- Sworn translations.
- Bank statements and other relevant documents.
7. Risks and Penalties
Failure to declare income from abroad can be considered a serious offence or tax offence if it exceeds €120,000.
The Form 720 entails penalties if it is not filed when obliged to do so.
8. Final Recommendations
- Verify your tax situation annually.
- Declare all foreign income.
- Seek the assistance of a tax advisor.
- File the IRPF and Form 720 in due time and form.
| RealDecreoLey 5 2004 IRPF consolidado 2025 | 364 KB |
