IRPF (Personal Income Tax) in Spain

Posted on May 4, 2024 in Law & Jurisprudence

Nature (Art. 1)

  • Personal: As opposed to IRNR (Non-Resident Income Tax).
  • Direct: Taxes the income directly.
  • Progressive: Tax rate increases with income.
  • General: Applies to all residents of Spain.
  • Equity: Considers personal and family circumstances.

Object

IRPF encompasses all income obtained by a taxpayer, regardless of the source or location. The concept of income is based on the theories of Schanz, Haigh, and Simons, and includes:

  • Rendimientos (Earnings)
  • Ganancias Patrimoniales (Capital Gains)
  • Imputaciones de Renta (Imputed Income)
  • Pérdidas Patrimoniales (Capital Losses)

Taxable Event (Art. 6)

The taxable event is the obtaining of income by a taxpayer. The main sources of income are:

  • Work (dependent or self-employed)
  • Capital
  • Economic Activities
  • Capital Gains and Losses
  • Imputed Income

Subjective Element: Residence

Taxpayers are individuals who reside in Spanish territory. Exceptions include:

  • Foreign nationals residing in Portugal and working for another state (reciprocal agreement).
  • Spanish individuals who move to a tax haven (for the year of the move and the following four years).
  • Individuals who become residents due to an employment contract with a Spanish company and who resided in Portugal in the previous 10 years, with certain conditions.
  • Individuals residing abroad while working for the Spanish State (Art. 10).

Habitual Residence in Spain

An individual is considered a resident if they stay in Spain for more than 183 days in a calendar year. Sporadic absences are counted as days of residence unless the individual can prove tax residence in another country. For residents of tax havens, the 183-day rule applies strictly.

Other factors considered for determining residence include:

  • The location of the individual’s main economic activities.
  • The location of the individual’s spouse and minor children.

Presumption of Residence in an Autonomous Community (CA)

An individual is presumed to reside in the CA where their habitual residence is located. Additionally, the CA where their center of main interests is located is also considered. This is determined by the location of the majority of their:

  • Work income
  • Real estate capital
  • Capital gains from properties
  • Economic activities

Change of Residence

Individuals who change their residence to a CA with lower taxes may face scrutiny if their income increases by more than 50% and their effective tax rate decreases. They may be required to return to their previous CA within two years.

Attribution of Income

In certain cases, income is attributed to individuals from entities such as unincorporated entities and civil societies with legal personality. The allocation rules depend on the entity’s agreements and the nature of the income.

Temporal Aspects

Tax Period

The tax period is generally the calendar year. However, for deceased individuals, the tax period ends on the date of death.

Accrual

Income is generally accrued on the last day of the tax period. This determines the applicable tax law and the individual’s personal and family circumstances for tax purposes.

Special Rules for Accrual

  • Income pending court ruling: Accrued when the right to receive the income is legally established.
  • Delayed work income: Accrued when received, but can be declared in the year it was due without penalties or interest.
  • Unemployment benefits: Can be attributed to the periods when the individual would have been entitled to the benefit.
  • Forward transactions: Can be attributed proportionally as payments become due.
  • Negative foreign currency balances: Accrued when the payment is collected.
  • Unit-linked insurance: The difference in net asset value is attributed to each period.
  • Public housing assistance: Accrued when received.
  • Presumption of work income from capital: Accrued when obtained.

Death or Change of Residence

All income must be included in the final tax return. Supplemental returns can be filed without penalties or interest. The taxpayer or their successors can request a deferral of payment.

Note: The document mentions a potential conflict with the European ban on inheritance taxes. This issue requires further investigation.