The Spanish system of direct taxation on individuals is mainly structured around two income taxes: personal income tax, which applies to individuals who have their tax residence in Spain, and the Non-Resident Income Tax (IRNR), aimed at those who do not reside fiscally in Spain but earn income in the country. Therefore, anyone who obtains income in Spain will be subject to one of these two taxes, depending on their tax residence.

Tax Residency and Tax Obligations

Tax Residents in Spain: They are subject to personal income tax based on their worldwide income, which means that they must declare and pay taxes on all the income they earn, regardless of where it is generated. After applying the relevant legal reductions, these incomes are taxed at progressive tax rates, implying that the tax rate increases with the level of income.

Non-Tax Residents in Spain: They are subject to the IRNR only on their income from a Spanish source. Unlike personal income tax, IRNR does not tax global income, but only income earned in Spain.

Tax Bases in Personal Income Tax

Spanish personal income tax differentiates between two types of tax bases:

Savings Tax Base, which includes:

• Dividends and other income derived from holding shares in companies.
• Interest and other income obtained from the transfer of equity capital to third parties, except when these capital exceeds three times the own funds of a related company, in which case the excess is taxed on the general tax base.
• Income obtained from capitalization transactions and life and disability insurance.
• Capital gains generated by the transfer of assets.

General Tax Base: Includes all income that is not part of the savings base, such as:

• Capital gains not derived from the transfer of assets.
• Allocations, attributions or attributions of income as established by law.
• Interest and other income generated by the transfer of the taxpayer's own capital to a related company when the capital contributed exceeds triple that company's own funds, for the part corresponding to the excess.

Non-Resident Income Tax (IRNR)

With regard to the IRNR, income earned without a permanent establishment is taxed on each individual income, with no possibility of compensating losses with profits. In general, taxable income for non-residents without a permanent establishment is gross income according to personal income tax regulations, without the application of reductions.

In specific cases, such as the provision of services, technical assistance, installation and assembly work derived from engineering contracts and other economic activities or operations carried out in Spain without a permanent establishment, the tax base is determined by the difference between gross income and expenses attributable to personnel or to the acquisition of materials incorporated into works and supplies, in accordance with the requirements established in the IRNR regulations.

For taxpayers without PE who are resident in other member States of the European Union, a distinction is made between individuals and companies when calculating net income. Deductible expenses are determined according to personal income tax and corporate tax legislation, respectively. In both cases, the taxpayer must demonstrate that the deductible expenses are directly related to income earned in Spain and have a clear and indisputable economic connection with the activity carried out in Spain.

Exemption for work done abroad

Income from work earned by people with tax residence in Spain for work actually performed outside of Spain, with a limit of 60,100 euros, is not taxed by personal income tax, if the following requirements are met:

• The worker is a tax resident in Spain.
• That the work is actually carried out outside of Spain.
• That the work is carried out for a company, entity or EP that is not a tax resident in Spain.
• In the country where the worker performs the work, a tax identical or similar to the Spanish personal income tax is applied.

This tax exemption is incompatible with the tax regime for non-taxable excesses, according to which the amounts paid to company workers posted abroad in excess of the total compensation they would have obtained if they had stayed in Spain are not subject to Spanish personal income tax.

In this case, the taxpayer can choose to apply the regime of non-taxable excesses instead of this tax exemption.

Types of personal income tax

The savings tax base is taxed at the following types:

• 19% for the first 6,000 EUR of taxable income.
• 21% for taxable income between 6,000 and 50,000 EUR.
• 23% for taxable income between 50,000 and 200,000 EUR.
• 27% for taxable income between 200,000 and 300,000 EUR.
• 28% for amounts over 300,000 EUR.

For the general tax base, progressive tax rates apply (which are the sum of the applicable rate approved by the State and the applicable rate approved by each autonomous community of Spain in its progressive tax rate scales). Therefore, the tax rate may differ from one autonomous community to another.

The following tables show the tax scale for withholding approved by the State. This scale can be used to guide the progressive tax rates applicable to the general tax base. For the above reasons, for the calculation of the total progressive tax rate, the scale applicable in the corresponding Spanish autonomous community must always be consulted.

Tax scale for withholding applicable in 2024:

Types of personal income tax

The savings tax base is taxed at the following types:

• 19% for the first 6,000 EUR of taxable income.
• 21% for taxable income between 6,000 and 50,000 EUR.
• 23% for taxable income between 50,000 and 200,000 EUR.
• 27% for taxable income between 200,000 and 300,000 EUR.
• 28% for amounts over 300,000 EUR.

For the general tax base, progressive tax rates apply (which are the sum of the applicable rate approved by the State and the applicable rate approved by each autonomous community of Spain in its progressive tax rate scales). Therefore, the tax rate may differ from one autonomous community to another.

The following tables show the tax scale for withholding approved by the State. This scale can be used to guide the progressive tax rates applicable to the general tax base. For the above reasons, for the calculation of the total progressive tax rate, the scale applicable in the corresponding Spanish autonomous community must always be consulted.

Tax scale for withholding applicable in 2024:

Types of Non-Resident Income Tax (IRNR)

For non-residents, income earned without a permanent establishment is taxed at the following types:

• Overall type: 24%. For residents in other EU member states or in countries of the European Economic Area (EEA) with which there is an effective exchange of tax information, the rate is 19%.
• Capital gains generated by capital transfers: 19%.
• Interest: 19%. Interest is exempt from tax for EU residents. Agreements to avoid double taxation usually establish lower rates.
• Dividends: 19%.
• Fees: 24%.
• Pensions: they are taxed at progressive rates, ranging from 8% to 40%.