Tax Differences Between Spain and the United Kingdom

Tax Differences Between Spain and the United Kingdom main

What taxes do expats pay in Spain?

In general, not all European countries have the same tax rates. There are big differences, for example, between the taxes paid in Spain and those paid in the UK, so if you are thinking about starting a new life in Spain, it is important to do some research into how Spanish taxes will affect you. One clear difference in the taxes in these countries is VAT, the value-added tax levied on consumer products.

While VAT (known as IVA in Spain) exists in both countries, it works quite differently in each place. In the United Kingdom, this type of tax (VAT) is not applied to a large number of products that in Spain have high-interest rates, such as food (which has a reduced VAT) or culture (which has 21% VAT). Other products where VAT is applied in the UK at a fairly low rate, such as electricity, water or telephone charges (5% VAT), have a much higher VAT rate in Spain (21%).

It is clear, then, that VAT is a much higher rate of tax in Spain than in the United Kingdom. But is this the only difference between taxes in Spain and the UK? And what are all the taxes any expat has to pay in Spain?

What taxes are paid in Spain?

If we think about the idea of moving to another country, we know that many people decide to move to Spain to enjoy an unforgettable experience. And it is hardly surprising that this country is so appealing, when, as well as its Mediterranean coastlines, it is known for its fantastic weather and stunning landscapes. These are not the only reasons that tempt foreigners to visit Spain, however, or even, perhaps, to stay for the rest of their lives. Mediterranean food, the open welcoming nature, and the excellent possibilities for doing business are also taken into account by foreign people visiting Spain.

There is one factor, however, that is not so positive: taxes. But what are the taxes that foreigners living in Spain have to pay? Below is a summary of the main taxes that have to be paid by all foreign people who decide to make a permanent move to Spain.

Tax Differences Between Spain and the United Kingdom euros

Types of taxes paid by foreigners in Spain

Value Added Tax (VAT)

The VAT is a tax that forms the basis of the Spanish system of indirect taxation. It is a type of taxation based on the consumption of goods and services, and is, therefore, a tax paid by all those who buy consumer products (companies, workers, etc.).

Personal Income Tax (IRPF)

This type of tax must be paid by all individuals who are considered tax residents in Spain. But what is taken into account to calculate Personal Income Tax? According to the Spanish administrative system, Personal Income Tax applies to all individuals who earn wages as employees, who generate invoices as self-employed workers, or who earn capital gains (from dividends, pension benefits, etc.).

Non-Resident Income Tax (IRNR)

The Non-Resident Income Tax is a specific type of tax, paid by non-residents who own a rented home in Spain, or who have any other income-generating assets.

Wealth Tax (IP)

This type of tax affects a large number of foreign people living in Spain, as it must be paid by all individuals who own a property. This type of wealth tax taxes different types of assets such as property, real estate investments, cars, boats, or works of art.

Inheritance and donation tax (ISD)

The Inheritance and Donations Tax is a tax that must be paid by all persons who accept an asset through an inheritance. Therefore, inheritance tax affects all foreigners who receive an asset in Spain, even if they no longer live in the country.

These are some of the most important taxes that foreigners living in Spain have to pay, but they are not the only ones, so if you are thinking of making the move to Spain and need to have a better understanding of taxes, we recommend looking for more information on the Internet on websites specializing in the subject.


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