Introduction
The Income Tax and Wealth Tax campaign for the year 2023 started on April 3rd and will end on July 1st.
The personal income tax is one of the main taxes in terms of revenue collection by the Tax Agency, which all individuals who are tax residents in Spain are obliged to declare. They must declare all their worldwide income for the last fiscal year in the case of IRPF, as well as report the value of all their assets worldwide for Wealth Tax purposes.
Who is considered a tax resident according to Spanish laws?
For the purposes of IRPF (Personal Income Tax), a person is considered a tax resident if they are in either of these two situations:
That they stay in Spain for more than 183 days during the calendar year.
That the main nucleus or base of their economic activities or interests, either directly or indirectly, is located in Spain.
Likewise, it shall be presumed, unless proven otherwise, that a taxpayer has their habitual residence in Spain when, in accordance with the aforementioned criteria, their legally non-separated spouse and dependent minor children habitually reside in Spain.
Types of tax returns
Regarding the income tax return, the taxpayer can choose between filing a joint or individual return in the case of family units.
The choice of one or the other option can have a significant impact on the final outcome of the tax return, so it's important to carefully analyze the income of each spouse, the deductions available at the state and regional level, as well as various individual and family circumstances.
There is also the option to choose joint filing in the case of single-parent families. For Wealth Tax, only individual filing is allowed, so the assets belonging to each declarant must be assessed separately.
Filing and payment deadlines
For tax returns with a balance to pay and the option of bank direct debit selected, the deadline will conclude on June 27th.
As in previous years, the option of installment payment remains available, so it will be possible to split the payment into two installments without interest or surcharges according to the following schedule:
First installment - 60% on July 1st.
Second installment - 40% on November 5th.
Requirement to file Income Tax
The general threshold for being required to file the income tax return, with earnings from a single payer, is 22,000 euros.
There is a new exempt threshold in case of having more than one payer - 15,000 euros (in 2022 it was 14,000), provided that the sum of the amounts received from the second and subsequent payers exceeds 1,500 euros annually.
Those taxpayers who have had gross income from movable capital or capital gains subject to withholding tax exceeding 1,600 euros per year.
Those who have had more than 1,000 euros in imputed rental income, subsidies for the acquisition of public housing, income from treasury bills and other public debt securities, or capital gains from public aid. Beneficiaries of the minimum living income are also obligated.
Wealth Tax
The exempt threshold for Wealth Tax depends on each autonomous community, as well as any possible reductions.
In the case of Catalonia, the minimum exempt amount is €500,000 plus €300,000 for the main residence. In the case of the Community of Madrid, it is fully exempt.
Therefore, it is necessary to carefully analyze each case depending on the taxpayer's fiscal residence to take advantage of all the tax benefits that the Autonomous Community in which they reside can offer.
