I don’t claim to be an expert on Taxation matters but since sorting out my Tax in Spain has taken so long, I thought I’d share my experience and try to explain in layman’s terms what the basic Tax principles are.
In my particular case, because my work is home-based and I have clients in different countries made it particulary complex. I was unsure if I came under the English or Spanish Tax systems. The more I read about it the more confused I became because not only did I have to take the Tax Laws of Spain/UK to take into account but International Tax Treaties too!
I didn’t know where to begin, I started by phoning up my Spanish bank (Solbank), they had a Tax Advisor helpline but they could only really give general advice. A friend recommended their Gestor* but it turned out that the advice he gave me was distinctly dodgy (basically to lie about my circumstances)!!
In the end my Bank Manager recommended a good local Accountant who specialises in Tax and International Tax.
The basic rule of thumb is that if you live in Spain for over 183 days, you will be taxed here.
The way you are taxed depends on whether you are employed or self-employed.
Employed by Spanish Company
Tax will not be a problem because your employer will deduct Tax and National Insurance at source.
Self-Employed
This is a bit more complicated. You must pay your own National Insurance contributions (roughly 240 Euros a month – but this will cover your entire family and let them use the state medical service). You must submit your accounts to the Spanish Tax Office every quarter. You can do this yourself but it involves a lot of queuing and the best thing is to find an Accountant or Gestor* who will do this for you. There is the added advantage that they can advise you on expenses that can be offset against your tax bill.
My recommendation would be to definitely take professional advice on Tax matters, it is important to get these matters right not only because the penalties for not paying tax can be huge but it will save you a lot of time and effort too.
* There is no UK equivalent for Gestor, a literal translation is ‘Manager’. Basically he/she is a facilitator, sorts out various matters for clients and is an expert on Spanish administrative bureaucracy.
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