Latest news with #IRPF
Local Spain
4 days ago
- Business
- Local Spain
Salaries close to the minimum wage are now the most common in Spain
Spain's Socialist-led coalition government has repeatedly increased the minimum wage since 2019. Most recently, back in February Spain's minimum wage or SMI (Salario Mínimo Interprofesional) was increased by €50 per month, up to €1,184 across 14 payments. This created some controversy as it means that many of these low-income workers will now earn enough to pay income tax (IRPF in Spanish) for the first time, as well as creating tension between the coalition partners in the Spanish government. Spain's leftist government has prioritised increasing the minimum wage and state benefits more widely, but new data now shows that this could have had consequences for the overall pay scales in the country. This is seemingly having an impact on wages in Spain, which have also grown but not been able to keep pace with the SMI. The consequence of this is that the minimum wage has in practice become, according to one Spanish outlet: 'the most common wage in Spain.' Sensationalist though that is, it's not entirely unfair. Let's unpick it. In 2018, the year before the current cycle of SMI rises began, the most frequent or commonly earned salary in Spain amounted to €18,469 gross per year. This was €8,200 less than the minimum wage at that time, when the SMI was just €10,303. Only five years later, these two salaries had practically aligned. According to the 2023 Wage Structure Survey, published by Spain's national stats institute INE, the most frequent full-time wage has fallen to €15,575 gross a year, just €450 more than the SMI. In other words, the minimum wage has gone from 56 percent of the most frequent wage to 97 percent in a period of just five years. It's also worth noting that Spain's average and median annual salaries are considerably higher: €28,050 gross and €23,349 gross respectively. The average is the sum of all salaries divided by the number of workers, while the median is the middle value in the ordered salary data set. Calculating the average is generally useful when data is normally distributed or free of outliers, while using the median is better when the data is skewed or contains outliers. In this case, given the huge salary disparities that can exist in Spain, the median salary - €23,349 gross per year - is a truer reflection of wages in Spain as at least half of the working population earnt this. But this doesn't change the fact that the most frequent salary in Spain in 2023 was €15,575 gross a year. Increasing the minimum wage has undoubtedly helped many Spaniards move away from lives of poverty, however if the minimum wage has been outpacing normal wages, it raises questions about pay in Spain more broadly. This is particularly worrying in the context of the cost of living and housing crises the country is currently experiencing.
Local Spain
6 days ago
- Business
- Local Spain
Why having an empty home in Spain could soon cost you more
In order to help solve the housing crisis, Spain's Socialist-led government recently presented a draft bill in Congress with several eye-catching tax proposals. One of these fiscal measures was aimed at encouraging the release of empty properties into the rental market by progressively increasing the amount of taxes owners are charged. There is no updated official registry of vacant properties in Spain, but according to the National Statistics Institute (INE) census in 2021, there are 3.8 million of them, which is 14 percent of the total. According to the INE, a home is considered empty when "It is not the habitual residence of any person nor is it used seasonally, periodically, or sporadically by anyone." Therefore, it is considered "uninhabited'. The current legislation defines empty properties as those that have been vacant for longer than two years. The government has confirmed that it does not include second homes that are used for holidays once or twice a year, for example. Spain's main stats body estimates the number of empty homes by looking at which ones do not meet minimum electricity consumption. The idea of the new measure is to make those with empty homes pay more. To do this the government will modify personal income tax or IRPF. Currently, homeowners are charged 1.1 percent of the cadastral value or 2 percent if this value hasn't been updated in more than a decade. If the new bill passes, those with vacant homes with a total cadastral value of up to €100,000 will continue to add 1.1 percent to their tax return, but beyond that, the percentage will increase to 1.5 percent up to half a million euros; to 2 percent for homes worth up to €1 million; and up to 3 percent for those with empty homes valued above €1 million. Here's an example of how this would work in reality. The average price of a property in Spain is around €165,000. So, under the current rules, a homeowner who keeps it empty will have to add €1,815 to the amount used to calculate their personal income tax. With the government's new proposal, this would rise to €2,475. If it's a very wealthy person with three homes with the same cadastral value - €495,000 in total - the tax would go from €5,445 to almost double that amount - €9,900. With this new measure, the government hopes it will put thousands of vacant homes back on either the rental market or up for sale. A total 26.1 percent of homes in towns with fewer than 1,000 inhabitants in the region of Madrid are considered to be empty, and in Catalonia it's 24.8 percent. The general pattern is that the percentage of empty homes decreases as the population grows. In Madrid, only 5.6 percent of properties in municipalities of more than 100,000 inhabitants are uninhabited, while in Catalonia, 8.4 percent of towns with more than 48,000 are uninhabited, according to Ministry data. In big cities like Madrid, Barcelona, and Málaga less than 10 percent of properties are empty. Not everyone thinks the Spanish government's fiscal punishment will work though. Jaime Palomera, co-founder of the Urban Research Institute and the Sindicat de Llogateres (Landlords ' Union) explained to newspaper El Diario that 'the monetary impact in terms of costs is too small to incentivise owners'. He also explains that the cadastral value is usually much lower than the tax and appraisal values. This means that a property costing €600,000 home can easily have a cadastral value of €200,000. This could be an issue because owners will be paying much less tax for what the property is actually worth. Víctor Palomo, a lawyer from the Spanish Housing Authority (CAES) also believes this measure is not enough. "For it to be effective, the surcharge has to be striking'. Spain's maligned Housing Law, introduced two years ago, already included the possibility for city councils to add up to 150 percent of the property tax for empty homes. Some municipalities in the Basque Country and Catalonia already implemented this, but so far experts claim there no evidence that this has put very many of them back on the rental market. It's important to remember that far this is a draft law, which means it will still have to pass through Congress and receive a majority vote, not so straightforward for the ruling Socialists given their weakened parliamentary position.
Local Spain
26-05-2025
- Business
- Local Spain
LISTED: The taxes Spain wants to introduce to fix the housing crisis
The draft bill registered at the Spanish Congress plans aimed at limiting the number of short-term tourist apartments in Spain, something many blame for rising rental costs, while ensuring the availability of public housing stock, incentivising lower rental prices and, most headline-grabbing of all, curbing home purchases by non-resident third-country nationals. In order to do this the Spanish government is further tinkering with tax rules to essentially double the price for non-EU, non-resident foreigners buying property in Spain. As reported by The Local last week, according to the legal text for the so-called "Complementary State Tax on the Transfer of Real Estate to Non-EU Residents", this tax "will be obtained by applying a 100% tax rate to the taxable base', which is the value of the property. The 100 percent tax has caught international media coverage, but the bill also includes several other policies and tax changes that the Spanish government hopes can help the property market. Tourist flat tax hike Among the proposed measures are an increase in VAT on holiday apartments to 21 percent, so that they are there taxed as any other economic activity. The idea is to try and make tourist rentals a less attractive option for landlords, who can currently make a lot more money than renting out to locals long term. Currently, landlords who rent out Airbnb-style properties that do not provide typical services similar to a hotel (cleaning, meals, laundry) are VAT exempt. Extension to IRPF rebates in 'non-stressed' areas Similarly, the extension of the net rental yield rebates for IRPF is included, which can reach 100 percent in areas that have not been declared 'stressed' rental markets. This deduction will be made available for owners who rent properties below the reference price on Spain's state rental index. Property investment companies taxed more The draft also proposes to tighten taxation on listed real estate investment companies (known as SOCIMIs in Spain), which would go from being taxed at 15 to 25 percent, except in the case of homes intended for rent at affordable prices. Updating capital gains tax The proposed law also includes an update to rates and quotas for the Increase in Urban Land Value tax (known as plusvalía) following a recent constitutional court ruling, though the details are still unclear. Penalising empty properties There are also a range of measures to penalise landlords who keep empty properties, especially if they hold large real estate portfolios. The government argues this is a way of encouraging them to rent them out to local people as taxes levied on empty properties will be increased. Rates currently range between 1.1 percent and 2 percent. For this reason, greater progressivity will be established by introducing more tax brackets, the percentage of which will be updated in coordination with the Ministry of Finance.
Local Spain
31-03-2025
- Business
- Local Spain
EXPLAINED: Who has to do a tax declaration in Spain in 2025?
The Spanish tax season is almost upon us, beginning on April 2nd and ending on June 30th, meaning that you have to file your income taxes between these dates. Personal income tax is known as IRPF in Spain (Impuesto sobre la Renta de las Personas Físicas) and the annual income tax return is called la declaración de la renta. This year you must report any income you earned during the previous financial year, which was 2024. The Spanish tax year is the same as the calendar year, unlike in the UK for example where it runs from April to April. The general rule is that anyone who lives in or stays in Spain for more than 183 days a year is considered to be a tax resident and must fill out the annual income tax form. 'If you stay in Spain for more than 183 days during the calendar year," you are usually considered a tax resident here states Spain's Tax Agency (Agencia Tributaria). If you have a complicated situation where you split your time between two or more countries, or if you have property or a business in other countries, there are international tax treaties, which state where you should be considered a resident and where you need to declare your income for tax purposes. In this case it would be best to hire a tax expert to guide you. Those who are classed as a tax resident in Spain will be subject to pay tax on their worldwide income, which includes income from rental properties overseas for example. Article 96 of the Personal Income Tax (IRPF) regulations establishes that all taxpayers must file a tax return, but there are certain exceptions. Generally, if you are resident in Spain you will have to complete la declaración de la renta if you meet the following requirements: You received more than €22,000 annually from a single employer. You had multiple employers, but your income from the second or subsequent ones exceeded €1,500 annually. You earned more than €15,876 from two or more employers, if the second employer paid you more than €1,500 annually. Individuals with capital income and capital gains subject to withholding or advance payment exceeding €1,600 per year. Autonómos or self-employed workers who were registered as such at any point in 2024. Even if they made a loss. Taxpayers with real estate income, non-withholding capital gains from Treasury Bills, subsidies for the purchase of social housing, and other public aid exceeding €1,000 per year. Those who received the Ingreso Mínimo Vital (IMV) or Minimum Vital Income in 2024, as well as members of their household. Those who want to request refunds such as deductions for maternity, large families, or disability, as well as deductions for withholdings and instalment payments. Taxpayers who applied for the transitional deduction regime for investment in housing, for international double taxation, or those who have made contributions to protected assets of people with disabilities, pension plans, dependency insurance, among other social security instruments. Those who exclusively earned gross income from exclusively from capital or economic activities, as well as capital gains exceeding €1,000 per year and capital losses of more than €500.
Local Spain
28-03-2025
- Business
- Local Spain
The changes to Spain's income tax declaration in 2025
Spain's annual income tax return is called 'la declaración de la renta'. This year, you must file your taxes for 2024, but there are some changes you should be aware of for this campaign. Personal income tax is known as IRPF in Spain (Impuesto sobre la Renta de las Personas Físicas) and is commonly shortened to la renta. Unlike in some other countries, the Spanish tax year runs from January 1st to December 31st, meaning that during the 2025 tax campaign this year you will present your taxes from last year - that is, from January 1st to December 31st 2024. First things first. You need to present a tax return in Spain if: You are employed and have an annual income over €22,000 from a single employer. You have earned over €15,876 from multiple employers, as long as the amount from the second or third employer exceeds €2,500 per year. You are self-employed or have your own business – known as autónomo in Spain. Your income from yearly dividends, interest and capital gains exceeds €1,600. You receive rental income over €1,000 per year. It is the first year that you are filing a tax return in Spain. For a full breakdown of the key dates for this year's campaign, read our guide below. Tax changes for 2025 Digital platforms For this year's campaign, the Spanish tax authorities will increase its monitoring of income earned on digital and online platforms. This not only requires self-reporting on income, but requires these platforms (think Wallapop or Ebay) to report data on the sale of new and second-hand services and items. Spain's state broadcaster RTVE states that someone could be chased up by the treasury if they have sold more than 30 second-hand products on the same platform, or if any of these transactions or the total exceeds €2,000 without declaring them. Limits for people with more than one income stream Last year, taxpayers with incomes under €22,000 per year and more than one employer or income source were exempt from personal income tax, provided that the income from the second or remaining payers did not exceed €1,500. The total amount of gross income earned from the second or third employers or sources has now been raised to €2,500. This means that more taxpayers will be exempt from filing their income tax returns, as the threshold for not filing taxes has been increased by €1,000. Unemployment benefits This year it will be mandatory for those receiving unemployment benefits regardless of the amount, the number of days they have received it, or whether or not they meet the minimum requirements for filing. Failure to include the benefit in your tax return could result in it being stopped. Donations Taxpayers will be able to deduct 80 percent of the first €250 they have donated to official organisations or charities. Until now, it was only on the first €150. For amounts above that figure, the deduction will be 40 percent, instead of the 35 percent in force until now, and if donations have been made to the same organisation in the previous two years, it increases to 45 percent. Tax compensation for the Valencia floods As part of the aid plan launched by the Spanish government and Valencian authorities, this year will also see several tax benefits that directly benefit people affected by the Valencia floods. These include the exemption from the Property Tax (IBI) in 2024 and the reduction in the tax on Economic Activities (IAE). It will also be possible to deduct 100 percent of the repair costs for damage to main residences caused by the flash flooding. New payment methods Tax can now be paid via Bizum or bank card. Penalty for failure to file If you owe tax and for any reason you haven't filed your return, you must pay the amount due along with a fine that can range from 50 to 150 percent of the total. Changes in deductions for housing rental Until now, having a home and putting it up for rent on the market as a primary residence brought deductions of up to 60 percent. This year, in most regions there will be a generic deduction of 50 percent, but in the regions where the rental market has been declared as 'stressed' (Catalonia), special deductions will apply: Up to 90 percent if the rental price has been reduced by at least 5 percent. 70 percent if it has been rented to young people under 35. 60 percent if the property has been refurbished.
