June 6th, 2014
Dealing with the annual Spanish income tax return (‘Declaración de la Renta’) for Spanish residents/tax payers is not one of our professional service areas.
Nevertheless, it is an issue that concerns many of our clients and contacts; and we have been asked to circulate some general information about it.
The final date for submission of Spanish tax returns is 30 June. However, for cases where tax is to be settled by direct debit, the cut off point is earlier. In any event, it is recommended that filing/ payment is submitted by mid June at the latest, to avoid the risk of last minute ‘hitches’.
This summary does not relate to non- Spanish residents owning properties in Spain. The rules that regulate their obligation to file an annual Spanish (non-residents’) tax return in Spain differ substantially. That subject will be covered separately.
Some points of general information we wish to publicise are:
1. Key dates. Spanish tax returns to be filed by 30
June 2014 deal with the calendar year from 1 January 2013 to 31 December 2013.
Financial matters from 1 January 2014 to 31 December 2014 will be covered by
the tax return to be filed by 30 June 2015.
2. On line filing. It is recommended that the tax returns are filed on line (in preference to posted, paper forms); as it is relatively straightforward and more secure.
3. Professional advice is recommended. It is possible to deal with Spanish tax returns personally. However, we recommend that a certified ‘gestor’ (administrator/ accountant) is consulted; to submit the tax return for the client. For straightforward cases, the charge is generally fairly modest.
4. Avoid errors! Errors in tax returns can be unexpectedly complicated and extremely time consuming and lengthy to regularise subsequently. Accuracy of the data provided and precision in the completion of the tax form in the first place are therefore crucially important. As stated above, professional advice is recommended.
5. Claim allowances! There may be allowances/ credits/ deductions depending on the specific circumstances of the tax payer. To ensure all applicable benefits are correctly claimed, professional input is recommended, as stated above. Also, advance planning and documentation collation is essential, to ensure nothing is missed in a ‘last minute rush’. Some examples of the benefits to consider are: the personal tax allowance; additional allowance for married couples declaring jointly; employment allowance; pension contribution deductions; and pension benefits.
6. Late filing penalties. Failure to submit a tax return on time can result in a late filing penalty (usually 100 Euros).
7. Increases in late-paid tax. Failure to submit a tax return on time when tax is payable can result in additional tax charges- a periodic increase in the tax amount plus interest.
8. Exemption from obligation to file. There is an exemption from the general obligation to file a tax return for those earning under 22,000 Euros annually when tax is deducted at the employment income source. But beware the ‘small print’. In each case when an exemption is relied upon, there are various exceptions to this general rule. For example, cases where: there is foreign employment income; or more than one source of income.
9. File early; reduce rebate delays. An advantage of filing the tax return sooner rather than later is that it brings forward the date of receiving any rebate due. Rebates can in any event, take several weeks (if not months) to come through.
10. Information required. In order to complete the tax return, the information/ documentation varies from case to case; but for employment income, an employer’s certificate is required; receipts for property rates payments; end of year certificates for any bank accounts; statements of any investment income/ disposals/ gains; and any rental income details.
There is a lot of information about Spanish tax returns on the internet, but much of it is out of date and/ or confusing. Caution is therefore strongly advised. There is also the on line guidance provided by the Spanish Tax Authority- indeed, in English for non-Spanish speakers. But many find that resource complex and unwieldy.
For these reasons (and the others stated above) in our opinion, a personally appointed ‘gestor’ (engaged in good time), is generally the best option. This assists in avoiding the pitfalls in this exercise; and ensuring that the benefits due are properly provided for and claimed- thus ensuring full legal compliance, but tax payment at the lowest level legally and legitimately possible.