Types of Taxes in Spain- special guide for freelancers and digital nomads

Types of Taxes in Spain: a special guide for freelancers and digital nomads

The tax that exists in our country is the tax that everyone, whether it is a personal or a company, is obliged to pay. Both taxation from professional activities and personal taxation are part of our taxation system. Therefore, it is the responsibility of every residence, company, employee and self-employed person to comply with this obligation. Below we will discuss the types of taxes in Spain, what they each refer to and how they are classified.

At the expense of knowing last year’s data, in 2019, 2% more was collected with respect to the previous year in terms of taxes. To this data, provided by the Tax Agency, other types of income received by the State coffers must be added. And the fact is that not all that is collected are taxes, but there are other contributions such as, for example, Social Security contributions.

The opinion of citizens on taxes according to the CIS

Before to start with this topic, it is worth highlighting some of the findings of the CIS survey on a topic that never ceases to be controversial:taxes. The opinion of citizens, according to the barometer carried out last year on taxes, made clear their dissatisfaction with tax policies. More than 75% of those surveyed stated that the current tax system is not fair. Even so, practically half of them agreed with paying more taxes as long as they benefit society; improving public services and social policies.

On the other hand, 40% of the answers determined that many taxes are paid in our country, compared to 44% who thought it was normal. The majority of those surveyed by the Center for Sociological Research considered it fair to collect indirect taxes such as personal income tax. Or, in other words, collecting taxes based on each citizen’s income (or wealth). And not through direct taxes that affect everyone equally, such as VAT.

Finally, almost 48% agreed that there is tax fraud in our country.

But, regardless of the general dissatisfaction of Spanish citizens with taxes, every person and company must comply with the tax authorities. So, so that you do not miss a single point of your tax obligations, we tell you how taxes are classified in Spain. Let’s get to it!

Types of taxes in Spain

The reason for a State to levy taxes is none other than to collect money to finance public spending. Thus, it is understood that thanks to tax collection, essential public services such as health, education and pensions, among others, are sustained.

The Spanish tax system is generally divided into two categories: direct taxes and indirect taxes. Direct taxes are taxes levied on the income of an individual or business, such as B. Income Tax (IRPF). Indirect taxes are taxes related to the purchase of goods or services, such as Value Added Tax (VAT).

Direct taxes

Direct taxes, i.e. those levied on the wealth of individuals, salaries or assets, are in turn divided into other types of taxes. The following taxes fall into this classification:

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IRPF or Personal Income Tax.

Undoubtedly the main and most important tax in any modern society, it is levied on the income of resident individuals. Specifically, it is applied on the income obtained within one year. It is a progressive tax that measures the economic capacity of the citizens, so it is paid according to the money generated. The ultimate purpose of Personal Income Tax is to achieve the redistribution of wealth.

On the income of non-residents

While personal income tax is levied on persons resident in the national territory, this tax is levied on income obtained in our country by non-residents.

Corporate income tax

Corporate income tax is levied on the profit obtained by companies or enterprises. To be more precise, it is applied on the net profit, after subtracting the expenses necessary to obtain such profit.

Inheritance and gift tax

This tax is payable by all persons who receive money or any other type of goods free of charge.

Wealth tax

Currently, this tax is managed by each Autonomous Community, which generates controversy as there is a great deal of inequality depending on the Autonomous Community in which one resides. It is paid annually depending on the assets or wealth owned.

Indirect taxes

Indirect taxes include the following taxes:

Value Added Tax (VAT).

The best known and the best example to understand what indirect taxes mean. An objective tax that is paid regardless of the legal form and is levied on the consumption of goods and services.

Transfer Tax and Stamp Duty 

It is mainly applied on the different financial operations of a company or society, such as mergers, capital increase, etc. It also includes all transfers (sales and purchases) of assets other than inheritances and donations. The person obliged to pay this tax is the buyer.

Special Taxes

It is only applied to those who acquire certain goods: tobacco, alcohol, hydrocarbons and registration of means of transport.

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