Taxes in Madrid: what are the taxes charged in Madrid?
As well as being the capital of Spain, Madrid is the most popular city in Spain for tourists and nomads, not only because of its cultural richness, but also because of the quality of life of its population compared to other cities on the Iberian peninsula, among other factors.
However, those who live in Madrid or intend to do so will need to be aware of Spain's tax system.
Unfortunately, the demand for legal assistance in the tax area is low, and this practice can lead to serious consequences, such as the payment of fines or even criminal prosecution for tax evasion.
Before going into the subject of the article, it's worth explaining what tax residency is.
What is Tax Residency?
Tax residence is nothing more than the place where an individual carries out their vital economic activities. This place can be their fixed residence or their habitual residence.
Digital nomads do not have a fixed residence, but they do have a habitual residence. Therefore, the assertion that, because they have no fixed abode, they don't have to declare their taxes anywhere is false.
It doesn't matter if the digital nomad travels every 3 months, every month or every week. Everyone in the world will have a tax residence somewhere.
If you declare taxes for two countries at the same time, you will have double tax residence, i.e. you will be subject to declaring and paying taxes for two countries at the same time.
Taxes in Madrid
Spain has national taxes and taxes delegated to the autonomous communities (local taxes). In other words, some taxes can be levied (or even created) by the autonomous communities.
The city of Madrid belongs to the autonomous community of Madrid and, like all cities in Spain, is subject to the main national taxes:
a) Impuesto sobre la Renta de las Personas Fisicas (IRPF);
b) Value Added Tax (VAT);
c) Tax on Inheritance and Donations (Impuesto sobre Sucessiones e Donaciones).
I'll talk about VAT in this article.
How about Inheritance and Donations Tax in this article.
The most important tax that all residents or those planning to reside in Madrid should be aware of is IRPF. This tax is similar to income tax in Brazil and is levied on all Spanish taxpayers.
This is the progressive IRPF table (updated until 2024):
Annual Income | Rate |
De 0€ até 12.450€ | 19% |
De 12.450€ até 20.2000€ | 24% |
De 20.200€ até 35.200€ | 30% |
De 35.200€ até 60.000€ | 37% |
De 60.000€ até 300.000€ | 45% |
Mais de 300.000€ | 47% |
Those considered by Spanish law to be tax residents in Spain have the duty to declare the "Impuesto Sobre La Renta De Las Personas Físicas" every year, in a universal and progressive manner.
In other words, they must declare all of their income, and those who earn more will contribute more.
In Spain, there is the possibility of some benefiting from the Beckham Law, which contains a more beneficial tax regime.
I comment on the Beckham Law and its recent changes in this article.
It should be noted that those who intend to choose Madrid as their permanent or habitual residence should carry out tax planning in order to avoid complications with the Spanish tax authorities.
If you are interested in hiring professional legal services related to tax planning, we are a law firm specializing in the subject. All you have to do is contact us via WhatsApp or email: thyanipuppio@gmail.com
Local taxes in Madrid
The city of Madrid has had no local taxes since 2021, when they were all repealed, with the exception of the Inheritance and Donations Tax.
Therefore, as of the date of publication of this article, Madrid has no other local taxes. However, this doesn't mean that it won't be able to introduce them in the future.
In addition, those who intend to live in another city in Spain will need to check whether that city belongs to an Autonomous Community and whether it has its own taxation, since the Autonomous Communities in Spain are authorized to institute taxes similar to national taxes - such as IRPF - as well as to institute some taxes of their own (Article 133, 2 of the Spanish Constitution).
Therefore, it is even more necessary for those who intend to reside in Spain - or already do - to carry out tax planning in order to avoid tax evasion and double taxation.
If you are interested in hiring professional legal services related to tax planning, we are a law firm specializing in the subject. All you have to do is contact us via WhatsApp or by e-mail: thyanipuppio@gmail.com
A Warning about Dual Tax Residency
As mentioned above, individuals who have dual tax residency need to declare their taxes for two countries at the same time.
However, what few people know is that when you are a tax resident in a particular country, the principle of universal income declaration prevails. In other words, taxpayers must declare all their income, regardless of its origin.
Generally, individuals have the habit of declaring income from their country of origin only in their country of origin, and income from Spain only in Spain. However, by failing to comply with the duty to declare assets universally, the taxpayer commits a crime: tax evasion.
Spain exchanges information on tax matters with various countries around the world. This exchange of information is carried out using artificial intelligence, which searches and cross-checks the data of its taxpayers in order to detect fraud.
In addition to the risk of being criminally liable for tax evasion and thus having your passport invalidated, the amounts evaded can be collected by the tax authorities, which will include a fine, interest and monetary correction.
Those whose passports are invalidated will not be able to leave the country and will automatically have their visas invalidated, since Spain requires individuals to have a valid passport in order to apply for and remain on visas. In other words: no passport, no visa.
Remember: tax evasion is not just a crime in Spain.
If you are interested in hiring professional legal services to avoid double tax residency, tax evasion and double taxation, we are a law firm specializing in the subject and we can help you, just get in touch via email: thyanipuppio@gmail.com, or via WhatsApp.
