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The Spanish tax system is complicated. There are three tiers of taxation which are levied by the government. The Central Government, Autonmous Regional Governments and Local Municipalties. The Ministry of Economy and Taxation are based in Madrid and administer the tax system. Assessment and tax collection centres in the capital towns of the provinces operate a five year assessment and tax collection service.

Spanish tax compared to UK taxes are still reasonably low, it is a good idea if you have some understanding of the tax system.

Overview of Main Spanish Taxes

Income Tax: If you are a Resident in Spain you are liable for a World Wide tax. If you are a non resident in Spain you are liable for tax on any income that you earn.

Business Tax: If you are Self Employed you will pay Business tax.

Capital Gains Tax: Payable on the profits made on the sale of property and other assets located in Spain.

Company Tax: Paid at a percentage of profits by Partnerships and Registered Companies.

Wealth Tax: If you are a Spanish Resident you pay Wealth Tax on your assets World Wide, if you are a Non Resident, you pay on the value of your Spanish assets only.

Inheritance: Payable on assets situated in Spain or assets passing to a beneficiary who is a Spanish resident

Motor Vehicle Tax: Paid on your Suma once a year.

Property Tax: Paid by all property owners.

Value Added Tax (IVA): Most items are subject to IVA 7% to 16%.

Income tax

To be eligible for tax in Spain, you have to have lived in Spain for more than 183 days, you are considered a Tax Resident, whether or not you have applied for your Residencia. You also have to take in account all your World Wide income and assets which would need declaring to the Spanish tax authorities. Fill in the same Tax Return as a Spanish Resident. Spanish income tax is calculated between 15 and 39 per cent at current time of writing.

A Non Resident staying in Spain less than 183 days per calendar year, there is no need to complete any forms to make a declaration. If you have any income arising in Spain, this must be declared, this includes property rentals where you make money from letting out your property.

Car Tax

Car Tax is payable once a year, you will get what is called a Suma bill and this will show you how much tax you owe. It is due no later than May. Car Tax varies from car to car. This year, 2006, bills are taken to the Bank to be paid, some people have paid their Suma at the Suma office in the past, but things change from time to time. At the time of writing, if you get your Suma Car Tax bill, take it to the Bank to pay.

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