Gibraltar “cross border” workers pay tax on their salaries at source in Gibraltar under the PAYE (pay as you earn) system and later complete a Gibraltar tax return declaring this income, but their tax liability does not ends there. Individuals who live in Spain also need to complete a tax return in Spain.
Most individuals with a connection to Spain will usually have to complete some form of tax return. For example, non Spanish residents have to complete non resident tax returns if they own a Spanish property, but as non resident tax residents their liability is limited to Spanish assets only.
If you live and are tax resident in Spain then you have to declare your worldwide income and gains (which will include any income you have received in Gibraltar).
Therefore ascertaining an individual’s tax residence is very important as it will dictate how you are taxed in Spain.
The main test for Spanish tax residency is physical presence; if you spend 6 months (183 days) or more in Spain (during a calendar year) you are automatically tax resident there. When counting six months for this test temporary absences from Spain are ignored, (unless you can prove that you are resident in another country).
If you do not spend 183 days in Spain, the tax authorities can still deem you to be Spanish tax resident if your centre of personal or economic interests are in Spain. An example of your personal interests making you resident in Spain is if your spouse and/or (minor) children habitually live in Spain. An example of your economic interests making you resident in Spain is if the majority of your income/assets are in Spain. There is also a double tax treaty between Spain or Gibraltar which would need to be looked at in any cases of residency conflict.
If after applying these tests you realise that you are tax resident in Spain and do need to complete a tax return in Spain then you would need to include your Gibraltar income on the tax return but the good news is that a tax credit is generally allowed for the Gibraltar PAYE tax paid reducing your liability to Spanish tax on your Gibraltar employment income.
Spanish resident tax returns have to be completed during April, May and June in the following tax year (with a deadline of the 30th June). Therefore, 2023 tax returns need to be completed before the end of June 2024.
The regional autonomies are able to amend income tax rates (which has occurred in Andalusia). Therefore the income tax rates for those that live in Andalusia are as follows (bolded column):
|Tax Income Bands||Andalusian Rates||National Rates||Full tax rate|
0 – €12,450
|€12,450 – €13,000||9.5%||12%||21,5%|
|€13,000 – €20,200||12%||12%||24%|
|€20,200 – €21,100||12%||12%||24%|
|€21,100 – €35,200||15%||15%||30%|
|€35,200 – €60,000||18.50%||18.50%||37%|
|€60,000 – €300,000||22.5%||22.50%||45%|
Married couples are able to complete a joint tax return. This is useful if only one of the spouses is working as it results in an overall reduction in the tax bill (as it prevents the allowances of the non working spouse being wasted).
There are a number of allowances available to reduce your liability to Spanish income tax, please see table below for the main allowances. Other allowances include: relocation costs due to change in employment, working employees over 65 years of age etc, Employee Social Insurance contributions are also tax deductible).
|Personal allowance (65 & over) : (€5,550 + age allowance of €1,150)||6,700|
|Personal allowance (75 & over) : (€5,550 + age allowance of €2,550)||8,100|
Income allowance for those earning under €14,000
Taxpayers with income under €15,000 are exempt from tax.
|Children’s allowance (for children under 25 with income less than €8,000)|
|For each Child under 3 years above allowances are increased by:||2,800|
|Degree of incapacity: up to 65%||3,000|
|Degree of incapacity: from 65%-100%||9,000|
|If third party care required add:||3,000|
Elderly parents living with taxpayer (age 65 & over with income less than €8.000):
There is also a €60,100 exemption for Spanish residents working abroad, unfortunately if the employment income is earned in a black listed territory (Gibraltar is on the black list) then this exemption is not available, so is currently not available to cross border workers between Gibraltar and Spain.
If you need help in completing your tax returns or require further information please do not hesitate to contact us at: firstname.lastname@example.org