Obtaining foreign income, general rules
How foreign earned income affects Personal Income Tax
If a natural person is a tax resident in Spain, he or she is liable for Personal Income Tax (IRPF) and must pay taxes in Spain on his world income , that is, he must declare in Spain the income obtained anywhere in the world, without prejudice to the provisions of the Convention to avoid international double taxation signed between Spain and the country of origin of the income.
If the foreign income comes from a country with which Spain has signed an Agreement to avoid international double taxation, you must refer to the provisions of the Agreement to know the tax power over it and , where applicable, the applicable measures to alleviate double taxation.
The agreements list some types of income and establish, with respect to each of them, the tax powers that correspond to each signatory State:
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In some cases, exclusive power for the country of residence of the taxpayer,
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in others, exclusive power for the country of origin of the income and,
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finally, in some cases, shared power between both countries, both being able to tax the same income, but with the obligation, in general, for the country of residence of the taxpayer to arbitrate measures to avoid double taxation.
In general, in the case of double taxation, it will be up to Spain as the country of residence to arbitrate these measures, normally consisting of the application of a deduction. In certain cases, the Convention may provide for an exemption of income in the country of residence, although with the application of progressivity, which means that the exempt income is added to the rest of the income to calculate the tax rate applicable to the rest of the income. income. When any Convention is applicable, it is always necessary to consult the specific Convention.
If foreign income comes from a country with which there is no Agreement to avoid international double taxation, that income is taxed in Spain. If this income is also taxed in the other country, the taxpayer may apply the deduction for international double taxation provided for in article 80 of Law 35/2006, of November 28, on personal income tax.
The personal income tax tax period is the calendar year. A person will be a resident or non-resident throughout the calendar year since the change of residence does not imply the interruption of the tax period.
The income tax return of natural persons who are tax residents in Spain is submitted in the months of April, May and June of the year following the year of accrual. The Personal Income Tax regulations regulate limits and conditions that determine the obligation to submit the tax return, which must be consulted every year.