Obtaining foreign income, general rules

If a natural person is a tax resident in Spain, he/she is a taxpayer for Personal Income Tax (IRPF) and must pay taxes in Spain on his/her worldwide income , that is, he/she must declare in Spain the income he/she obtains 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, it is necessary to refer to the provisions of the Agreement to find out the tax authority over it and, where appropriate, the applicable measures to alleviate double taxation.

The agreements list certain types of income and, with respect to each of them, establish the tax powers that correspond to each signatory State:

• In some cases, exclusive power for the taxpayer's country of residence,

• In others, exclusive power for the country of origin of the income and,

• Finally, in some cases, shared power between both countries, with both being able to tax the same income, but with the obligation, in general, for the taxpayer's country of residence to take 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 decide on these measures, which normally consist 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 progressive application, 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. Where a Convention is applicable, it is always necessary to consult the specific Convention.

If a foreign income comes from a country with which there is to avoid international double taxation, that income is taxed in Spain. If that 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 period is the calendar year. A person will be a resident or non-resident throughout the calendar year since a change of residence does not imply an interruption of the tax period.

The income tax return of individuals who are tax residents in Spain must be submitted in the months of April, May and June of the year following the year of accrual. The Personal Income Tax regulations set limits and conditions that determine the obligation to file a tax return, which must be consulted each year.