June 6th, 2014

Dealing with the
annual Spanish income tax return (‘Declaración de la Renta’) for Spanish
residents/tax payers is not one of our professional service areas.

Nevertheless, it is an
issue that concerns many of our clients and contacts; and we have been asked to
circulate some general information about it.

The final date for
submission of Spanish tax returns is 30 June. However, for cases where tax is
to be settled by direct debit, the cut off point is earlier. In any event, it
is recommended that filing/ payment is submitted by mid June at the latest, to
avoid the risk of last minute ‘hitches’.

This summary does not
relate to non- Spanish residents owning properties in Spain. The rules that
regulate their obligation to file an annual Spanish (non-residents’) tax return
in Spain differ substantially. That subject will be covered separately.

Some points of general
information we wish to publicise are:

1. Key dates. Spanish tax returns to be filed by 30
June 2014 deal with the calendar year from 1 January 2013 to 31 December 2013.
Financial matters from 1 January 2014 to 31 December 2014 will be covered by
the tax return to be filed by 30 June 2015.
2. On line filing. It is recommended that the tax returns are filed
on line (in preference to posted, paper forms); as it is relatively
straightforward and more secure.
3. Professional advice is recommended. It is possible to deal with
Spanish tax returns personally. However, we recommend that a certified ‘gestor’
(administrator/ accountant) is consulted; to submit the tax return for the
client. For straightforward cases, the charge is generally fairly modest.
4. Avoid errors! Errors in tax returns can be unexpectedly complicated
and extremely time consuming and lengthy to regularise subsequently. Accuracy
of the data provided and precision in the completion of the tax form in the
first place are therefore crucially important. As stated above, professional
advice is recommended.
5. Claim allowances! There may be allowances/ credits/ deductions
depending on the specific circumstances of the tax payer. To ensure all
applicable benefits are correctly claimed, professional input is recommended,
as stated above. Also, advance planning and documentation collation is
essential, to ensure nothing is missed in a ‘last minute rush’. Some examples
of the benefits to consider are: the personal tax allowance; additional
allowance for married couples declaring jointly; employment allowance; pension
contribution deductions; and pension benefits.
6. Late filing penalties. Failure to submit a tax return on time
can result in a late filing penalty (usually 100 Euros).
7. Increases in late-paid tax. Failure to submit a tax return on
time when tax is payable can result in additional tax charges- a periodic
increase in the tax amount plus interest.
8. Exemption from obligation to file. There is an exemption from
the general obligation to file a tax return for those earning under 22,000
Euros annually when tax is deducted at the employment income source. But beware
the ‘small print’. In each case when an exemption is relied upon, there are
various exceptions to this general rule. For example, cases where: there is
foreign employment income; or more than one source of income.
9. File early; reduce rebate delays. An advantage of filing the tax
return sooner rather than later is that it brings forward the date of receiving
any rebate due. Rebates can in any event, take several weeks (if not months) to
come through.
10. Information required. In order to complete the tax return, the
information/ documentation varies from case to case; but for employment income,
an employer’s certificate is required; receipts for property rates payments;
end of year certificates for any bank accounts; statements of any investment
income/ disposals/ gains; and any rental income details.

There is a lot of
information about Spanish tax returns on the internet, but much of it is out of
date and/ or confusing. Caution is therefore strongly advised. There is also
the on line guidance provided by the Spanish Tax Authority- indeed, in English
for non-Spanish speakers. But many find that resource complex and unwieldy.

For these reasons (and
the others stated above) in our opinion, a personally appointed ‘gestor’
(engaged in good time), is generally the best option. This assists in avoiding
the pitfalls in this exercise; and ensuring that the benefits due are properly
provided for and claimed- thus ensuring full legal compliance, but tax payment
at the lowest level legally and legitimately possible.