Invest in The Basque Country

Basic guide to labour, commercial, accounting and tax regulations

Sayma SPRI
Personal Income Tax2019-05-17T12:22:23+02:00

PERSONAL INCOME TAX

01. OVERVIEW

Tax agreed under autonomous regulations on the income of natural persons who usually reside in the Basque Country.

Taxpayers are taxed for obtaining income regardless of where it was made and regardless of the payer’s residence, i.e. the worldwide income is taxed.

This tax is on the economic capacity of the taxpayer, for which a personal and family minimum is set that must be taken into account when calculating the full tax liability.

The family unit may choose to pay tax jointly or each of its members may pay separately.

02. COMPONENTS OF THE TAXPAYER’S INCOME

  1. Earnings from work
  2. Earnings from economic activities
  3. Earnings from movable and immovable assets
  4. Capital gains and losses
  5. Other allocations of income

For the purposes of determining the taxable base and calculating the tax, income will be classified in general and from savings. Income from savings will be made up of dividends and interest, among others, unless they come from related entities and capital gains.

03. REDUCTIONS IN THE TAX BASE

  1. Inputs and contributions to social security systems. The limits on reductions for inputs and contributions to social security systems will be as follows:
    • €5,000 per year for the sum of contributions made to social security systems
    • €8,000 per year for the sum of contributions made
    • €12,000 per year for the sum of inputs and contributions, respecting the limits set for each of them
  2. Judicially fixed compensatory allowance and annual child support
  3. Joint taxation

04. APPLICABLE RATES

General Tax Base

General tax base up to (euros) Gross tax payable Remaining tax base up to (euros) Applicable rate %
0,00 0,00 16,030.00 23.00%
16,030.00 3,686.90 16,030.00 28.00%
32,060.00 8,175.30 16,030.00 35.00%
48,090.00 13,785.80 20,600.00 40.00%
68,690.00 22,025.80 26,460.00 45.00%
95,150.00 33,932.80 31,700.00 46.00%
126,850.00 48,514.80 58,100.00 47.00%
184,950.00 75,821.80 From there on 49.00%

Tax Base On Savings

Part of tax base on savings (euros) Applicable rate %
Up to 2,500.00 20%
From 2,500.01 up to 10,000.00 21%
From 10,000.01 up to 15,000.00 22%
From 15,000.01 up to 30,000.00 23%
From 30,000.01 on 25%

05. TAX DEDUCTIONS

  1. Family and personal deductions
  2. Deduction for contributions made to the protected assets of a disabled person
  3. Deductions for main residence
    • Rental
      • 20% of the amounts paid in the tax period, with a limit of €1,600
      • 25% of the amounts paid in the tax period, with a limit of €2,000 in the case of a large family
      • 25% of the amounts paid in the tax period, with a limit of €2,400 in the case of being under the age of 30
    • Acquisition of a house
      • The deduction percentage will be 18% of the amounts invested in the acquisition of a house, including the expenses incurred which were charged to it. Likewise, they will be able to apply a deduction of 18% of the interest paid on the loan received for said purchase.
      • The maximum annual deduction will be €1,530, although if the taxpayer is under the age of 30 or has a large family, the deduction will be 23% and the maximum deductible amount will be €1,955.
  4. Deductions for promoting economic activities
    • Deductions for investments and other activities
      • Taxpayers may apply the deductions to incentivise investments in new fixed assets and carrying out activities provided for in the Provincial Regulation on Corporation Tax, with equal percentages and deduction limits.
      • Deductions not applied due to insufficient tax payable may be applied by respecting the same limits on the self-assessments for the thirty immediate and successive years.
    • Deduction for workers’ holdings in the company
      • Under certain requirements, taxpayers may apply a deduction of between 10% and 20%, depending on the province, of the amounts intended for the acquisition or subscription of shares or holdings in the entity or in any of the group of companies in which they provide their services as workers.
    • Deduction for investment in new, newly-created or innovative companies
      • Between 10% and 20% may be deducted from the amounts paid for the subscription of shares or holdings in new or newly-created companies. This percentage will be between 20% and 30% in the case of innovative companies.
      • The maximum deduction base will be between €50,000 and €100,000 and will be made up of the acquisition value of the shares or holdings and may not exceed between 10% and 15% of the net tax base.
  5. Donations
  6. Deduction for international double taxation
    • When there are earnings or capital gains obtained and taxed abroad, the lesser of the following amounts will be deducted:
      • Amount paid abroad for a tax of an identical or similar nature to this tax
      • The result of applying the average general or savings tax rate on income obtained abroad.
  7. Deduction for dues paid to unions and political parties.

06. TAX RESIDENCY

It is understood that an individual has their main residence in the Basque Country when they reside here for more than 183 days during the calendar year. Depending on where the greatest number of days are spent, the income tax return will be filed in one of the provinces that make up the Basque Country

Temporary absences shall be calculated to determine the period of stay, unless the tax residency is shown to be in another country.

In the absence of proof to the contrary, an individual will be considered to reside in the Basque Country when their main residence is here.

Even if their main residence is not in the Basque Country or they have several or it is impossible to determine their residence for this reason, they will be considered to be residents in the Basque Country when the main hub or base of their business or professional activities or their economic interests are located there.

07. REGIME FOR SECONDED / IMPATRIATE WORKERS

Special Regime for Seconded Workers

There is an exemption of up to 60,100 euros per year for income received for work effectively carried out abroad, if certain requirements are met:

  1. That such work is carried out for a company or entity not resident in Spain or a permanent establishment located abroad.
  2. That a tax of an identical or similar nature to that of this tax is applied in the territory in which the work is carried out and that it is not a country or territory considered to be a tax haven.

Special Regime for Inpatriate Workers

In order to attract and recruit talent, the regulations establish a system of exemption for individuals who acquire their tax residence in the Basque Country, during their first five years, as a result of their secondment to that territory, provided that certain requirements are met:

  • That the secondment takes place to carry out particularly skilled work that is directly and mainly related to R&D, scientific, technical or financial activities, with the requirements established in the regulations.
  • That they have not been resident in Spain during the previous 5 years
  • That the secondment occurs as a result of an employment contract with a person or entity in Spain
  • That the work is effectively carried out in Spain
  • That such work is carried out for a company or entity resident in Spain or a permanent establishment of a non-resident entity

Based on this regime:

  • 15% of the income derived from the employment relationship (work income) shall be exempt, and certain expenses incurred as a consequence of the secondment to the Basque Country shall also be considered deductible.
  • Income from assets abroad shall be exempt, provided that they have been taxed by a tax of an identical or similar nature and it is not a tax haven.