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As a general rule, domicile should be equated with the concept of “residence”. If you are domiciled in Spain, for administrative and tax purposes you will, in principle, be considered a resident or “tax resident”. However, you should take care to ensure that your holiday home does not inadvertently become your main tax residence, since for those who unknowingly become subject to unlimited tax liability, their supposed “second home” can quickly turn into a tax trap.
Whether wealth tax is payable in Spain, and how much, depends on the region. In response to the abolition of wealth tax in several Spanish regions, the State introduced a new “solidarity tax”, which applies whenever no wealth tax is payable and assets exceed €3,000,000 (€3,700,000 including the tax-free allowance). In some regions, however, wealth tax applies from as little as €500,000.
To understand Spanish Personal Income Tax, it is particularly important to distinguish between the average tax rate, the marginal tax rate and the top marginal tax rate. Unlike some other countries, Spain does not use a tax-class system. Personal circumstances are therefore not taken directly into account when determining the applicable tax rate. Instead, tax is calculated progressively using a system of tax brackets.
The sale of real estate and land may have significant tax consequences, which vary depending on the country involved. While capital gains arising from the disposal of property are generally subject to taxation in Spain, German tax law provides for certain exemptions under specific circumstances. Careful planning of the timing of the sale can therefore result in substantial tax advantages.
Moving to Spain can provide significant tax advantages for many employees and company directors. Individuals relocating to Spain for employment purposes may opt to have their employment income taxed as a non-resident at a fixed tax rate of 24% for a period of six tax years.
Our law firm regularly advises clients who relocate their residence from Germany to Spain. In such cases, one question frequently arises: Which country is entitled to tax worldwide income during the year of relocation – Germany or Spain?
Particularly in times of economic uncertainty, when relocating abroad is increasingly used as a tax planning strategy, one question remains: How can a country protect its tax base against the emigration of taxpayers, and to what extent are such mechanisms legally permissible? Spanish exit taxation, also referred to as the exit tax, was introduced by Law 26/2014 of 27 November 2014 as part of the reform of the Spanish Personal Income Tax Act through Article 95 bis of the Personal Income Tax Act (LIRPF). Its purpose is to prevent tax avoidance resulting from the transfer of tax residence abroad.
Exit taxation is a key component of German tax law. It applies to individuals who transfer their tax residence abroad while holding certain shareholdings. The rules are primarily governed by Section 6 of the German Foreign Tax Act (Außensteuergesetz – AStG) and Section 17 of the German Income Tax Act (Einkommensteuergesetz – EStG). Their purpose is to tax the increase in value of these shareholdings—commonly referred to as hidden reserves—before Germany loses its taxing rights. As of 1 January 2025, the new Section 19(3) of the German Investment Tax Act (Investmentsteuergesetz – InvStG) also extends exit taxation to certain investment fund units.
Pensioners who wish to relocate their residence to Spain may generally receive their pension either into a German or a Spanish bank account. Where your pension is taxable depends primarily on when you started, or will start, receiving your pension. In certain cases, it may be necessary to file an income tax return in both Germany and Spain.
Anyone planning a longer stay in Spain or wishing to move to Spain will need to apply for an N.I.E. In Spain, the N.I.E. serves as a tax identification number and is therefore required for virtually all administrative procedures. Although the N.I.E. is often mistakenly equated with the term “Residencia”, the N.I.E. is simply your personal tax and identification number.
Originally associated mainly with the software and telecommunications sectors, remote work has now become common across a wide range of industries. For many employees, this creates the opportunity to fulfil what was once an unattainable dream: living in Spain while working remotely.
The internet and the evolution of modern marketing have significantly increased the visibility and reach of businesses offering services and marketing products both nationally and throughout the European Union. This not only facilitates customer acquisition but also makes it easier to promote products and services across international markets.
Globalisation, the digital age and the rapid expansion of e-commerce have enabled many businesses to access international markets and expand their operations across national borders.
While the concept of a permanent establishment plays a key role in international tax law when determining where business profits are taxed, a foreign subsidiary is a separate legal entity and therefore does not constitute a permanent establishment of its parent company. Nevertheless, even where no permanent establishment exists for tax purposes, important tax issues arise within a corporate group, particularly with regard to the distribution of profits.
Donations made to organisations qualifying under Law 49/2002 are directly tax-deductible in Spain for both individuals (Personal Income Tax) and companies (Corporate Income Tax):
Due diligence, a risk assessment conducted with “due care,” analyses the legal status of the property as well as any potential risks. This preliminary analysis plays an important role both in determining the value of the property and in providing legal protection for the buyer.
Property purchases in Spain may generally be financed either through Spanish banks or through foreign banks. However, following the entry into force of the new Spanish Mortgage Act, obtaining financing from foreign lenders has become significantly more difficult in practice. In order to enhance consumer protection and prevent unfair lending practices, the new legislation requires, among other things, the electronic transmission of the mortgage documentation between the lending institution and the notary. Consequently, the lender must be connected to the digital platform established for this purpose.
These preliminary agreements, often only one or two pages long, are frequently presented as a "reservation agreement", although they are in fact a legally binding preliminary contract. By signing such an agreement, you already undertake to purchase the property at a specified date under the conditions set out in the contract. A "reservation agreement" drafted and presented by a real estate agent can therefore quickly become a legal pitfall, particularly with regard to the deposit.
In order to register the purchase of a property with the Spanish Land Registry, the purchase agreement must be executed before a Spanish notary. This can either be done by having an existing private purchase agreement notarised in the presence of both parties, or by having the purchase agreement drafted directly as a notarial deed of sale (escritura pública de compraventa).
Renting out holiday apartments and rural holiday homes in Andalusia requires compliance with a number of legal requirements and registration in the relevant tourism register of the corresponding Autonomous Community. In Andalusia, a distinction must be made between urban tourist accommodation and rural holiday homes. In the latter case, registration in the Andalusian Tourism Register is mandatory.
German citizens, as well as all other European citizens, can generally purchase property in Spain without restrictions. Real estate can be acquired either through a private purchase agreement or by means of a notarial deed. To avoid unpleasant surprises during the purchasing process, it is advisable to consider the following points carefully.
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