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TAXES

Is it better to do a joint or separate tax declaration if you’re a couple in Spain?

The deadline for filing your Spanish annual income tax return is just a couple of months away, but working out whether to file jointly or as an individual can be tricky. Here's everything you need to know in order to help you decide.

Published: 1 June 2022 15:38 CEST
Updated: 5 May 2024 10:32 CEST
Is it better to do a joint or separate tax declaration if you're a couple in Spain?
Should you file tax return in Spain jointly or separately? Photo: Kampus Production

The tax season is upon us in Spain and there’s just a month and a half to file your annual tax returns for the year 2023.

The deadline for this year is July 1st 2024. 

As a general rule, anyone resident in Spain for more than 183 days who earned €22,000 or more or if it’s their first time filing, needs to complete a tax return. If you’re self-employed you must also file one, no matter how much you make. 

Figuring out how to complete your tax return, what deductions you can make and what to declare can be difficult, but on top of all this, if you’re married or in an established relationship, you’ll also need to decide whether you want to file your return individually or with your partner.

Generally, income tax returns must be declared individually, but the Agencia Tributaria (Spanish Tax Agency) does allow you to fill one out as a couple or a family unit, provided you meet certain criteria.

The Agencia Tributaria defines a family unit, in the case of marriage, as “spouses, not separated and if any, minor children, except for those who are independent”.

In the event that there is no marriage or you are separated, a family unit is defined as: “A father or mother and all their children who live with one of the two and who meet the required requirements”.

Remember, when filing the familial situation you take into account that which existed as of December 31st, 2023.

READ ALSO: The key changes to Spain’s 2023/2024 annual tax return

Is it better to fill out my tax return as an individual or as a couple?

Depending on your situation, you could end up paying more or less tax if you file as a couple rather than an individual. Joint returns can often mean you benefit from a series of tax reductions, but this option is not open to everyone and it may not always be beneficial to you.

Before you fill out your tax return, you’ll need to calculate whether it will be better for you to file on your own or with your spouse.

You can ask your gestor or your accountant to calculate this for you or you can use the tax income simulator. This is an online version of the Agencia Tributaria portal that makes it possible to create your declaration without actually having to submit your data, therefore you can work out which situation would be best for you. 

Remember that if you decide to declare as a couple this year, you can always go back to filing individually next year, if you choose. Your circumstances change year on year, meaning that some years it may be beneficial for you to do a joint declaration, while other years it won’t.

When filing a joint return, keep in mind that it will include income of any kind obtained by all members of the family unit. If one of the members of the family unit files their income tax return individually, then the rest must also do the same. One spouse cannot choose to declare it on their own the other as a couple.

Generally speaking, if both spouses work, it’s preferable to file individually. Joint taxation is preferable when only one of the spouses works. Make sure to check with your gestor or accountant that this is true in your case.

READ ALSO: What does a ‘gestor’ do in Spain and why you’ll need one

If you live and work in Spain, you’ll need to calculate whether it will be better for you to file on your own or with your spouse. Photo: Surface/Unsplash

What are the advantages of filing your tax return jointly? 

One of the main advantages of paying taxes jointly is the reduction. This means you are able to offset income gains and losses jointly. In theory, it could end up saving you a lot of money, but it could also end up costing you more too.

The basic personal allowance for each person under the age of 65 is €5,550, however, for joint declarations, the allowance of the second taxpayer is established at €3,400. The reduction for single-parent family units is €2,150 per year. Once you reach 65, the allowance rises to €6,700.

There is an additional personal allowance granted depending on the number of children you have. If you have one child it will be €2,400 and if you have two it’s €2,700. The amount rises more for 3 or more. 

Who can file a joint 2023-2024 Income Tax return?

According to the Agencia Tributaria, the following taxpayers can opt to declare their declaration jointly:

  • Spouses who are married and live with all their children under 18 or those who have been declared incapacitated when they become of legal age.
  • De facto couples – only one of the members can form a family unit with their minor children or disabled adults. The other member of the couple will have to make an individual declaration.
  • In those cases of divorce or separation, joint taxation will correspond to the person who has custody of the children on the date on which the Personal Income Tax (IRPF) is accumulated.
  • In those cases of shared custody, the option of joint taxation can be made by either of the two parents, and the other will have to make the declaration individually.

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AMERICANS IN SPAIN

EXCLUSIVE: What the new Spain-US social security deal means for Americans

The Local speaks to the Spanish government and tax experts to understand what the new social security and pensions agreement between the United States and Spain means for American workers, digital nomads and pensioners in Spain.

Published: 15 May 2024 11:10 CEST
Updated: 19 May 2024 08:20 CEST
EXCLUSIVE: What the new Spain-US social security deal means for Americans

In early April, the United States and Spain announced a new social security and pension agreement.

The first update to the bilateral agreement between the two countries since 1986 was announced by US Ambassador to Spain, Julissa Reynoso, and Spain’s Minister of Inclusion, Social Security, and Migration, Elma Saiz.

The official agreement is unpublished so The Local spoke with a representative from Spain’s Ministry of Inclusion, Social Security, and Migration as well as international tax experts to understand the agreement in more detail.

Key aspects of the agreement

The Ministry told The Local Spain that the agreement is a step towards, bolstering mobility between Spain and the United States by improving pension calculations and social security protections.

The agreement has to do with the accumulation of benefits and affects working Americans living in Spain. There are two main components; the first affects which system people pay into (Spanish or American) and the second maximises the amount people can collect from social security.
 
Regarding paying into social security, the new agreement extends the “posting period” from three years to five years, with the possibility of extending it to seven years.

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This is meaningful for US employees who are working in Spain and means that they can now pay into the US social security system, rather than the Spanish social security system for longer.

Whereas the employee contributions in Spain and the United States are similar, 6.4 percent in Spain and 6.2 percent in the United States, the rate that employers pay differs greatly. In the United States the employer pays 6.2 percent into social security, whereas in Spain they pay 31 percent.
 
Why does this matter? “Previously when Americans moved to Spain, US employers were cutting the amount that they paid in salary because the cost of employment went up so much”, Louis Williams, Co-Founder and CEO of Entre Trámites, told The Local Spain.

It’s also made employers hesitant to grant digital nomads an Employer of Record (EOR) which would allow American workers to be on a Spanish contract.

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In terms of collecting benefits, the representative from Spain’s Ministry of Inclusion, Social Security, and Migration says, “In the calculation of the Spanish pension there have been technical modifications that will benefit especially those people who developed their last working life in the United States, without this harming those who have worked in Spain immediately before requesting the benefit.”

In other words, under the new agreement, after calculating a person’s benefits under each country’s system, the recipient will be awarded the most beneficial of those two calculations.

Impacts for self-employed workers and digital nomads

According to the Ministry, “The agreement allows self-employed workers to temporarily move to the other State while maintaining their legislation, a possibility that was previously restricted only to employed workers.”
 
This has big implications for people who avoid moving to Spain because of the complicated social security contributions scheme, as they’ll now be able to continue paying US social security taxes (rather than Spanish) for up to seven years.
 
“The interesting thing is if this is extended to digital nomads because it would make the digital nomad visa more attractive,” says Williams.

“Why? Because if you’re posted by an employer (who can now avoid high Spanish social security taxes) you’re eligible for Beckham’s Law.” The law, which does not extend to autonomous works, can cap tax liabilities at 24 percent.
 
Being posted could make life much simpler, according to Elliott Locke, ACSI, co-founder of abroaden, a financial wellbeing and education start-up for people living abroad headquartered in Barcelona.

“The calculus is harder for freelancers given the different legal structures and methods for freelancing between the two countries. In many ways, if an American moves here to work remotely, it could be beneficial for them to have their US-based employer hire them on a local contract through an employer-of-record,” Locke told The Local.
 
In short, the new agreement could make it more attractive for U.S. companies to post employees in Spain, making them eligible for Beckham’s law and allowing autonomous workers to pay into the U.S. social security system, making it more beneficial and easier to be a digital nomad in Spain.

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Who benefits from the new agreement?
 
The people who will feel this new agreement the most are employers, digital nomads, retirees who have paid into both systems over the years, and finally, civil servants. “Spain has incorporated as possible beneficiaries of the Agreement those people who have contributed to the civil servant’s regime (passive class regime), who were excluded in the previous Agreement,” says the Ministry.
 
When can we expect the new agreement to come into force?

Don’t hold your breath; this is Spain after all, but we can expect the agreement to come into force within the next two years.

The deal has to pass through Congress before approval, which is likely why it has not yet been published. If things move quickly, people could expect to benefit within a year.

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