If you plan to retire in Spain, understanding how taxes and financial planning work as an expat is essential. Spain offers many benefits for retirees, but it also comes with a different tax system that you’ll need to navigate carefully, especially if you receive income or hold assets outside of Spain.
Do Retirees Pay Tax in Spain?
Yes, if you become a tax resident (spending more than 183 days a year in Spain), you must declare your worldwide income and may be liable for income tax, capital gains, and even wealth tax.
Spain has tax treaties with many countries—including the UK, USA, Germany, and the Netherlands—to avoid double taxation. You’ll typically pay tax in only one country, but you must declare foreign income and submit the right forms.
Common Taxes Retirees Should Know:
- Income Tax (IRPF): Ranges from 19% to 47%, depending on region and income level
- Capital Gains Tax: 19% to 26%
- Wealth Tax: Applies to net assets over €700,000 (exemptions vary by region)
- Inheritance Tax: Varies widely; discounts for close relatives and over-65s
- Sales Tax (IVA): 21% standard, 10% for essentials
Pension and Investment Income
- UK Pensions (State & private): Taxable in Spain if you’re a tax resident
- US Pensions & Social Security: Generally taxable in Spain, but covered by tax treaties
- ISAs & Roth IRAs: Not tax-free in Spain
We recommend speaking with a cross-border tax adviser to structure withdrawals efficiently and avoid unnecessary penalties.
Financial Planning Tips for Expats
- Review your assets before you move: Some investments may be better held or sold before residency.
- Diversify currency holdings: Avoid heavy exposure to GBP or USD by holding euros.
- Plan your estate early: Spain has forced heirship laws and regional variations.
- Maintain proper documentation: Spain requires annual foreign asset declarations (Modelo 720).
See our list of Financial Advisors for Retiring to Spain