How much taxes I pay in Spain

Money and taxes in particular is a sensitive topic we should all be aware of. Especially, if you move from one country to another or search for opportunities abroad.

With the article, I want to help you avoid unexpectedness and make a more conscious choice when considering countries for relocation. I have lived in Spain for over 2 years now, so the article is about Spanish taxes and what you have to pay to enjoy the sea, the sun, and the company of exceptionally open people (I’m fond of Spain).

Disclaimer: The taxation in Spain is complex and this article is not supposed to cover everything, hence I will simplify it on purpose to give an overall idea. Each use case and situation should be investigated individually.

I like to count and value each penny and if you are so too, I recommend reading my other article How I manage my expenses, which highlights the cost of living in Madrid.

Income taxes in Spain

Spanish tax rates are progressive: the more you earn — the higher percent of income you pay.

Current rates are (2023, Comunidad de Madrid), but they can vary between regions, so be mindful:

This percentage is paid after allowances and some deductions. They are applied based on social and family status, age, and, of course, an autonomous community where you live and work.

While the progressive rates apply to most people living in Spain, there are exceptions. For example, for me, they are not applicable yet, as I fall under a different regulation, the so-called “Beckham law”.

The “Beckham law”

There is a special scheme for workers posted to Spanish territory that was designed to attract highly qualified people. It aims to reduce and simplify taxes temporarily — the Backham Act or the Backham law.

The applicable tax rate for income is fixed at 24% up to €600,000 and 47% for everything above that amount. The Beckham law is applicable during the tax period in which the change of residence was carried out and for the five following financial years (1+5). Thus, falling under the conditions, for roughly 6 years you can forget about the progressive tax system (though, about allowances too).

This tax regime is commonly known as the Beckham Law because it was initially used by football clubs to sign players, and David Beckham was one of the first to benefit from these special rules. Ironically, under this Act, professional athletes are currently excluded from the special rules.

Relocating to Spain for the first time and being hired by a Spanish company I was able to apply for the special tax regime (The applicant must not have been a tax resident in Spain during 5 years before their relocation for employment purposes).

As an additional advantage of the regime, only income from employment obtained in Spain is taxed. For this reason, if you have an additional income outside Spain, it is not taxable by Spanish authorities.

Social security deductions

If at this point you think, that I exaggerated by saying that the system is difficult, let me introduce another term: Social Security payments, which everyone is obliged to pay by law.

Spain is a social country with plenty of social benefits (whether this is good or bad is taken out of the scope) and 4 deductions, that every employee has to pay by law (regardless of being under the “Beckham law” or not):

1. Common contingencies (Contingencias comunes): 4.7% of the tax base (the tax base doesn’t count “benefits”, that you could receive from an employer). They are contributions made by both the company and the worker (you pay 4.7%) to access coverage in certain circumstances, such as retirement, paternity/maternity leave, sick leave, accidents and health care, as long as the cause is not related to work activity nor has it occurred in the workplace.
2. Unemployment contribution (Cotización por desempleo): 1,55% of the tax base. The purpose of the deduction is to have the right to receive an unemployment benefit when our employment contract is involuntarily terminated.
3. The Intergenerational Equity Mechanism (El Mecanismo de Equidad Intergeneracional, MEI): 0.12% of the tax base for employers in 2024, and the percentage will gradually increase until 2050. It is an additional contribution that was approved and implemented in 2023 to reinforce the pension system of Spain.
4. Professional training contribution (Cotización Formación profesional): 0.1% of the tax base. This deduction is aimed to cover professional training for unemployed workers.

Bear in mind, that each amount is paid not only by an employee but also by an employer, on average 5–6 times more. As an illustration, the Professional training contribution for an employee is only 0.1%, but an employer pays 0.6%. All these additional employer payments you don’t see on a payslip — imagine how much your soul actually costs to the employer!

Summary

The Spanish tax system has nuances. Every case is unique, and allowances, deductions, and taxes vary from person to person. I hope, that with this article, Spanish taxes, The “Beckham law” and especially Social Security deductions became clearer to you. With the numbers above, you can roughly estimate how much a person will have to pay when signing a contract with a Spanish employer and relocating to Spain.

As a person born in Russia, taxes in Spain are a nightmare to me, since Russian taxes are paid by an employer (a stable 13% for everyone. Some taxes are paid by the employer as well, but they are hidden from you) and almost every company indicates the salary after taxes.