Understanding your tax obligations is important after you move to Madrid. This guide explains how Spanish income tax works, tax brackets, residency rules, and deductions.
Who is a tax resident in Spain?
You must determine your tax residency status to understand your tax liabilities. You are a residente fiscal (tax resident) if you spend over 183 days in Spain in a calendar year.
The days do not need to be consecutive. You are also a tax resident if your primary economic interests are in Spain.
Tax residents must pay Spanish tax on their worldwide income. Non-residents only pay tax on income earned within Spain.
What to check before signing a lease in Spain
How IRPF works
The Spanish personal income tax is called impuesto sobre la renta de las personas físicas (abbreviated as IRPF). Your employer deducts this tax directly from your monthly paycheck.
The tax rate is divided into a national portion and a regional portion. Madrid has its own regional tax rates.
Madrid offers the lowest regional income tax rates in Spain. This makes living in Madrid cheaper tax-wise than living in Barcelona or Valencia.
Social security contributions
In addition to income tax, you must pay social security contributions. These funds support the public healthcare and pension systems.
The Spanish term for these payments is cotizaciones a la Seguridad Social (social security contributions).
Your employer deducts these contributions directly from your salary. For employees, the standard contribution rate is 6.35 percent of your gross salary.
This deduction is separate from your personal income tax. You must factor both deductions in when calculating your net take-home salary.
Progressive tax brackets in Madrid
Spanish income tax is progressive, meaning higher income is taxed at higher rates. You only pay the higher rate on the portion of income within that bracket.
The combined tax rates in Madrid for 2026 are:
- Up to 12,450 euros: 18.5 percent.
- 12,450 to 20,200 euros: 23.5 percent.
- 20,200 to 35,200 euros: 29.5 percent.
- 35,200 to 60,000 euros: 36.0 percent.
- 60,000 to 300,000 euros: 44.0 percent.
- Over 300,000 euros: 47.0 percent.
Example: If your taxable income is 25,000 euros, the first 12,450 euros is taxed at 18.5 percent. The next 7,750 euros is taxed at 23.5 percent. The remaining 4,800 euros is taxed at 29.5 percent.
Regional tax deductions in Madrid
The Community of Madrid offers several regional tax deductions that can lower your tax bill.
Expats under 35 years old can claim a rental deduction. You can deduct 20 percent of your rent up to a maximum of 1,200 euros.
To claim this, your landlord must have deposited your housing deposit with the regional authority.
Other deductions are available for families. You can claim deductions for childbirth, adopting children, or paying school tuition fees.
The Beckham Law special tax regime
Foreign workers relocated to Spain can apply for a special tax regime. This regime is commonly called the Ley Beckham (Beckham Law).
It allows you to pay a flat tax rate of 24 percent on Spanish income up to 600,000 euros. You do not pay Spanish tax on foreign passive income.
You must apply within six months of starting your employment contract. This regime is valid for your first six years in Spain.
The Modelo 720 declaration of overseas assets
Tax residents in Spain must report assets located outside of Spain. This report is filed using the form Modelo 720 (declaration of overseas assets).
You must file this form if you own assets worth more than 50,000 euros in any category.
The main categories include foreign bank accounts, properties, or investment portfolios located abroad.
You only file this form once, unless the value of your assets increases by more than 20,000 euros.
The deadline for filing this form is March 31 of each year. Failure to file or filing late can result in audits and fines.
Filing your annual tax return
The annual tax return is called the declaración de la renta (annual tax return). The tax campaign runs from early April to late June each year.
You must file a return for the previous calendar year. You must file if you earn over 22,000 euros from a single employer.
The limit drops to 15,000 euros if you have multiple employers. If your employer withheld too much tax, you will receive a refund.
Questions and answers
When is the Spanish tax deadline?
June 30. You must file your annual tax return before this date each year.
Does Madrid have wealth tax?
No. Madrid offers a 100 percent discount on wealth tax for its residents.
What happens if I file my tax return late?
You will pay a penalty. Fines start at one percent of the tax owed per month of delay.
Can married couples file taxes together?
Yes. You can choose to file joint tax returns if it reduces your overall tax bill.
Are double taxation treaties applicable?
Yes. Spain has double taxation treaties with over ninety countries to prevent paying tax twice.
