In this world nothing can be said to be certain, except death and taxes.
I will give you a first introduction so you can understand how taxes work in Madrid, and estimate your net salary at the end of this post, so you know what to expect.
I will assume here you know roughly how much you are going to earn, and that you will be a fiscal resident of Spain (click this link if not sure) .
At any time, If you need our professional help to make your move to Madrid zen:
ask for your free relocation consultation !
1. Income Tax
In general, the basic rule is that you should pay taxes, on all income (including rentals for instance) earned globally, in the country you are a fiscal resident of (more details about fiscal residency here)
The tax brackets go from 0% up to 43 % for the maximum bracket at around 53 000 € per year.
Be aware that not all your income is taxed at this rate: it’s a marginal rate.
It means that up to the 1st bracket limit, it’s taxed at the first bracket rate. And so on for each bracket, so you get a smooth augmentation every time you change bracket.
2. Social Security
If you are a fiscal resident of Spain, either employed or self-employed, you are going to pay social security taxes.
For an employee, you will pay around 6-8%: social security payments will include services like health care, retirement and unemployment.
For a self-employed, starting at around 300 € a month, you choose how much you want to pay, within a range, whatever you earn this month.
You get social security rights similar to employees: retirement, health care and even unemployment. Without going into details, be aware though that there are way more restrictions for self-employed.
Note that in both cases, there are minimums and maximums, which means that if your base is over 60 000 €, the % will decrease greatly.
For more details, read my article about getting access to healthcare in Madrid.
I recommend you use this tool to estimate your take home salary, by CincoDias, one of the major newspapers in Spain:
- enter your annual salary in the “Sueldo Bruto anual“ cell,
- click on calcular at the botton of the page
This will give you a first good estimate. In fact, if you already a definite employer, confirm this with them.
4. Key tips
As an employee, all taxes will be deducted directly by the company.
At the end of the year, you will then do the annual income declaration, and check if what you gave monthly was the right amount.
In most cases, the annual declaration means you get money back, since you can get deductions for renting, buying, donations etc…
As a self employed, you will have to declare quarterly or monthly. If you earn above 60 000 € a year and you can charge it as a self employed or via a company, we would recommend also you rather consider this self-employee or company option.
If you need further specific professional help, I recommend you contact Tom Leacy of SpainWide Services.
Mention Pierre from Moving2Madrid recommended his services. He has been in Madrid for 20 years as an accountant. He will answer your questions, and provide you with thre right services to make sure you pay the right amount of taxes.
And remember, if you need professional help for your move to Madrid, and want to save weeks of search and temp accomodation like other international people we have helped moved here:
Do not hesitate to leave a comment if you have any kind of question. Madridly yours,
Pierre & the Moving2Madrid Team – Property Search & Relocation Services