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The Personal Income Tax is a personal tax that taxes the income of natural persons taking into account their nature and their personal and family situation. Check https://offshorecitizen.net/ for more information.

This tax is levied on the income generated by natural persons residing in Spain during an economic year (one year).

Tax income as an indicator of the economic capacity of each citizen

The rent is considered a tool to measure the economic capacity of each resident. This tax has a progressive nature, that is, more individuals who receive more income pay more.

In contrast to the taxes that are taxed with a fixed percentage (which are regressive in the vast majority of cases), the IRPF applies a different tax depending on each of the different income brackets.

What does the concept of rent include?

Although the main source of income or money of most individuals comes from their salary, the concept of income covers much more.

They take into account the income from work and economic activities, capital returns, such as stock dividends or interest generated by bank accounts, as well as capital gains and losses.

At the time of making the income statement, there are deductions for certain expenses set by the State and applicable to all residents in Spain who have income.

The Autonomous Communities, for their part, may apply additional deductions for their residents, as established in their competences.

How do VAT and Personal Income Tax differ?

For starters, the Value Added Tax (VAT) is an indirect tax. There are several types of VAT, with the aim that the products of first necessity have a lower tax rate than those that are secondary or luxury goods.

The VAT is a proportional tax and has a regressive effect on the income of consumers, while the IRPF is progressive.

Why is VAT regressive? Because people with less income have to allocate a greater percentage of their income to acquire a basket of the purchase of basic products than those individuals with high-income levels.

Another of the most notable differences between VAT and IRPF lies in the fact that the first is an indirect tax, while the second is a direct tax (directly taxes the income of natural persons).

Do I have to pay personal income tax if I do not receive income of any kind?

No. The IRPF taxes the income of natural persons. In case you do not receive any type of income, or from work, rental income or stock dividends, you will not have to pay the IRPF. If the opposite situation occurs, you will be obliged to pay.