Claiming a credit for foreign tax so you are not taxed twice

Key rules

• Credit limit: The credit is the lower of the tax paid abroad and the Spanish tax on that same income, and any excess can be carried forward for four years.
• Treaty cap: Foreign tax above what a treaty allows is not credited in Spain, so reclaim it from the foreign authority.
• Late payment: If you pay the foreign tax in a later year, claim it in the year of payment or amend the return for the income year.
• Proof: Keep proof of payment ready for the AEAT, but do not send it with your return.

How much credit you get

Spain gives you a credit for foreign tax, but a limited one. You can deduct the lower of two amounts:

• the tax you actually paid abroad on that income, and
• the Spanish tax that corresponds to that same income.

The Spanish figure is your average effective tax rate multiplied by the net foreign income in your taxable base. It includes both the state and the regional part of the tax.

This is for Spanish tax residents, who are taxed on their worldwide income. It does not apply to non-residents.

What if the foreign tax is higher than a treaty allows?

If a tax treaty caps what the other country can charge, only the capped amount counts in Spain. Anything above the cap is not deductible here.

What if you pay the foreign tax in a later year?

Sometimes the foreign tax is paid in a later year than the income. You then have two options:

• Take the credit in the year you pay the tax.
• Amend the return for the year of the income.

What if the limit stops you deducting everything?

Any excess you cannot deduct because of the limit carries forward. You can claim it over the following four years. The same limit applies each year.

Where to enter it in the return

1. Declare the gross foreign income first, in its usual income section. That might be employment, capital or savings income.
2. Open the Deducciones pages in Renta WEB.
3. Enter the income, the country, the net foreign income and the foreign tax paid.

You claim the credit in the annual return, which is filed from early April to 30 June, and the claim costs nothing beyond any tax due on the return itself.

Proof you need

Keep the proof for four years from the end of the voluntary filing period. Keep it longer if you are carrying a deduction forward.

Credit, exemption or reduced rate: how double-tax relief differs

Which relief route fits each of your foreign income streams?

When to choose

Choose per income stream: name the type of income, find it in your treaty, then claim in your Spanish return what remains.

• Credit: Your income is dividends, interest or royalties, or the treaty gives credit for your employment income, pension or gains. Spain uses the credit unless the treaty says otherwise.
• Exemption: The treaty leaves your employment income, pension or gains out of Spanish tax. Do not assume it: if the treaty only gives a credit, claim the credit.
• Reduced treaty rate: You receive dividends, interest or royalties from abroad and want less foreign tax withheld at the source. Ask the payer to apply the lower rate, or reclaim the excess from the foreign tax authority; foreign tax above the cap cannot be credited in Spain.

Documents that prove foreign tax paid

Proof of foreign tax paid

• Proof that the foreign tax was actually paid. Any one of these works: the foreign tax assessment or return, payment receipts, a withholding certificate from the payer, or a statement from the foreign tax authority.

• A Spanish translation of any proof written in a foreign language, ready if the AEAT asks for it. You do not need to translate it when you file.

• An apostille (an international stamp that certifies a foreign document) on the proof, only if the AEAT asks for it. It is not routinely required.