In Spain, non-resident taxation is subject to non-resident status, i.e., whether or not a natural person or an institution is required to pay taxes depends on their condition as resident or non-resident in Spain.
Natural persons residing in Spain are required to pay the Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas, IRPF in Spanish) or the Corporation Task (Impuesto sobre Sociedades, IS in Spanish). On the other hand, both non-resident natural persons and institutions are required to pay the Non-resident Income Tax (Impuesto sobre la Renta de no Residentes, IRNR).
Moreover, non-residents who are also property owners in Spain are legally required to pay taxes on their property, regardless of their non-resident status. In other words, they are legally obliged to pay the taxes derived from the ownership of their property, regardless of whether they are residents or non-residents.
Cases In Which A Natural Person Is Considered A Tax Resident In Spain
Spain, like many other European countries, taxes citizens based on their residency status. In which cases is a natural person considered a tax resident in Spain?
- CASE 1: Natural persons will be considered as tax residents in Spain when they remain in Spain for more than 183 days in a calendar year, between the 1st of January and the 31st of December, regardless of whether this is continuous or during different periods of time.
- CASE 2: Natural persons will be considered as tax residents in Spain when their main economic activities take place in Spain, either directly or indirectly, i.e., if a person has the majority of his or her assets, investments or if he or she obtains most of his or her income in Spain.
- CASE 3: Natural persons will be considered as tax residents in Spain when both their current non-separated spouse and their underage dependent children have their usual residence in Spain, unless proven otherwise.
Natural persons are considered as Spanish residents when any of these requirements are met. If your situation does not apply to any of those cases, you will be considered as a Non-resident in Spain. Consequently, you will be required to pay the Non-Resident Tax. We will elaborate on this kind of taxation in the paragraphs below.
This scheme generates controversy when natural persons are considered as tax residents in two different countries, that is, when they are required to pay taxes in both countries for the same income. For cases like these, there are bilateral tax agreements which provide information on how to proceed.
If you find yourself in a situation in which you are required to pay taxes in two different countries for the same income, contact our Law Firm specialised in Non-Resident Taxation and International Tax Law. We will study your case and provide you with the best legal advice.
Joaquín Pons, CEO Savloir.
Non-Resident Taxation In Spain: State And Local Taxes
Non-resident Income Tax (IRNR)
The Non-resident Income Tax is applied to non-resident natural persons in Spain if they own, lease or transfer Real Estate. Whenever you are required to pay taxes both in Spain and your country of residence, check the bilateral tax agreement list to avoid paying taxes twice.
Depending on how your property in Spain is used, you will be required to pay your Non-resident Income Tax in one way or another:
- Taxation on non-residents using their property as a second home for recreational purposes and for a period shorter than 183 days in the calendar year. When a property is uninhabited and unrented for longer periods of time, the Spanish Tax Agency taxes homeowners on said property. The tax rate applied on non-residents residing in another European country, Norway or Iceland is 19%, while 24% is taxed upon residents in other countries. You are required to file your taxes using Form 210 during the calendar year following the financial year.
- Taxation on non-residents who rent their property: You have to file your taxes every three months, using Form 210. This means that in April, July, October and January you will be granted up to 20 days to file your taxes of the previous quarter. Depending on your country of residence, you may be able to deduct expenses, which could mean a significant reduction of your property taxation in Spain. The tax rate applied is between 19% and 24%.
- Taxation on non-residents for a property sale: Non-residents who decide to sell their property in Spain are required to pay taxes at the rate of 19%. They have three months to do so.
Non-Resident Wealth Tax
Non-resident natural persons are also subject to pay the Wealth Tax (Impuesto sobre el Patrimonio, IP in Spanish). This tax is applied to those non-residents who own any kind of property in Spain. Under the Spanish law, you will not be levied on your wealth as long as it does not exceed €700,000. The Wealth Tax is to be paid every financial year and filed under Form 714 during the same period as tax residents file their Tax Income Return in Spain.
State law states that wealth tax will be applied starting at €700,000 wealth for both residents as well as non-residents.
Other Types Of Taxes For Non-Resident Property Owners In Spain
Spanish Property Tax
The Spanish Property Tax (Impuesto sobre Bienes Inmuebles, IBI in Spanish) is a local tax to be paid by both residents and non-residents to the City Council of the city or town where their properties are located. Each property will be individually levied on, so if you own multiple properties, this tax is applied to each of your possessions.
The tax bill is normally issued in September, and landlords are granted several months to pay the tax for each property they own. We advise you to set up a direct payment plan through your bank to avoid an overdraft.
Household Refuse Collection Fee
The Spanish Household Refuse Collection Fee (Tasa de Recogida de Residuos Urbanos in Spanish) is a local fee which is collected annually by each City Council. It is normally collected before the summer, but each City Council sets up their own calendar. As in the case of the Spanish Property Tax, we recommend you set up a direct payment plan through your bank.
All property owners of housing or commercial premises are required to pay this fee. If this fee is stipulated in their lease contract, tenants of properties may also be required to pay.
If you are looking for an expert Law Firm to file your taxes in Spain or assess your personal financial situation, do not hesitate to contact us.
Joaquín Pons, Savloir CEO.
