What taxes do non-residents pay in Spain?

Non-tax residents in Spain are also required to file tax returns and settle taxes in Spain. This includes people who own property in Spain for personal use or for investment purposes (renting property to tourists). In this article, we explain what tax obligations non-residents in Spain must keep in mind.

Tax on non-residents in Spain (IRNR)

A non-resident is a person whose center of life interests (work, family) is abroad and who stays in Spain for no more than 183 days in a calendar year. Non-residents pay taxes in Spain related to, among other things, income earned in this country. This is the income tax on non-residents (Impuesto sobre la Renta de no Residentes - IRNR). The tax return is filed using the Modelo 210 form, with the income tax for non-residents being:

• 19% - for citizens of Poland and other countries of the European Union and the European Economic Area (Iceland, Norway);
• 24% - for citizens from third countries.

IRNR tax on rental property

Non-resident tax applies, among other things, to those who own property in Spain and derive income from renting it. A tax of 19% or 24% is paid on the rent earned. European Union citizens have the option to reduce the tax base by the costs incurred, such as property renovation or utility payments. Modelo 210 Declaration can be filed quarterly or annually.

IRNR tax on non-rented property

Those who own property in Spain solely for their own use are also required to file a Modelo 210 return. In this case, the tax is calculated on "fictitious" income, from the mere right to use the property. The tax base is 1.2% or 2% of the cadastral value of the property (the lower rate applies to updates). A tax of 19% for EU/EEA citizens or 24% for non-EU citizens is calculated on such a base.

Capital gains tax

The Modelo 210 form is also used to declare capital gains. Non-residents who have sold a property in Spain must remember to account for it. The taxable base is the difference between the acquisition value of the property and the sales price less expenses (e.g. notary fees, renovations). The tax rate is 19%, with a so-called retention to be included in the tax return. This is an advance payment of IRNR income tax in the amount of 3% of the sale price of the property. The retention is collected and settled by the person buying the property from a non-resident. The advance payment should be settled up to a month after the transaction, while the income tax should be settled up to about four months.

Other taxes paid by non-residents in Spain

In addition to IRNR income tax, non-residents in Spain also pay other taxes. Among the most important tributes are:

• Property tax (Impuesto sobre Bienes Inmuebles - IBI) - a local tax calculated at a rate determined by the municipality in which the property lies.
• Land appreciation tax (Plusvalía Municipal) - a local tax that applies when property is transferred as a result of a sale, donation or inheritance.
• Wealth tax (Impuesto sobre el Patrimonio - IP) - for those who own physical assets (e.g., real estate) in Spain with a value that exceeds the tax-free amount (the nationwide exemption amount is 700,000 euros).
• Property Transfer Tax (Impuesto de Transmisiones Patrimoniales - ITP) - a tax charged on the purchase of secondary market property, among other things (6-13%, depending on the region).
• Tax on Documented Deeds (Impuesto de Actos Juridicos Documentados - AJD) - a tax charged when deeds are drawn up (0.5%-1.5% on the value of the transaction).
• VAT (IVA) - added to the purchase of goods and services (usually 21%), for new residential properties the IVA tax is 10%.

It is worth remembering here that the tax system in Spain provides the autonomous communities with a certain degree of freedom in setting tax rates and tax benefits. This means that the amount of tax depends, among other things, on the region in which the property is located.

Information was provided by the Polish-Spanish accounting firm espaytax.