Non-resident foreigners with property in Spain: What taxes do they have to pay?

Spain is one of the main countries in Europe that attracts large numbers of foreigners wishing to acquire real estate, whether for investment purposes, to rent or simply to enjoy their summer holidays.

However, although foreigners with properties in Spain are not residents, they are obliged to pay certain taxes to the AEAT (Spanish Tax Office). What taxes? In which cases? We explain below.

What does it mean to be a non-resident in Spain?

For tax purposes, the legislation establishes that an individual will be classified as a resident in Spain in any of the following cases: if they stay in Spanish territory for 183 days/year or more, if they have their core economic activities in Spain, or if their spouse and minor children reside in Spain.

Therefore, for a person to be classified as a non-resident, he/she does not have to meet any of the above conditions. Similarly, if the non-resident is the owner of a property in Spain, he/she must pay taxes to the Spanish tax authorities.

Taxes affecting non-residents’ property in Spain?

Regardless of whether the property is for their own short-term use or is rented, non-resident foreigners who own property in Spain are subject to the following taxes:

Real estate tax (IBI) for non-residents in Spain.

IBI is the main tax payable by a non-resident with a property in Spain. It is a local tax levied on property located in any municipality, regardless of whether it is urban or rural in nature.

It is paid annually and the amount to be paid is calculated on the basis of the cadastral value of the property. This is why the amount varies according to the provisions of the Town Council of the municipality in which the property is located. The accrual periods and payment periods also vary.

Non-Resident Income Tax (IRNR)

This is a tax similar to the “Impuesto Sobre la Renta de Personas Físicas (IRPF)”, but for people residing abroad. The difference is that for non-residents, income obtained in Spanish territory from profits derived directly or indirectly from property located in Spain will be considered as income.

Tax return is made using AEAT form 210. The way in which the IRNR is taxed depends on the type of profit or income obtained by the non-resident as owner of the property, according to the following cases:

If the non-resident keeps the dwelling unoccupied, for own use only.

Irrespective of whether or not the non-resident has enjoyed the property owned by him, and without having rented the property during the previous tax year, he is required to declare IRNR. The non-resident foreigner is obliged to pay this tax only because he/she is the owner of the property, this is called real estate imputation income.

Form 210 must be filled in. The deadline for filing is between 1/January and 31/December of the year following the year in which the tax is declared.

In order to calculate it, 1.1% of the cadastral value of the property is taken into consideration:

• On this result the tax rate of 19% is applied for residents of the European Union, Norway, Iceland and Liechtenstein.
• Non-residents who receive outside the European Union and the aforementioned countries are taxed at a rate of 24%.

In the event that the non-resident foreigner has not been the owner of the property during the whole of the declared year, or if in any period of that year the property was rented out, the amount to be paid will be proportional to the time he/she actually enjoyed it as owner.

If the non-resident rents the property

A non-resident who owns a property located in Spain, but rents it out, is receiving an economic benefit directly from the rental of his property. Consequently, it is necessary and obligatory for him to pay IRNR.

You must also use form 210, which can be completed on a quarterly or annual basis. IRNR is taxed according to the country of residence in which they are located.

• For residents within the EU the tax rate is 19%. Although there are certain deductible expenses, such as expenses arising from the rental of the same property being rented. They can only be deducted at 100% if the property is rented every day of the year.
• For non-residents domiciled outside the EU, no deduction can be made. The tax rate is 24%.

If the non-resident sells the property

On the other hand, if the non-resident foreigner sells the property he owns in Spanish territory, he also pay IRNR to the tax authorities, but only if he obtains a profit from the transaction. Only if he sells the property for a higher price than the amount he paid at the time of purchase.

Fiscal representation in Spain

When acquiring a property in another country, it is always necessary to know the local legislation, especially the tax regulations, to avoid the risk of incurring tax offences.

In Spain, even if you do not live in Spain, but you have acquired certain assets within the country, you will be obliged to pay certain taxes both to the Inland Revenue and to the Town Hall. Remember that each of the taxes has its own particular characteristics, and each one is taxed differently.

This is why it is important to have legal assistance in Spain, both to receive timely advice and to have a reliable and expert representation in national tax law and international law.

At ABOGADOS MAR CONSULTORES we have been offering peace of mind to our clients, by filing tax returns and representing them before the Spanish tax authorities. Contact us. Being up to date and avoiding any kind of tax penalties is possible.