What taxes do non-residents pay in Spain?

Non-residents in Spain who own any urban property in Spain will be subject to non-resident income tax and local tax, known as Impuesto sobre Bienes Inmuebles. In addition, they are subject to a wealth tax. Just as people resident in Spain have to pay Personal Income Tax (Impuesto sobre la Renta de las Personas Físicas), people who do not reside in Spain must also declare Non-Resident Income Tax (Impuesto sobre la Renta de no Residentes, IRNR). If you need help, it is best to contact a tax lawyer for the best possible advice.

The statement applies a tax rate of 19% to 24% depending on the type of income and the country of residence, "including income obtained from economic activity in Spain, income from real estate capital, ownership of a second residence and pensions".

When is a person considered a non-resident in Spain?

A person falls into the category of Spanish non-resident if he/she lives in the country for less than 183 days a year and has no tax residence in Spain. In these cases, the tax regime is different and includes taxation of income and capital gains obtained in Spain. However, there are other criteria to be taken into account in order to be considered a non-resident, such as the location of the main business centre or core home.

What taxes do I have to pay if I rent out my property?

The latest Tinsa report for 2021 shows how housing prices on the Spanish coast have changed. After the pandemic and with the rise of teleworking there has been a huge increase in demand from people wanting to settle in coastal areas and not just for summer, but to reside all year round. This attracts both people looking for exactly that and investors who see how demand can grow. Many of these investors are foreigners who are not tax resident in Spain, either companies or individuals, who buy these properties to rent them out. This rental income will be taxed differently depending on the country of residence of the owner, so for non-resident investors, especially before doing anything, it is important to be aware of these aspects. In the case of a private individual it would be as follows:

• If the owner is resident in Spain and pays IRPF (Impuesto sobre la Renta de las Personas Físicas), then his or her inherent expenses, such as IBI, among others, can be deducted.
• Income from renting a property in Spain is taxed at a flat rate of 19% for IRNR (Impuesto sobre la Renta de No Residentes) if the lessor is resident in another EU country. Expenses inherent to the rental are deductible without reduction of profits.
• The landlord lives in a country outside the European Union. In this case, the income from rented housing in Spain is taxed by the IRNR (Non-Resident Income Tax) at the single rate of 24% and no deductions of any kind can be made.

Taxation of non-residents' property transfers and written legal transactions

This tax consists of three different forms that non-residents also have to deal with. These payments received by the Ministry of Finance from non-residents are as follows:

1. Heavy transfer tax: This tax must be paid when there is an in vivo act of goods and rights that constitute property of a natural or legal person. It is the tax payable when the assets or rights acquired are located in Spain, can be exercised or must be realised in Spain. Its value depends on the type of inheritance transfer made:
   • Transfer of real estate: 6%.
   • Transfer of movable assets: 4%.
   • Composition of the patrimonial guarantee: 1%.
2. Business Tax: This method pertains to the act of financing the company, such as increasing the capital of a commercial company. The amount contributed is always 1%. If you live outside Spain, you must pay this tax as long as your registered office is in Spain, your registered office is in Spain and your head office is always in the European Union. Also, if you carry out your activity in Spain, provided that your registered office or head office is located in the EU.
3. Taxation of written legal acts: This tax is levied on the formalisation of legal acts, i.e. those that require notarial, commercial and administrative documents for their validity. This amount must be paid whenever the legal acts take effect in Spain or abroad, if they have economic or legal consequences in our territory. The value of this tax varies between 0.5% and 2%, depending on the municipality to which it applies. Cantabria, Catalonia, Extremadura and Valencia have the highest taxes (2%). Opposite is Ceuta, Melilla and the Basque Country, where 0.5% is applied. The rest are subject to an intermediate tax between 0.75% and 1.5%.