Taxes in Spain for Non-Residents

Introduction

If you own a property in Spain but are not fiscally resident in the country, that is if you spend less than 183 days per year in Spain, you are considered to be non-resident. Non-residents will normally need to justify to which tax authority they pay their taxes. Governments don't like citizens to be non-resident everywhere! Your tax residence is important as it affects what type of taxes you pay and how much. These are the taxes to which non-residents are subject:

Income Tax

Non-residents in Spain are generally subject to a flat tax rate of 24% on income earned in the country. This applies to employment income, rental income, and other sources of income generated in Spain. Income generated outside Spain is taxed in the country in which you are fiscally resident.

Wealth Tax

Wealth tax in Spain is applicable to both residents and non-residents. Non-residents are subject to tax on their assets located in Spain. The rates vary depending on the autonomous region in which the asset is located and its value. In some regions, the tax rate can be as high as 2.5% on the net wealth exceeding €2 million. In others, such as Andalucia and Madrid, there is currently a 100% relief allowable against the wealth value. In other words, there is no taxation.

Property Tax

If you own property in Spain, you'll be subject to property tax, known as the Impuesto sobre Bienes Inmuebles (IBI). The rate of IBI varies depending on the municipality where your property is located. It is calculated on the catastral value, or lately, the catastral reference value of your property. What's the difference? Catastral values were always way below market values, often less than one quarter of the true value. The introduction of the reference value is an attempt to bridge this gap. The IBI in rural areas is usually very low. In urban areas it better reflects the type of services received. However, in comparison with most other European countries the rates are still low.

Capital Gains Tax

Non-residents in Spain are required to pay capital gains tax on the sale of property or assets located in the country. The tax rate is typically 19% for EU residents and 24% for non-EU residents. This discrimination is being challenged in Brussels. However, exemptions or reductions may apply under certain circumstances, such as reinvesting the proceeds into another property in Spain. Persons over 65 are not subject to capital gains tax on the sale of their main home.

Value Added Tax

Value Added Tax (IVA) is applied to most goods and services. The standard rate of IVA is 21%, but reduced rates of 10% and 4% apply to specific items, such as food, housing, and medical services.

Inheritance and Gift Tax

Spain imposes inheritance and gift tax on the transfer of assets within the country. The tax rates vary based on the relationship between the donor and the recipient.

Non-Resident Property Tax

If you own property in Spain, you will also be subject to the non-resident property tax (IRNR). This tax is levied on notional income, that is rent that you could have obtained if you had rented the property. It is calculated based on the property's catastral value. The rate for non-EU residents is 24% x 1.1% x the catastral value if the catastral value has been revised in the previous ten years or 24% x 2% x the catastral value if it has not. This tax rarely amounts to a lot of money. To give an example. We recently sold a rural property for €640.000. Its catastral value is €117.355.

The annual tax payable is: 1.1% x €117.355 x 24% = €309.82

If you do rent the property, you will be taxed under the Income Tax regime.

Municipal Taxes

Municipal taxes vary depending on the city or town where you reside. They can include waste collection fees and sewage disposal, although this latter charge may be levied by the local water company instead. 

Overall the taxation regime in Spain is in line with other European countries and the services provided through taxation are generally good.

This information is provided in good faith and is not intended as legal advice. Cases may vary according to personal situation and the region in which you live..