Non-residents in Spain are usually taxed on their worldwide income in their country of residence and only pay taxes in Spain on the assets they hold in the country. Real estate ownership plays a particularly important role as it affects both income tax and property tax.
In order to carry out administrative procedures at the relevant tax offices, a Spanish tax identification number (NIF) is required.
If you already have an N.I.E., it also serves as a tax identification number. If you do not yet have an N.I.E., you can also apply for the tax identification number (NIF) directly at the Tax Office.
Here are the taxes applicable to non-residents in Spain:
Property tax (IBI)
The property tax (IBI) is collected directly by the municipalities (Ayuntamientos) and applies to any type of real estate. If you own more than one property in different municipalities, the tax must be paid separately in each municipality.
The cadastral value is generally calculated by each town hall according to their tax regulations. Usually, it can be deposited in a bank account at the municipal administrations so that the tax can be directly debited. If the direct debit process is not approved, the exact payment date of the relevant municipality must be respected, which is usually between September and November.
Non-resident income tax (IRNR)
A) Income from property (for personal use)
This tax generally amounts to one or two per cent of the cadastral value. In this case, the property is considered an increase in assets and, therefore, must be taxed, even if you live in the property yourself.
B) Income from renting out real estate
It should be noted that property owners who are tax residents in any other EU country can deduct certain expenses from the tax. The same expenses can be deducted as for residents of Spain.
There is the option to file the tax quarterly or to group the income and file it annually.
Further information about deadlines, forms, and special characteristics can be found on the Spanish Tax Agency’s website.
C) Income from the sale of real estate
When a property is sold, the difference between the purchase price and the sale price must be taxed, as in most cases this represents an increase in assets. For the calculation of the capital gain, expenses related to the purchase and sale can be considered.
Additionally, if you gift a property in Spain, the value increase of the property must also be taxed as a capital gain.
Wealth tax
The wealth tax is levied on the total value of a person’s assets and rights, after deducting debts and other liabilities.
As a non-resident, you will only be required to file the Wealth Tax if the value of your assets and rights in Spain, less your debts, exceeds the legal threshold, which will depend on whether the national or regional regulations apply (and in the latter case, the regulations of which Autonomous Community). Assets located outside Spain are not considered for these purposes. Generally, you must file a wealth tax return if the resulting amount is positive (i.e., if you have to pay taxes) or if the total value of your assets exceeds €2 million. It is important to check the specific regulations of your Autonomous Community, as they may offer additional exemptions or different tax rates. Some Autonomous Communities have fully subsidised this tax.
Inheritance tax
Inheritance tax is managed by the Autonomous Communities, which apply highly variable tax relief depending on the region. Thanks to the 99.9% tax reduction in Madrid, inheritance tax is almost non-existent, whereas in Andalusia, the full state tax rate must be paid. In Catalonia, tax relief for inheritance tax is more moderate compared to Madrid. There are specific reductions and exemptions depending on the degree of relationship with the deceased.
The applicable tax law largely depends on several factors: whether you live in Spain as the heir, whether the deceased had their tax residency in Spain, and in the case of real estate, where the property is located. Particularly in the area of inheritance and wills, it is advisable to be informed about tax advantages from the outset and to develop tax planning in accordance with inheritance law, if necessary.
