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Tax Bases For Non-Residents

Non-residents of Spain are generally taxed on their world income in their country of residence and pay taxes in Spain only in respect of assets located here. The ownership of real estate plays a particularly important role here, as it affects both income tax and real estate tax.

In order to be able to carry out administrative acts at the relevant tax offices, you will need the Spanish tax number (NIF). If you already have the N.I.E, this is also your tax number. If you do not yet have an N.I.E., you can also apply for the tax number (NIF) directly at the tax office.

These taxes apply to non-residents in Spain:

1. Real estate tax (IBI)

The real estate tax (IBI) is levied directly by the municipalities (Ayuntamientos) and basically concerns any kind of real estate. If you have more than one property in different municipalities, the tax must be paid separately in each municipality.

The cadastral value is generally offset against the multiplier determined by the city government. Normally, a bank account can be deposited with the municipal administrations so that the tax can be debited directly as a direct debit. If the direct debit procedure is not approved, the exact payment date of the relevant municipality must be observed, which is usually between September and November.

2. Income tax (IRNR)

Income from property ownership (for own use)

This levy generally amounts from one to two percent of the cadastral value. In this case, the real estate property is considered as an increase in assets and must, therefore, be taxed, even if you live in the property yourself.

Income from the letting of real estate

It should be noted here that owners who have their tax residence in any other European country can deduct certain expenses from the tax. The same expenses can be deducted as for persons resident in Spain, which means that the Income Tax Act (IRPF) applies. The tax is due quarterly and the tax return must be submitted within the first 20 days of January, April, June, and October. Further information on deadlines, forms, and special features can be found on the website of the tax office.

Income from the sale of real estate

When real estate is sold, the difference between the purchase and sale value must be taxed, as in most cases this represents an increase in assets. There are various and extensive tax relief options such as: in the event that you invest the proceeds directly back into another property which then forms your main residence, for persons over 65, etc. It should be noted that the hypothetical increase in assets must also be taxed on donations. So if you give away property, not only does the recipient have to pay the gift tax, but you also have to tax the added value of the property as a capital gain.

3. Wealth tax

The wealth tax was reinstated for a limited period for the tax years 2011 to 2015, with the first 700,000 euros being tax-free. In principle, you must file an asset tax return if it is positive or if you have to pay taxes, or if your assets amount to more than 2 million euros.

4. Inheritance tax

Inheritance tax is the competence of the autonomous regions (Comunidades Autónomas), which apply very variable tax relief depending on the region. Thanks to a 99.9% tax reduction in Madrid, virtually no inheritance tax is due, while in Andalusia the full state tax rate must be paid. Which tax law applies depends mostly on whether you live in Spain as an heir yourself, whether the testator had his tax residence in Spain and in the case of real estate where the property is located. Especially in the area of inheritance and will, it is advisable to inform yourself about tax advantages early on and to work out a tax planning according to inheritance law if necessary.