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 calculated by each municipality according to its fiscal regulations. Typically, it can be deposited into a bank account at municipal offices so that the tax can be directly debited. If the direct debit procedure is not approved, the exact payment date set by the corresponding municipality must be adhered to, 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 property owners who are tax residents in any other European Union country can deduct certain expenses from the tax. They can deduct the same expenses as residents in Spain.
There is the option to file the tax quarterly or aggregate the incomes and file it annually.
More information about deadlines, forms, and special features can be found on the Tax Agency’s website.
Income from the sale of real estate
When a property is sold, the difference between the acquisition value and the transmission value must be taxed, as in most cases this represents an increase in assets. For calculating capital gains, expenses related to the purchase and sale can be considered.
Additionally, if you gift a property in Spain, you also have to tax the added value of the property as a capital gain.
3. Wealth tax
The wealth tax taxes the total value of a person’s assets and rights, after subtracting debts and other charges.
As a non-resident, you will only be required to file the Wealth Tax return if the value of your assets and rights in Spain, minus your debts, exceeds the legal threshold determined, which depends on whether state or regional regulations apply (and in the latter case, the regulations of which Autonomous Community). Assets located outside of Spain are not considered for these purposes.
Generally, you must file a wealth tax return if the resulting tax due is positive (meaning you have to pay taxes) or if the total value of your assets exceeds 2 million euros. It is important to review the specific regulations of your Autonomous Community, as they may offer additional exemptions or different tax rates. Some Autonomous Communities have completely exempted this tax.
4. Inheritance tax
Inheritance tax is under the jurisdiction of the Autonomous Communities in Spain, which apply highly variable tax breaks depending on the region. Thanks to a 99.9% tax reduction in Madrid, inheritance tax is practically negligible, whereas in Andalusia, the full state tax rate must be paid. In Catalonia, tax breaks for inheritance tax are more moderate compared to Madrid. There are specific reductions and bonuses based on the degree of relationship with the deceased.
The applicable tax law depends significantly on several factors: whether you reside in Spain as an heir, if the testator had their tax residence in Spain, and for real estate, the location of the property. Especially in the realm of inheritance and wills, it’s advisable to understand tax advantages from the outset and develop a tax plan in accordance with inheritance law if necessary.
