Taxation for non-residents in Spain is a complex and highly relevant issue, especially in a globalised context where economic borders are increasingly blurred.
This article aims to provide clear and detailed guidance on what foreigners must file for non-resident taxes in Spain.
Definition of tax residence
Tax residence in Spain refers to the status of an individual or entity that is considered resident in the country for tax purposes. This implies tax obligations to declare and pay taxes in Spain.
Who is considered non-resident in Spain?
But who are considered non-residents under the tax laws? The Tax Agency establishes the following criteria:
- Not often residing in Spain: unless there is proof to the contrary, those who do not live entirely in Spain are not considered tax residents.
- Centre of main economic interests: if your main economic interests are in another country, you are not a tax resident in Spain.
- Spouse and dependent children: if your spouse is not legally separated and your minor children often reside in another country, you are not considered a tax resident in Spain either.
Criteria for determining tax residence
- Residing in Spain for more than 183 days a year.
- If you spend more than 183 days in Spain, but have sporadic absences in the other country where you are tax resident, you are not considered resident in Spain.
- If your main economic activity is elsewhere, you are not tax resident in Spain.
Non-Resident Income Tax (IRNR)
Concept and characteristics of the IRNR
The IRNR is a tax that applies to those who are not resident in Spain, but obtain income in the country without a permanent establishment. These taxpayers follow rules similar to those for resident companies. Some key points of this tax are:
- This tax is triggered when income is obtained in Spanish territory. This occurs through permanent establishments or financial operations carried out in the country.
- Permanent establishments are considered to be those workplaces or facilities that exist continuously or habitually in Spain. This category ranges from head offices and branches to production facilities, warehouses and sales outlets, including natural resource holdings such as mines, wells and farmland.
- The tax is adjusted to the level of income earned in Spain by non-residents.
Tax rates and calculations
The tax base is calculated as for resident companies. The tax liability is determined by applying the following tax rates:
Gains from dividends, interest and income derived from investment securities are subject to a tax ranging from 19% to 24%.
IRNR tax return
Non-residents who earn income in Spain without a permanent establishment must file an IRNR return. This obligation applies from 1 January 2021 and the deadlines and forms for tax returns are defined by Spanish tax regulations.
In addition, withholders are also responsible for withholding and reporting tax obligations.
Other taxes affecting non-residents
Wealth tax
Although its name suggests it, this tax does not apply directly to non-residents. It is addressed to residents in Spain and to those non-residents who own wealth in Spanish territory.
Inheritance and Gift Tax
It affects non-residents who receive donations or inheritances in Spain. It applies to free transfers of assets (such as inheritances, donations or bequests) within the country.
Non-residents must self-assess this tax at the Tax Agency if they do not have a representative or proxy in Spain.
Transfer Tax and Stamp Duty (Impuesto sobre Transmisiones Patrimoniales y Actos Jurídicos Documentados)
This tax is levied on non-residents who carry out property transactions in Spain. Non-residents must self-assess this tax if they do not have legal representation in Spain.
Real Estate Tax (IBI)
This affects non-residents who own real estate in Spain, such as homes or rural properties. They must declare and pay this tax at the corresponding town hall.
Municipal capital gains tax (Plusvalia municipal)
Applies to non-residents who sell real estate in Spain. This tax is levied on capital gains generated by the sale of property. Non-residents must also declare and pay this tax at the local town hall.
Exemptions and deductions applicable to non-residents
When a non-resident obtains income in Spain, he/she is subject to Non-Resident Income Tax (IRNR).
However, if the non-resident’s country of residence has a double taxation treaty with Spain, specific tax exemptions apply to prevent the same income from being taxed twice. In such cases, tax deductions in Spain cannot exceed the tax that would be due under the treaty.
Individuals wishing to prove their resident status in nations with which Spain has tax treaties must provide a certificate of residence. This certificate of tax residence is official and must be issued by the competent tax authority of the applicant’s country of origin.
In addition, double taxation treaties also apply to Wealth Tax.
If a non-resident is resident in a country with which Spain has signed a treaty containing specific provisions related to net wealth, he/she can apply those provisions to avoid double taxation in Spain.
Procedures and deadlines for filing IRNR tax returns
Form 210 is applicable to both individuals and companies that do not have a fixed establishment in Spain. It also covers foreigners who are in the country for work purposes and foreign entities that generate income in Spanish territory.
Form 210 is filed through the AEAT (Agencia Tributaria) portal and the form must be completed to avoid delays or penalties.
In Spain, owners must declare imputed income from urban real estate in the calendar year following the year in which it was generated.
On the other hand, other income must be filed as of the first of February of the year following the year to which it corresponds. It is important to note that there is a limit of four years to file these tax returns, counted from the end of the corresponding fiscal year.
