Taxes for Non-Spanish Tax Residents With Properties in Spain

If you are a non-Spanish tax resident and you own a property located in Spain, according to Spanish tax laws, you would be liable for several taxes such as Non-Resident Income Tax, local property taxes, and the Wealth and Solidarity Taxes.

Non-Resident Income Tax #

Individuals tax residents in a country that has signed a convention to avoid double taxation with Spain have to comply with the provisions of the agreement. In general terms, conventions to avoid double taxation allow the state where the property is located to tax the income obtained from it. In this case, the country of residence should eliminate the double taxation.

Do I Owe Taxes? #

Pursuant to Spanish Non-Resident Tax Law, there would be tax implications in two scenarios:

Tenancy of the Property - Calculations

• The imputation of income is an income established by tax law that the taxpayer must report simply for being the owner or holder of properties in Spain, provided that these properties do not generate rental income or are not affected by economic activities. The value of the imputation of income is the result of multiplying 1.1% or 2% (depending on the property's location) by the cadastral value of the property.
• If the property has been rented partially during the same tax year, the imputation of income will be proportional to the days the property was not rented. The tax rate is 19% if the taxpayer is a resident in the EU or in a state of the European Economic Area (EEA) where there is an effective exchange of information (currently Iceland, Norway, and Liechtenstein). Otherwise, the tax rate is 24%.

The imputation of income for each property located in Spain must be reported on Form 210 annually during the following calendar year to the tax year in question.

Rental Income #

• Residents in the EU or in the EEA where there is an effective exchange of information should report the net rental income. They can deduct rental expenses from the gross rental income as long as they are related to the rental income. The tax rate is 19%.

• Residents outside the EU or outside the EEA where there is an effective exchange of information should report the gross income. The Spanish tax law does not allow deductions for any rental expenses so the gross income must be reported. The tax rate is 24%. You may be able to deduct expenses from your U.S. taxes at the time of a sale so make sure to keep all of your receipts and payment records.

Rental income obtained for each property before January 1st, 2024, should be reported through Form 210 during the first 20 days of the months of April, July, October, and January.

Rental income obtained for each property after January 1st, 2024, could be reported through Form 210 annually during the first 20 days of the following year to the tax year in question.

Local Property Taxes #

All owners of a property in Spain would be liable to pay Spanish IBI tax and the Rubbish tax. Both taxes are charged by the town hall where the property is located.

Transfer of Property Sold #

If the property is sold, the non-tax resident will be liable for Capital Gains Tax for the difference between the acquisition value and the sale value at a tax rate of 19%.

The person acquiring the property is obliged to withhold and deposit with the Treasury 3% of the transfer price. This withholding tax serves as payment on account of the corresponding tax for the capital gain arising from this transfer.

If there is a capital gain, the transfer of the property would also be subject to The Tax on the Increase in Value of Urban Land.

Net Wealth Tax #

Net Wealth Tax is an annual tax payable on the total value of the taxable taxpayer's assets as of December 31st. Provided that the conventions to avoid double taxation allow Spain to tax the assets located in Spain, non-Spanish tax residents will be taxable for their rights and assets located/exercised in Spain.

Spain levies Net Wealth Tax at rates from 0.2% up to 2.5%, and each individual has a tax allowance of €700,000 under the state Wealth Tax law. However, Spanish regions can modify the tax rates and allowances.

The Balearic Islands government levies Net Wealth Tax at a rate ranging from 0.28% up to 3.45% and has established an allowance of €3,000,000 from the tax year 2024 (€700,000 for tax years before 2024). Therefore, non-Spanish tax residents with assets in The Balearic Islands will be taxed under the Wealth Tax when the value of their net rights and assets located/exercised in Spain exceeds €3,000,000 (€700,000 for tax years before 2024).

However, there will be an obligation to file a tax return even if the tax liability is not positive when the value of the assets or rights exceeds €2,000,000.

Spanish Solidarity Tax #

Spanish Solidarity Tax is a temporary tax complementary to the Net Wealth Tax. Provided that the conventions to avoid double taxation allow Spain to tax the assets located in Spain, non-Spanish tax residents will be taxable for their rights and assets located/exercised in Spain if their net wealth exceeds €3,000,000. The rates, allowances, and other detailed rules of this new tax are the same as the state Wealth Tax Law.

In order to avoid double taxation, the wealth tax liability will be offset from the solidarity tax liability.

Contact A Spanish Tax Expert #

Understanding how the Spanish tax system works can be complicated, especially if Spanish is not your primary language. My firm specializes in tax-related legal services for individuals and enterprises, domestic and foreign, at the national and international levels. Please contact me for a further understanding of the Spanish tax system >> Maria Garcia at MG Abogados