Individuals who are not resident in Spain are generally required to pay tax on their worldwide income in their country of tax residence and are only subject to taxation in Spain in respect of income and assets located in Spain. Real estate ownership is particularly relevant in this context, as it may give rise to both income tax and property tax obligations.

To determine whether, as a result of your stay in Spain, you are considered a tax resident ("Residente") or a non-resident ("No Residente"), please refer to our article: "Differences: Residence, N.I.E. and Residencia".

In order to carry out administrative procedures with the relevant tax authorities, you will in any event require a Spanish tax identification number (NIF). If you already have an N.I.E., this also serves as your tax identification number. If you do not yet have an N.I.E., you can also apply for a tax identification number (NIF) directly from the Spanish Tax Agency.

1. Property Tax (IBI)

Property Tax (IBI) is levied directly by the municipalities (Ayuntamientos) and generally applies to all types of real estate. If you own several properties or real estate located in different municipalities, the tax must be paid separately in each municipality.

As a general rule, the tax is calculated on the basis of the cadastral value, applying the corresponding tax rate established by the local authority. It is normally possible to register a bank account with the local authority so that the tax can be collected automatically by direct debit. If payment by direct debit is not arranged, the specific payment deadline established by the relevant municipality must be observed, which usually falls between September and November.

2. Non-Resident Income Tax (IRNR)

A) Income from Real Estate Held for Personal Use

This tax is generally calculated on the basis of between one and two percent of the cadastral value. In this case, ownership of the property gives rise to imputed income that is subject to taxation even if you use the property yourself.

B) Income from the Rental of Real Estate

It should be noted that property owners who are tax resident in Germany may deduct certain expenses for tax purposes. The same types of expenses that apply to individuals resident in Spain may be deductible, with the corresponding provisions of the Spanish Personal Income Tax Act (IRPF) applying in this respect. The tax is payable quarterly, meaning that the corresponding tax return must be filed within the first 20 days of January, April, June and October.

Further information on taxation for non-residents in connection with the rental or personal use of Spanish real estate can be found in our article: [Modelo 210: Taxation of Spanish Real Estate Owned by Non-Residents].

C) Income from the Sale of Real Estate

When real estate is sold, the difference between the acquisition value and the sale value is generally subject to taxation, as this will usually constitute a capital gain. Various tax exemptions and reliefs may be available, for example where the proceeds are directly reinvested in another property that becomes the taxpayer's main residence, for persons over the age of 65, and in other specific circumstances. It should also be noted that a deemed capital gain may be subject to taxation in the case of a gift. Therefore, if you gift a property, not only may the recipient be required to pay gift tax, but you may also be required to pay tax on the increase in value of the property as a capital gain.

 

3. Wealth Tax

Even if you are tax resident abroad, you may be liable to Spanish Wealth Tax or Solidarity Tax if your net assets located in Spain exceed the applicable tax-free allowances of the relevant Autonomous Community (Comunidad Autónoma), or if your gross assets in Spain exceed €2,000,000. Further information on the applicable allowances and tax rates can be found in our article: [Wealth Tax and Solidarity Tax in Spain].

4. Inheritance Tax

Inheritance Tax falls within the competence of the Comunidades Autónomas (Autonomous Communities), which apply tax allowances and reductions that can vary considerably from one region to another. For example, due to a 99.9% tax reduction in Madrid, the amount of Inheritance Tax payable may be minimal, whereas in Andalusia the full state tax rate may apply. The applicable tax rules generally depend on factors such as whether the heir resides in Spain, whether the deceased was tax resident in Spain and, in the case of real estate, where the property is located. Particularly in matters involving inheritance and wills, it is advisable to obtain information on potential tax advantages at an early stage and, where appropriate, to develop an inheritance tax planning strategy. Further information on Inheritance Tax and wills can be found in our section "Inheritance and Wills" and in the article: [Where Is a Spanish Inheritance Taxable?].

Our law firm will be pleased to assist you in analysing your individual circumstances, handling the necessary administrative procedures on your behalf and preparing and filing the relevant tax returns. If you are interested or have specific questions regarding this matter, please feel free to contact us by email or telephone.

Author: 

Christoph Sander
Lawyer and Tax Advisor
CEO, Partner, Director
info@sspartners.es
Tel: (+34) 951 12 13 06
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