In Spain, many non-residents own properties, whether for investment, leisure, or other reasons. Although these individuals do not permanently reside in the country, they are obliged to pay taxes for the properties they own. How does this process work? Should the Personal Income Tax (IRPF) be filed for the ownership of these properties? Here, we explain it to you.
Non-Resident Properties: An Overview of Non-Rented Properties
First and foremost, it is important to mention that non-resident property owners are taxed under the Non-Resident Income Tax (IRNR), not the IRPF. If the owner is an individual and the property is neither rented out nor used for economic activities, the rules for imputing real estate income provided in the IRPF apply. This means that they must declare a presumed income of 2% of the cadastral value of the property, or 1.1% when the cadastral value has been revised or modified in the same tax period or in the previous ten years.
This imputation is calculated based on the number of actual days the property has been at the owner’s disposal. Therefore, the longer the property is available, the higher the tax to be paid.
The applicable tax rate depends on the owner’s country of residence. If they reside in the European Union (EU), Iceland, or Norway, they must pay 19% on the presumed income. However, if they reside in another country, the applicable rate is 24%.
Rented Properties
In the case of rented properties, non-residents must also pay taxes under the IRNR, not the IRPF. The terms are slightly different in this case:
- If the owner resides in another EU country, Iceland, or Norway, they can deduct the corresponding expenses according to the rules of the IRPF or the Corporate Income Tax (depending on whether they are an individual or legal entity). However, the Spanish Tax Agency does not allow the 60% reduction provided for in the IRPF for rental income, although the EU has initiated proceedings against Spain, considering this restriction discriminatory.
- If the owner does not reside in the mentioned territories, they cannot deduct any expenses.
Similar to non-rented properties, the tax rate is 19% for residents of the EU, Iceland, or Norway, and 24% in other cases.
Frequently Asked Questions
What is the IRNR? The IRNR is the Non-Resident Income Tax. It applies to individuals and entities that do not reside in Spain but obtain income in the country.
How is the IRNR calculated?
The IRNR is calculated as a percentage of the income obtained in Spain by the non-resident. The percentage varies depending on the owner’s country of residence and whether the property is rented or not.
Can non-residents deduct expenses for their rented properties?
If the non-resident owner resides in a European Union country, Iceland, or Norway, they can deduct the corresponding expenses according to the rules of the IRPF or the Corporate Income Tax. However, the Spanish Tax Agency does not allow the 60% reduction for rental income.
How does the cadastral value affect property taxes?
The cadastral value of a property is the value assigned to it for tax purposes. For non-residents, this value is used as the basis for calculating presumed income, which is the income that is assumed to be generated by the property. This presumed income is subject to taxation under the IRNR.
How is presumed income declared?
Presumed income is declared by filing the model 210 with the Tax Agency. This model must be filed during the first 20 days of April, July, October, and January, as applicable to the tax period.
Conclusion Owning a property in Spain as a non-resident involves a series of tax obligations. Whether the property is rented or not, non-residents must comply with the payment of the IRNR. If you have any doubts about managing these taxes or need advice on buying or selling a property in Catalonia, do not hesitate to contact us. At Habitat Catalunya, we are experts in the real estate market and are ready to assist you.
Remember, it is essential to be aware of your tax obligations to avoid potential penalties. Stay informed and make the most of your real estate investments in Spain.
Important Note The information provided in this article is for informational purposes only and should not be considered as legal or tax advice. We recommend consulting a professional tax advisor for personalized advice regarding your specific situation.
Juan Micó, Director of iberohomes.com, API Associate No. 132
