Do you own property in Spain but reside in another country for tax purposes?
Then it is important for you to know the tax obligations you have as a property owner in this country. Non-residents are subject to a series of taxes that apply to the property, whether they use it for personal use or rent it out.
Below is a brief description of the taxes that a non-resident property owner must pay in Spain for owning a property:
Non-Resident Income Tax (IRNR)
Non-Resident Income Tax (IRNR) is a tax that non-residents who earn income in Spain must pay. This tax applies to income from economic activities carried out in Spain, such as property rental or sale. Depending on the use you give to the property, you will be required to file different declarations.
If you rent out your property, you must file quarterly declarations. Depending on where your tax residence is, the applicable tax rate will be 19% or 24%.
- If you are a tax resident in the EU, Norway, or Iceland, the tax to be paid will be the result of applying a 19% tax rate to the difference between income and expenses.
- If you are a tax resident outside the EU, the tax to be paid will be 24% of the income.
If you use the property for personal use and do not rent it out, you will have to file an annual declaration. The applicable tax rate is 19% for residents of another European country and citizens of Norway or Iceland, and 24% for other citizens. The amount of the annual declaration will be the result of multiplying the cadastral value of the property by 1.1% or 2% (depending on whether the cadastral value has been revised in the previous 10 years) and applying the tax rate mentioned above.
If you decide to use the property for personal use and for rent, you will have to file both declarations.
Wealth Tax (IP)
Wealth Tax (IP) is a tax that is applied to a person’s net worth. This tax applies to non-residents who own assets in Spain worth more than 700,000 euros. The wealth tax rate varies depending on the Autonomous Community where the assets are located, but generally ranges from 0.2% to 2.5%. In some Autonomous Communities such as Madrid and Andalusia, this tax has been eliminated.
Property Tax (IBI)
Property Tax, or “Impuesto sobre Bienes Inmuebles” (IBI), is a tax applied in Spain to the ownership of real estate, such as homes, commercial premises, land, and buildings. It is a municipal tax that taxes the ownership of the property and is used to finance local public services, such as garbage collection, park and garden maintenance, street cleaning, among others. The calculation of the IBI is based on the cadastral value of the real estate, which is a value established by the Tax Administration and is periodically updated. The tax rate varies depending on the municipality and is applied to the cadastral value of the property. In general, the IBI is paid annually, and the deadline for payment may vary depending on the municipality. It is also important to mention that there are some exemptions or discounts for certain cases, such as properties of cultural interest or owned by public organizations, among others.
Garbage collection fee
The garbage collection feeis a local tax applied in Spain to cover the expenses of the collection, transportation, and treatment of urban solid waste in a municipality. This fee is generally included in the Property Tax (IBI) receipt and is paid annually. The amount of the garbage collection fee varies depending on the municipality, and is usually based on factors such as the size of the home or business, or the number of registered persons.