Thursday, 16th August 2018
FINANCE & INVESTMENT Article
Advertisment

This Month's Magazine
Yearly Taxes for non residents in Spain

Yearly Taxes for non residents in Spain

Second part of a two part article by Susan Gracia offering advice from SG&G Abogados

Regardless of whether or not the real-estate property is leased out, income from said property shall be subject to IRNR. However, the tax treatment varies depending on whether or not the property is leased.

UNLEASED URBAN PROPERTY
Non-resident taxpayers who own urban property that is used by the owner but not for economic activities, that is transferred free of charge, or is unoccupied will be liable to pay IRNR. The tax is based on the estimated income of 1.1% of the property’s cadastral value (or 2% if the cadastral value has not be subject to revision or modification since 1 January 1994) and the applicable tax rate is 25%.

LEASED OR SUBLEASED PROPERTY
The full amount received from the lessee for all purposes shall be taken into account. Said amount shall include, where applicable, any assets leased with the property, but shall exclude VAT and no deductions of expenses shall be made.

If the property is only leased for part of the year, the income shall be calculated in accordance with the previous paragraph for the months it is leased. The income for the remaining months shall be calculated proportionally based on 1.1% (or where applicable, 2%) of the cadastral value.

The applicable tax rate is the general rate of 25%.

When premises are set up in Spain and used exclusively for the management of a property leasing activity, whose staff have a full-time employment contract, the activity carried out on said premises shall be understood to be a business run through a PE and shall be subject to tax as per the regulations indicated in the section on Income Obtained through a Permanent Establishment (PE).

PROPERTY WEALTH TAX
Although possibly not the proper legal terminology, it is a close translation of the Spanish name. This tax is levied on the capital assets, formed mainly by real estate when applied to non-residents. The base for calculating the Tax is the higher of either the assessed value (Town Hall value), the assessed value by the Tax Authority or the declared price shown on the Public Deed of Conveyance when the property was purchased. This real value is almost always the base for calculating the Property Wealth Tax.

The percentage to be applied is shown on the chart below.

Tax Base Rate - up to Euros

Tax Payable - Euros

Band Rate to - up to Euros

Marginal Rate %

0,00

0,00

167.129,45

0,2

167.129,45

334,26

167.123,43

0,3

334.252,88

835,63

334.246,87

0,5

668.499,75

2.506,86

668.499,76

0,9

1.336.999,51

8.523,36

1.336.999,50

1,3

2.673.999,01

25.904,35

2.673.999,02

1,7

5.347.998,03

71.362,33

5.347.998,03

2.1

10.695.996,06

183.670,29

upwards

2,5

Residents for tax purposes are affected differently with regards to the tax. They are required to declare their worldwide assets. However, residents enjoy a reduction of 108.182,18 euros on the tax base as well as deductions for debts against a business, mortgage loans on properties and the corresponding tax paid in their own country, as the case may be.


Advertisment

INCOME FROM DIVIDENDS AND INTEREST
Non-residents of Spain who obtain dividends or interest paid by a resident individual or public or private body corporate in Spain shall be subject to IRNR in Spain. When an agreement is applicable, the relevant tax rate shall be lower than the general rate. Furthermore, interest received by residents of an EU Member State shall be exempt from tax, provided said interest is not obtained through a tax haven.

Interest deriving from investments in public debt (except when obtained through a tax haven) and yields of non-residents’ bank accounts shall likewise be exempt from tax.

TAX BASE
The tax base is the full amount of said dividends or interest.

TAX RATE
In general the rate of 15% shall be applicable as from 1 January 2003. For residents of a country with which an agreement exists, the tax rate shall be the rate established in said agreement.

PENSIONS
When residents abroad receive a pension paid by a Spanish resident, the full amount of the pension shall be subject to Spanish tax.

ANNUAL REAL ESTATE TAX
This annual tax is handled by the Town Halls, which rules over the extension of the municipality. This tax varies from one municipality to another. Its Spanish name is I.B.I, and will be determined by location, size, nature of the land (urban or rustic nature) and the applicable percentages which national laws leave to the discretion of the Town Halls.
The base on which the tax percentage is applied is called the valor catastral, which is the assessed value of the property by the local authorities. This amount seldom comes in round figures and it is the result of a number of calculations performed by the relevant authorities.



Add Your Comments:
Other related businesses