Individuals who are Non-resident taxpayers in Spain and own a property have to pay the following taxes to the Spanish IRS (called AEAT or Hacienda):
1. Unrented property taxation
If the property is at their disposal, meaning the property is not leased to third parties, the Non-resident will pay an amount equal to the result of applying the 24% tax rate to the imputed taxable basis. This imputed taxable basis is calculated applying 1.1% of the cadastral value of the property (or 2% if the cadastral value is not revised).
If the taxpayer has not been the owner for the whole year -or if the property has been rented part of the year – this imputed income will be reduced in proportion to the number of days the property has actually been at the disposal of the owner.
If there is no cadastral value of the property, 50% of the higher of the following two values is taken into consideration for the calculation of the taxable basis: the acquisition value or the value reviewed by the tax authorities.
This imputation is mandatory for urban properties and for rustic constructions not used for economic exploitation. It does not apply to land, plots or buildings under construction.
The deadline to declare and pay for imputation when the property is not leased is the whole calendar year following the fiscal year to be declared. That is, for 2022 imputations the tax form must be filed before December 31, 2023, and so on.
2. Taxation of real property in Spain for leased
Non-resident individuals who have rented real estate in Spain are enforced to pay an amount equal to 24% of the gross rental income received for the lessor.
Spanish tax law does not allow non-EU residents to deduct the expenses incurred during the rental period. On the other hand, this deduction of expenses is allowed if the non-residents are living in another EU country.
Currently is being discussed in Courts that this discrimination infringes European Union Law, as it goes against the European principle of free movement of capital. Non-residents who so wish can try to claim the deduction of expenses, and even the 60% reduction of the net yield allowed for tax residents. The most advisable is to pay, and then appeal to avoid the statute of limitations on the refund of the excess paid.
The deadline for declaring and paying the income from properties that are leased is quarterly.
We remind that if the property has been rented for only part of the year, two types of income need to be declared: the income derived from the lease, and the imputed income for use and enjoyment of the owner.
3. Ownership of the property
The ownership of the property determines the following taxes must also be paid:
– Property tax: In Spanish this tax is called Impuesto de Bienes Inmuebles, but everyone call it with the acronym IBI. The IBI is an annual tax, and the City Hall is in charge of issuing its receipt. The amount to be pay depends on the characteristics and location of the property. It is convenient to have the payment of this receipt domiciled in the bank to avoid penalties.
– Wealth tax: In case the value of the property exceeds the thresholds of exemption of this tax that is established for each region, the non-resident could be enforced to declare for Wealth Tax in Spain for the value of the property they have in Spain on December 31. If the region has not established its own exemption threshold, the established by the Spanish government of €700,000 applies. Recently tax authorities have indicated this tax is also payable if the non-resident has interposed ownership of the property through a foreign business entity.
4. Transfer of real estate
In the transfer of real estate there are taxes for both the buyer and the seller.
The buyer -whether she is a tax resident in Span or not- has to pay a tax on the acquisition. This tax will be the Value Added Tax (VAT) in case the seller is a developer, or the Transfer Tax established by each region, in case the seller is a private individual or a second delivery of that property.
On the other hand, if the seller of the property is a non-resident taxpayer in Spain, the taxes to which she will be involved for the sale will be: (i) the Non-Resident Tax, for the capital gain or loss obtained from the sale of the property; and (ii) the Municipal capital Gain Tax, depending on the gain or time of ownership in the non-resident’s estate. Both taxes have a series of particularities since the seller is a non-resident taxpayer in Spain. That is why specialized advice is required to confirm that the taxation is correct.
At Spanish Lawyer NYC we will be pleased to assist you with the submission of your tax obligations for the ownership of properties in Spain.