New Rules for Non-Resident Income Tax

  1. OBLIGATION TO PAY INCOME TAX - A person who does not have fiscal residence in Spain but owns urban real estate in this country is obliged to pay non-resident income tax.
  2. TAX IDENTIFICATION NUMBER (NIF) - In Spain everybody is assigned a Tax Identification Number (Número de Identficación Fiscal, NIF), which must appear on all tax returns and in all communications with the Tax Authorities. For non Spaniards the NIF is the Foreign National Identity Number (Número personal de Identificación de Extranjeros, NIE), which is obtained from the Police Department.
  3. NON-RESIDENT TAX PAYER - When the property belongs to a married couple or to more than one person, each person is an independent taxpayer and must fill an individual tax return.
  4. INCOME FROM REAL ESTATE ASSETS ACCORDING TO THE INTERNATIONAL AGREEMENTS - All the Double Taxation Agreements subscribed by Spain follow the criteria of the OECD Agreement Model, in the sense that income derived from real estate assets may be taxed in the country in which said assets are located. This criteria is applied however the income is obtained e.g. from real estate, rental, use of housing etc.
  5. GROUPS OF TAX PAYERS: THERE ARE TWO GROUPS OF NON-RESIDENT INCOME TAX PAYERS -
    • A - Non-residents who obtain income in Spain: earnings from real estate subject of economic activities, Capital gains, pensions. Always where earnings are made by an individual with condition of Non-resident, which is considered to have been obtained or produced in Spain, this person will have an obligation to present a tax return declaration. We present a couple of most common examples –
      • Income from rented property (earnings from real estate subject of economic activities) The amount to declare is the entire amount received from the tenant without deducting any costs. This amount is understood to have become liable for taxation at the moment that it is demandable by the landlord or on the date that it is collected, if this is earlier. Tax is charged separately on each amount accumulated, and therefore, a tax return must be made for each amount accumulated. Nevertheless, joint tax returns may be made, including the amounts of one or more taxpayers for a quarter. In the event that the joint tax return contains amounts from different taxpayers, the declaration must be made by a common representative, someone jointly responsible for the tax liability (payer, trustee or manager) of all the taxpayers, or by a withholder (in the case of rental of premises to professionals or companies).
      Tax Return declarations: In accordance with the above, there are two possibilities:
      • Ordinary Return – the period is one month from the date of accrual of the income.
      • Joint Return – for a quarter, within the first 20 days of the months January, April, July and October, for the quarter immediately prior to this month. Tax Rate is always 24% Applicable deductions: The amount of the allowances and deductions specified in articles 30 to 44 of the rewritten text of the Corporate Tax Law may be applied to the total tax amount under the same conditions as the corporate taxpayers. If you are renting out your property (you established an economic activity, not necessarily a company), you can deduct the expenses made on maintaining the services like water, electricity etc. The amount of tax withheld at source, payments on account and partial payments can also be applied. When the amount withheld from a non-resident is greater than the tax due on the income they earned they can request a refund of the excess retention.
      • Capital Gains When they are derived from securities issued by resident individuals or organisations. When they are derived from other real estate assets located in Spanish territory. When those are derived from real estate located in Spain. When assets located in Spanish territory or rights that must be fulfilled or exercised on Spanish territory are incorporated into the taxpayers assets, even when not derived from a previous transfer, such as net gains from gambling activities.
      • Pensions and other similar benefits All individuals who obtain a pension which derives from employment in Spain or the pension in question is paid by a resident person or organisation or by a permanent situated on Spanish territory (payment criterion), will have obligation to present the tax return in Spain.
    • B. - Non-resident owner of a property for own use income tax: income from urban real estate. For property for own use the estimated yield for this tax is established as follows:
      • In general 2% of the building’s assessed value (Valor Catastral) which appears on Property Tax (Impuesto sobre Bienes Inmuebles, IBI) receipt.
      • In the case of properties for which the assessed value has been revised or modified after 1st January 1994, the rate will be 1.1%
      This yield is calculated once per year, on 31st December.
      • Tax rate 24%
      • The tax sum, therefore, will be the result of applying the corresponding rate to the estimated income. Applicable deductions: Deductions for donatives or Tax withholdings that have been applied on the taxpayer’s income in Spain.
  6. NET GAINS DERIVED FROM THE SALE OF BUILDINGS - Capital gains obtained as the result of the sale of a building constitutes taxable income. This income shall be deemed accrued when the property is transferred. In general, net gains shall be calculated based on the difference between the cost price and transfer value of the property. The cost price consists of the real cost price of the property involved plus all costs and taxes arising excluding interest paid by the transferor. If the building been transferred had been rented, the value determined should be reduced by the amount of the depreciation corresponding to the rental period. This depreciation will also be updated in accordance with the year to which it corresponds. The transfer value is the real amount for which the disposal was made, reduced by the amount of any costs or taxes related to the transfer paid by the seller. As a result, the net gains on which taxation shall be paid consists of the difference between the transfer value and the cost price, determined as described below. The person acquiring the building, whether resident or non-resident, shall be obliged to withhold 3% of the agreed payment and deposit it with the Public Treasury. For the seller, this withholding acts as a payment on account of net gains tax arising from the transaction.
  7. PROPERTY TAX - This is a tax charged by local Councils and paid by property owners. In Comunidad Valenciana this tax is called SUMA. All properties within each municipality are included on a census are assigned a value (Assessed Value) The amount of tax to be paid is calculated by applying the tax rate set by the Council to this Assessed Value. A bill is sent out for payment of this tax every year for every property on the census. Usually, Councils permit the possibility of payment of the tax by direct debit from a bank account, which facilitates payment within the time period set and this avoids any possible surcharges. The payment deadline depends on the Council, although it is normally around the months of September, October or November each year.
Administrators / Administración de fincas / Administrateurs
TORREFINCAS
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