Your Spanish Tax Obligations as a Non-Resident Property Owner
If you’re thinking of investing in property on the Costa del Sol, whether it’s to be used as a Mediterranean holiday retreat, or a rental investment, it’s important to understand the tax responsibilities linked to non-resident homeownership in Spain.
Here in this guide, we’ll be taking you through the different types of non-resident taxes you can expect to pay in Spain, as well as some valuable insights to help guide you through the process!
Non-Resident Imputed Income Tax
If you are a non-resident property owner who doesn’t rent out your Spanish property, you’ll need to pay the Non-Resident Imputed Income Tax (Impuesto sobre la Renta de No Residentes – IRNR). This tax is applicable even if the property is solely for personal use or remains empty throughout the year. To submit this tax, you’ll use the Spanish Tax Form Modelo 210, which needs to be sent to the Agencia Tributaria (the national tax authority in Spain).
Calculating your annual tax return involves the following formula: Cadastral value x Imputed percentage x Tax rate.
To find the cadastral value of your property, take a look at your local tax receipt (IBI or SUMA, depending on the area), get in touch with your local town hall, or visit www.sedecatastro.gob.es. You’ll need a valid Spanish digital certificate or your NIE number and the ‘numero de soporte’ on hand. Cadastral values typically range from €30,000 to €200,000, and the imputed percentage varies between 1.1% and 2%, depending on the property’s municipality.
For residents of the EU, Iceland, Norway, and Liechtenstein, the tax rate is 19%, while non-EU residents are subject to a 24% rate. Don’t forget that if you jointly own a property in Spain, each owner must file a Modelo 210 individually, with the imputed tax being split according to shares in the property.
Rental Income Tax
If you decide to rent out your Spanish property as a non-resident, you’ll be required to pay taxes on both the property itself and the rental income generated. Quarterly tax returns must be submitted within the first 20 days of April, July, October, and January for the previous quarter.
The tax calculation depends on how you use the property during the quarter:
Rented every day: Rental income generated minus deductible expenses* x Tax rate.
Rental/Private Use or Empty: Imputed income for private/empty days + rental income (income generated for rented days minus deductible expenses*) x Tax rate.
*Note: Only EU, Iceland, Norway, and Liechtenstein residents can deduct related expenses, which may include taxes, rates, local surcharges (e.g., Property Tax Bill – IBI, Rubbish Collection Bill – Basura), personal third-party services (e.g., administration, surveillance, porter services), costs for drawing up a lease, legal defence costs, insurance premiums, and amounts for services or supplies (e.g., electric, gas, water, community fees, etc.).
The number of rental days determines the proportion of expenses that can be deducted. If multiple individuals jointly own a property, each must file a Modelo 210, and the tax will be divided based on their respective shares in the property.
Capital Gains Tax
Capital Gains Tax (Impuesto sobre las Ganancias Patrimoniales) applies to profits earned from selling assets, such as property or land. Non-resident individuals or companies selling assets within Spain and earning capital gains from the transactions are subject to this tax. Declaration of this tax is also done through the Modelo 210 form.
Calculating Capital Gains involves deducting the sales price from the purchase price to determine the profit. However, allowable expenses that are directly related to the acquisition and sale of the property or land, such as legal fees, taxes, and improvement costs, can be deducted from the taxable capital gain, thereby reducing the overall amount of tax.
For non-resident individuals in Spain, capital gains tax is a flat rate of 19% for EU and European Economic Area (EEA) residents and non-EU/EEA residents. However, it’s important to keep yourself up to date on tax rate changes, as they can be subject to change. Payment for Capital Gains Tax in Spain must be made within 4 months from the sale date.
Investing in property on the Costa del Sol
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The decision to embark on your journey to home ownership in Spain is an exciting life event, and having a reliable partner by your side can make all the difference.
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With a vast selection of properties on the Costa del Sol, everywhere from Málaga to Sotogrande, make Idiliq Estates your first port of call! Get in touch with our team today and start your search for your dream property in the sun.