Citizens who are not resident in Spain must comply with various tax obligations that vary depending on the type of income they generate in the country. These non-resident taxes include Non-Resident Income Tax, Wealth Tax, and other municipal taxes, which we will now discuss.
At Taxmind, part of JDV Asesores, as a leading international tax consultancy in Barcelona, we help non-resident taxpayers to comply with these obligations so that they can take advantage of deductions and benefits, where applicable.
We explore this topic in depth, given that it is necessary to consider the specific tax characteristics that may apply in regions such as Barcelona and Catalonia.
Definition of non-resident for tax purposes in Spain
Who is considered a non-resident for tax purposes in Spain? Specifically, those individuals who do not meet the criteria established by the country’s tax legislation to be classified as tax residents.
Fundamentally, this status is based on several factors, such as the length of stay in Spanish territory and the location of economic interests.
Going into more specific details, we should note that anyone who does not remain in Spain for more than 183 days during a calendar year is designated as a non-resident. In this context, temporary absences may be taken into account, unless residence in another country can be reliably proven.
Location of economic interests
Another aspect to consider is the location of the centre of economic interests. If a person’s most relevant economic activities take place in another country, this can significantly influence their tax status. Examples:
- If the individual’s family resides abroad.
- When the person has property or investments in other countries.
It should be noted that the concept of legal residence is different from that of tax residence. While the former refers to official authorisation to reside in a country, the latter determines the tax obligations that an individual may have on their global income.
Anyone considering investing or working in Spain should understand how their situation is classified with regard to this tax issue.
Non-resident taxes: Tax obligations
Citizens who consider themselves non-residents in Barcelona and Spain have a series of tax obligations that they must comply with if they want to avoid penalties and legal problems. Let’s take a look at them:
Firstly, it is necessary to file tax returns related to income obtained within Spanish territory.
- Submission of Non-Resident Income Tax (IRNR), which must be paid by those who generate income in Spain, such as rental income or profits from economic activities.
- Declare Wealth Tax if you own assets and rights in the country that exceed the minimum exemptions established in current regulations.
- Pay Property Tax (IBI), which is applied annually to all property owners.
- Pay Municipal Capital Gains Tax, which corresponds to the increase in value of the land at the time of transfer of an urban property.
At Taxmind – JDV Asesores, we frequently observe that many non-resident taxpayers fail to keep proper records of their income and expenses. What happens then? They do not file their tax returns correctly, exposing themselves to severe penalties.
This situation can be avoided by working with an international tax consultancy with experience in taxes such as non-resident wealth tax, such as Taxmind-JDV Asesores, for example. We help non-resident taxpayers better understand their tax situation and ensure compliance with tax regulations in our country. In addition, they can benefit from specific deductions, if applicable.
Non-resident income tax (IRNR)
This tax for non-residents applies to income generated by individuals who are not tax residents in Spain but who earn income in the country. It is mandatory to ensure that income earned in Spanish territory is correctly taxed.
The types of income subject to this tax include:
- Income from work.
- Income from renting property located in Spain.
- Capital gains generated by the sale of property or rights in the country.
- Dividends, interest and other income derived from investments in Spanish entities.
The general IRNR tax rate is 24%, although residents of the European Union, Norway and Iceland can benefit from a reduced rate of 19%. This represents a significant advantage for those coming from these countries, as it allows them to have a lighter tax burden.
The tax base is established by considering the income earned during the fiscal year and the allowable deductions. It should be noted that the timing of the tax liability varies depending on the type of income. To comply with regulations, Form 210 must be filed, which is used to settle the tax corresponding to the income generated.
Wealth tax for non-residents
This tax for non-residents applies to the net wealth of non-residents who own assets and rights located in Spain. This significant tax is linked to the valuation of the wealth at the time of the declaration.
To establish the obligation to declare and pay this tax, the value of the net assets is considered. This includes, among other things, real estate, shares and rights in entities. However, each autonomous community may establish minimum exemptions that influence the need to file a tax return.
- The tax base consists of all assets and rights located in Spanish territory.
- The tax rate may vary depending on the autonomous community. In this case, Catalonia has its own tax regulations, which may differ from the rest of Spain.
- It is necessary to keep track of the value of assets, as correct valuation influences taxation.
The obligation to declare arises whenever the minimum exemption established in each region is exceeded. For non-residents, special attention must be paid to filing deadlines and the form of settlement, which may differ depending on location.
On the other hand, in the specific case of Catalonia, it is important to mention that there are allowances and deductions that only apply to residents, which could influence the tax burden of non-residents who own property in this region. At Taxmind – JDV Asesores, we can determine in each specific case whether allowances can be applied or not.
Property tax (IBI) and municipal capital gains tax
Property tax (IBI) is a local tax that must be paid by any owner of property located in Spain. This tax is levied on property ownership, regardless of whether the owner is a resident or not.
It is calculated based on the cadastral value of the property, which is determined by the local administration. In Barcelona, IBI rates may vary, so it is important to be aware of the tax rates applicable in each municipality.
Municipal capital gains tax
This refers to a tax that is triggered when a property is transferred. This tax is calculated based on the increase in the value of the land from the time of purchase to the time of sale. Non-residents should bear this in mind if they plan to sell a property in Spain, as it can have a significant impact on the profitability of the transaction.
- The IBI is paid annually and must be settled by the owner.
- The payment deadline for the IBI may vary depending on the municipality, and it is advisable to consult local regulations.
- The Municipal Capital Gains Tax must be paid at the time of sale of the property.
- The obligation to file and pay these taxes falls on the owner of the property, regardless of their tax status.
For non-residents of Barcelona, the same regulations apply as in the rest of Spain, although some local councils may establish specific variations in the IBI rate or criteria for calculating capital gains tax.
Other relevant taxes for non-residents in Spain
What non-resident taxes are we talking about? Be aware of other tax obligations that must be met for this type of taxpayer.
Income subject to taxation
Income from leases, interest and dividends received in Spain is subject to local taxation. As is to be expected (as is the case for tax residents in Spain), non-residents must declare this income in their corresponding tax return to avoid problems with the Tax Agency.
In the case of Catalonia, there are no specific additional taxes for non-residents that differ from the rest of Spain. However, it would be wise to keep a close eye on possible regulatory changes and tax updates that may affect taxation. Once again, we recommend working with a specialised tax advisor to clarify these issues and ensure proper compliance with tax obligations.
Double taxation agreements and their impact on non-resident taxation
We already know that double taxation agreements are agreements between countries that seek to prevent the same income from being taxed by both tax systems. In the case of Spain, there are numerous agreements signed with different countries that allow non-residents to benefit from more favourable taxation, thus avoiding double taxation of non-residents.
In fact, thanks to these double taxation agreements, non-resident citizens benefit, for example, from:
- Reduction of tax rates on income earned in Spain.
- Avoidance of double taxation on the same income.
- Facilitation of access to specifically agreed tax deductions and exemptions.
It must be said that the correct application of these agreements is often complex and requires detailed analysis. At Taxind – JDV Asesores, we have a thorough understanding of international tax legislation, which means we can ensure our clients take advantage of all the benefits offered by double taxation agreements.
Tax particularities for non-residents in Barcelona and Catalonia
One of the most notable features in Barcelona and Catalonia is the application of wealth tax, which affects assets and rights located in the region. This tax has thresholds and brackets that may vary depending on the taxpayer’s net worth.
Non-residents who own property in Catalonia must take into account specific criteria for property tax (IBI).
Tax rates and the tax base may differ in each municipality. Barcelona, as the capital of Catalonia, has its own tax regime for IBI, which could affect the amount payable.
The Plusvalía Municipal, which taxes the increase in value of urban land, also has differences in its regulation in Catalonia, depending on each municipality.
Census procedures and administrative obligations for non-residents
For non-resident taxes levied in Spain, certain administrative obligations must be fulfilled to ensure correct taxation. One of the main procedures is registration in the taxpaying census.
This register allows the identification of individuals who are subject to Spanish tax regulations, even if they do not reside permanently in the country.
The procedures that non-residents must complete include:
- Obtaining a Foreign Identification Number (NIE), which is necessary for any procedures related to tax obligations.
- Registration in the Land Registry, if you own property in Spain, to formalise ownership.
- Submission of Form 210 to settle Non-Resident Income Tax, which must be done within the deadlines established by the Tax Agency.
- Annual Wealth Tax return, if the exemption threshold, which varies according to the autonomous community, is exceeded.
The importance of completing these procedures correctly lies in avoiding penalties. The Spanish tax authorities may impose penalties if obligations are not met, resulting in additional costs and legal complications.
In Catalonia, and more specifically in Barcelona, some procedures may vary depending on regional regulations, so it is advisable to obtain adequate information and ensure that all the established administrative requirements are met.
Conclusions
We are already familiar with the taxes that non-residents who are not established for tax purposes in Spain are required to pay annually and their general implications. It is not easy, especially in a language you do not know, to correctly comply with these obligations, such as Non-Resident Income Tax or Wealth Tax.
At Taxmind – JDV Asesores, we advise and assist our clients in this area as a leading international consultancy for expatriates and foreigners in Barcelona and the rest of Spain. Contact us or leave us a comment and we will respond as soon as possible.
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