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    ARTICLE - Spain

    Non-Residents Owning Real Estate in Spain

    10 Mar

    Non-Residents Owning Real Estate in Spain - Introduction

    For non-resident individuals investing in Spanish real estate, understanding and complying with the specific tax obligations is crucial. Our Tax Natives can offer comprehensive guidance throughout the acquisition process and beyond, ensuring clients meet their tax commitments effectively.

    Tax Implications for Non-Rented Properties

    Non-resident owners of properties not put up for rent are subject to the Spanish Non-Resident Income Tax Law. They face taxation on a deemed income, calculated as 1.1% of the cadastral value in cities like Barcelona (2% in other areas without recent cadastral reviews). This approach does not permit deductions for any property-related expenses. The applicable tax rate is 19% for EU residents (including Iceland, Norway, and Liechtenstein) and 24% for those residing outside the EU. The first year's tax is calculated based on the period the property was owned.

    Tax Implications for Rented Properties

    When non-residents rent out their Spanish property, the income received is taxable under the same law. EU residents can deduct property-related expenses from their rental income, while non-EU residents cannot. The tax rate mirrors that for non-rented properties: 19% for EU residents and 24% for non-EU residents. Rental agreements with related parties must reflect market values, adhering to transfer pricing rules.

    Wealth Tax Considerations

    The Wealth Tax targets non-resident individuals owning assets within Spain, taxing the net value of such assets. Debt incurred for asset acquisition within Spain is deductible. A recent legal amendment extends this tax to non-listed companies owning significant Spanish real estate. Tax rates progress from 0.2% to 3.5%, with a 700,000 euros exemption threshold for non-residents. The applicability of Double Tax Treaties or Spanish exemptions should be analyzed.

    Real Estate Tax (IBI)

    The Real Estate Tax (IBI) applies to both rural and urban property ownership, based on the cadastral value set by local authorities, typically below market value. The tax rate varies by locality, with the owner as of January 1st each year responsible for payment. Automatic payment arrangements are available.

    Non-Residents Owning Real Estate in Spain - Conclusion

    Non-resident property ownership in Spain involves various tax obligations, from income tax on deemed or actual rental income to wealth and real estate taxes. Proper understanding and management of these obligations are essential to avoid penalties and ensure compliance.

    Final thoughts

    If you have any queries about this article and non-residents owning or buying real estate in Spain, the  get in touch. We have Tax Natives ready and waiting to assist you, or your client, through every phase of property investment, offering expert advice on tax compliance and planning.
    Real Estate

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