Non-resident taxation: Types of income from real estate in Spain.
Income derived from real estate located in Spain is subject to Non-Resident Income Tax.
If a property is owned by several individuals, each of them is an independent taxpayer who must file separate returns.
The incomes that taxpayers who own real estate can obtain are:
1-Imputed income from urban real estate for own use
Domestic regulation
In accordance with article 13.1.h) of the Non-Resident Income Tax Law (LIRNR), non-resident taxpayers who are individuals, owners of urban real estate located in Spanish territory, used for their own use or vacant, are subject to Non-Resident Income Tax for the imputed income corresponding to those properties.
Agreement
According to the Agreements to avoid double taxation, incomes obtained from real estate may be subject to taxation in the State where the properties are located, whether derived from direct use or enjoyment, leasing, or any other form of exploitation thereof.
Non-resident taxation
The taxable base corresponding to the imputed income from urban real estate located in Spanish territory shall be determined by computing as income the amount resulting from applying the percentage corresponding to the cadastral value of the property, 1.1% if the cadastral value is updated; or 2% in other properties.
Tax shall be levied on the aforementioned taxable base, without deducting any expenses.
The applicable tax rate is the current general rate:
- Residents of the EU, Iceland, Norway, and, since 11-07-2021, Liechtenstein: 19%
- Other taxpayers: 24%
2-Returns from leased properties
Domestic regulation
In accordance with article 13.1.g) of the LIRNR, income derived, directly or indirectly, from real estate located in Spanish territory or rights relating thereto are considered income obtained in Spanish territory.
Agreement
The Agreements signed by Spain attribute the power to tax incomes from real estate to the State where they are located. According to the Agreements, incomes from real estate may be subject to taxation in the State where they are located, whether derived from direct use or enjoyment, leasing, or any other form of exploitation thereof. Therefore, incomes derived from real estate located in Spain may be taxed in accordance with Spanish law.
Non-resident taxation
Incomes obtained must be taxed separately for each total or partial accrual of income subject to taxation.
In general, the taxable base shall consist of the gross amount, i.e., without deduction of any expenses.
In the case of leased properties, the full amount received from the tenant for all concepts shall be computed as income, including, if applicable, the amount corresponding to all assets transferred with the property and excluding Value Added Tax.
If the property is only leased for part of the year, the income shall be determined as in the previous paragraph, for the months the lease lasted, and for the remaining months, the proportional part of the imputed income shall be calculated (1.1% or, if applicable, 2% of the cadastral value).
The applicable tax rate is the current general rate:
- Residents of the EU, Iceland, Norway, and Liechtenstein: 19%
- Other taxpayers: 24%
3-Capital gains derived from transmission
Domestic regulation
In accordance with article 13.1.i) of the LIRNR, capital gains derived from real estate located in Spanish territory are considered income obtained in Spanish territory.
Agreement
According to the Agreements signed by Spain, gains derived from the sale of real estate located in Spanish territory may be subject to taxation in Spain.
Non-resident taxation
Incomes obtained without the intervention of a Permanent Establishment must be taxed separately for each total or partial accrual of income subject to taxation.
The taxable base corresponding to capital gains shall be determined, in general, for each alteration of assets, following the rules of Personal Income Tax (IRPF). Gains shall be calculated as the difference between the transmission and acquisition values.
The applicable tax rate is 19%.
Deductions: Only deductions for donations and the withholding tax practiced by the acquirer of the property may be deducted from the tax liability.
Withholding tax
The person acquiring the property, whether resident or not, is obliged to withhold and pay to the Public Treasury 3% of the agreed consideration. This withholding serves as an advance payment of the tax due on the gain derived from the transmission.
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