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Non-Resident Taxation Manual (July 2024)

Return on real estate property

Internal regulations

Regulations: Article 13.1.g) Law IRNR

According to internal regulations, income obtained in Spanish territory is considered to be income derived, directly or indirectly, from real estate located in Spanish territory or from rights relating to such property.

Agreement

The Conventions signed by Spain grant the power to tax income from real estate to the State where the property is located. In accordance with the Agreements, earnings from property may be subject to tax in the Statement of Financial Condition of the same, regardless of whether the earnings arise from the use or enjoyment of the real property or any other type of exploitation of the same. Therefore, earnings from property situated in Spain may be taxed in accordance with Spanish law.

Taxation

Regulations: Articles 24, 25 and 26 of the IRNR Law

Income obtained without the mediation of EP must be taxed separately for each total or partial accrual of the income subject to tax.

As a general rule, the taxable base will consist of the full amount, that is, without deducting any expenses.

In the case of leased properties, the full amount received from the tenant for all purposes must be computed as income, including, where 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, you must determine the yield as in the previous paragraph, for the months that the lease lasted, and, for the remaining months, you will find the proportional part of the imputed income (1.1% or, where appropriate, 2% of the cadastral value).

However, in the case of taxpayers resident in another Member State of the European Union or in a State of the European Economic Area in which there is an effective exchange of information (with effect from July 11, 2021, regulatory references made to States with which there is an effective exchange of tax information are understood to be made to States with which there are regulations on mutual assistance in matters of exchange of tax information in the terms provided for in Law 58/2003, of December 17, General Tax Law, which is applicable. See Annex V ), the following expenses may be deducted to determine the tax base:

  1. In the case of individuals, the expenses provided for in the Personal Income Tax Law, provided that the taxpayer proves that they are directly related to the income obtained in Spain and that they have a direct and inseparable economic link with the activity carried out in Spain.

  2. In the case of entities, deductible expenses in accordance with the provisions of the Corporate Tax Law, provided that the taxpayer proves that they are directly related to the income obtained in Spain and that they have a direct and inseparable economic link with the activity carried out in Spain.

The type of tax applicable is the current general one:

  • Residents EU , Iceland, Norway and, since 07-11-2021, Liechtenstein: 19%
  • Rest of taxpayers: 24%

Deductions: Only the following may be deducted from the tax rate:

  • Deductions for donations, under the terms provided for in the Income Law and in the Law on the tax regime of non-profit entities and tax incentives for patronage.

  • The withholdings that have been made on income.

In the event that property is rented and at least one person employed with a full-time employment contract is available in Spain for the purpose of organising the activity, the activity carried out may be deemed to be of a business nature through a permanent establishment and must be taxed in accordance with the rules provided for in the section on “Income from economic activities obtained through a permanent establishment”.