IRNR: What you need to know about Spain's non-resident tax
If you don't live in Spain but have some financial connection here such as owning a property, you are liable to pay non-resident tax. Here's everything you need to know about it, from what you're taxed on to how much.
Bureaucratic processes and taxes can be very confusing in Spain and you may not be aware that, even though you don't live in Spain, you may have to pay what's known as non-resident tax, depending on your situation.
Q: What is non-resident tax?
A: Non-resident tax in Spain is known as Impuesto sobre la Renta de no Residentes, or IRNR.
It can include property rental income tax, inheritance tax, wealth tax and capital gains tax. Generally, any income generated from Spain, even though you don’t live here, is considered taxable.
Q: Do I have to pay tax in Spain if I’m a non-resident?
A: If you’re a non-resident in Spain, i.e. you don’t spend more than 183 days here a year, do not work here and your partner and children don’t live here, but you still have a connection to the country, you may be liable to pay IRNR.
The laws are complicated, however, and if you don’t know if you’re considered a resident or non-resident in Spain, here’s our handy guide to find out.
The most common reason you’ll need to pay non-resident tax is because you own a property in Spain, such as a second home you use for holidays.
READ ALSO: How to open a bank account in Spain if you're not a resident
Q: How much IRNR will I be charged?
A: The general IRNR rate for EU residents is 19 percent on net income and for non-EU it’s 24 percent. There are different rates depending on which non-resident tax you're being charged.
- Capital gains generated from transfers of assets are taxed at 19 percent.
- Interest is charged at 19 percent. Interest is tax-exempt for EU residents. Double taxation agreements may mean you may pay less than this too.
- Dividends are charged at 19 percent.
- Royalties are charged at 24 percent.
- Pensions are taxed at progressive rates between 8 and 40 percent.
Q: Can I offset my expenses against the taxes?
A: If you own a property in Spain and you’re from the EU, Norway and Iceland, you can claim back expenses (mortgage interest, insurance, IBI, community fees etc), however, if you’re a non-EU resident you can’t claim back any of these expenses.
For example, an EU resident who makes €1,000 a month in rental income from a property in Spain will end up paying roughly €779 annually in taxes after deductions, whereas a non-resident from a non-EU country would pay €2,880 a year in IRNR tax for the same earnings and time period.
READ ALSO: How to prove you're not a tax resident in Spain
Q: How do I pay my non-resident taxes for renting out my property?
Non-residents who are renting out a property in Spain must declare their earnings by submitting form 210 every quarter. You will likely need to hire a gestor or accountant to help you do this.
Q: What happens if I don’t rent my Spanish property out?
A: What about foreigners who own a property in Spain and only use it as a holiday home without renting it out for the rest of the year? Unfortunately, even if you don’t rent your property out, you are still liable to pay tax on it. This is because you have the option to rent it out and make money from it if you want to.
You will be charged an annual tax levy of Renta Imputada de Inmuebles Urbanos which is calculated depending on the value of your property.
Q: What is non-resident wealth tax?
A: Non-residents are also liable to pay Spanish wealth tax, yet they only pay this on Spanish assets.
You are entitled to a €700,000 deduction per person, but if the total gross value of your assets in Spain exceeds €2 million, then you will have to pay tax on it.
Wealth Tax should be submitted every year using Form 714 during the same period as tax residents file their income tax returns, usually between April and June.
Q: Do I pay non-resident tax if I sell my Spanish property?
A: Yes, non-residents who decide to sell their property in Spain are required to pay taxes at the rate of 19 percent. They have three months after the sale in which to do so.
IRNR is a controversial tax and many people argue that the difference between EU resident taxes and non-EU resident taxes is unfair.
Brussels has warned Spain about this tax on several occasions and in 2008 said that IRNR tax "restricts the free movement of people and workers, the free provision of services and the free movement of capital between countries”.
It remains to be seen if this tax changes in the future.
READ MORE: What you need to know about Spain's plusvalía tax on property sales
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Bureaucratic processes and taxes can be very confusing in Spain and you may not be aware that, even though you don't live in Spain, you may have to pay what's known as non-resident tax, depending on your situation.
Q: What is non-resident tax?
A: Non-resident tax in Spain is known as Impuesto sobre la Renta de no Residentes, or IRNR.
It can include property rental income tax, inheritance tax, wealth tax and capital gains tax. Generally, any income generated from Spain, even though you don’t live here, is considered taxable.
Q: Do I have to pay tax in Spain if I’m a non-resident?
A: If you’re a non-resident in Spain, i.e. you don’t spend more than 183 days here a year, do not work here and your partner and children don’t live here, but you still have a connection to the country, you may be liable to pay IRNR.
The laws are complicated, however, and if you don’t know if you’re considered a resident or non-resident in Spain, here’s our handy guide to find out.
The most common reason you’ll need to pay non-resident tax is because you own a property in Spain, such as a second home you use for holidays.
READ ALSO: How to open a bank account in Spain if you're not a resident
Q: How much IRNR will I be charged?
A: The general IRNR rate for EU residents is 19 percent on net income and for non-EU it’s 24 percent. There are different rates depending on which non-resident tax you're being charged.
- Capital gains generated from transfers of assets are taxed at 19 percent.
- Interest is charged at 19 percent. Interest is tax-exempt for EU residents. Double taxation agreements may mean you may pay less than this too.
- Dividends are charged at 19 percent.
- Royalties are charged at 24 percent.
- Pensions are taxed at progressive rates between 8 and 40 percent.
Q: Can I offset my expenses against the taxes?
A: If you own a property in Spain and you’re from the EU, Norway and Iceland, you can claim back expenses (mortgage interest, insurance, IBI, community fees etc), however, if you’re a non-EU resident you can’t claim back any of these expenses.
For example, an EU resident who makes €1,000 a month in rental income from a property in Spain will end up paying roughly €779 annually in taxes after deductions, whereas a non-resident from a non-EU country would pay €2,880 a year in IRNR tax for the same earnings and time period.
READ ALSO: How to prove you're not a tax resident in Spain
Q: How do I pay my non-resident taxes for renting out my property?
Non-residents who are renting out a property in Spain must declare their earnings by submitting form 210 every quarter. You will likely need to hire a gestor or accountant to help you do this.
Q: What happens if I don’t rent my Spanish property out?
A: What about foreigners who own a property in Spain and only use it as a holiday home without renting it out for the rest of the year? Unfortunately, even if you don’t rent your property out, you are still liable to pay tax on it. This is because you have the option to rent it out and make money from it if you want to.
You will be charged an annual tax levy of Renta Imputada de Inmuebles Urbanos which is calculated depending on the value of your property.
Q: What is non-resident wealth tax?
A: Non-residents are also liable to pay Spanish wealth tax, yet they only pay this on Spanish assets.
You are entitled to a €700,000 deduction per person, but if the total gross value of your assets in Spain exceeds €2 million, then you will have to pay tax on it.
Wealth Tax should be submitted every year using Form 714 during the same period as tax residents file their income tax returns, usually between April and June.
Q: Do I pay non-resident tax if I sell my Spanish property?
A: Yes, non-residents who decide to sell their property in Spain are required to pay taxes at the rate of 19 percent. They have three months after the sale in which to do so.
IRNR is a controversial tax and many people argue that the difference between EU resident taxes and non-EU resident taxes is unfair.
Brussels has warned Spain about this tax on several occasions and in 2008 said that IRNR tax "restricts the free movement of people and workers, the free provision of services and the free movement of capital between countries”.
It remains to be seen if this tax changes in the future.
READ MORE: What you need to know about Spain's plusvalía tax on property sales
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