Real estate taxation for non resident individual persons in Spain

The purpose of this information note is to inform you briefly about the taxation of property situated in Spanish territory owned by Non Resident Individuals including when you sell your property in Mallorca.

Taxes which would be subject are detailed below:

Property tax (ibi):

All homeowners in Spain (residents and non-residents) are required to pay this yearly tax to the Town Hall of the corresponding location of the property. The amount of property tax is calculated for each municipality based on the assessed value of the property and applying a tax rate that provides the same Town Hall. The term of payment varies depending on each municipality, although it is usually around the months of September, October and November.

Capital gains tax:

The Capital Gains Tax has been temporarily restored for 2011, 2012, 2013 and 2014, interest will accrue on December, 31st of each of these financial years.

A reduction in the tax base of the minimum exempt amount of 700,000.-€ has been regulated for both residents and non-residents

Therefore, the persons who are required to file are:

  • Those whose amount requires payment
  • Those whose properties and rights are valued over 2.000.000.-€, even if the amounts shows negative.
  • The tax rate ranges from 0.2% to 2.5% depending on the tax scale.

Income tax for non-residents (irnr):

The non-resident individual owner of a property must file an annual return for this tax, accruing on December 31st.

The income to be declared will depend on the destination to be given to the property:

1º.- Attributed income from urban real estate for own use.

If the property is for own use, the yield to be declared is the amount that results from applying the assessed value of the property by 2% (in general) or 1.1% (revised for properties with rateable value from January 1st 1994). This performance is subject to a 24.75%. And the deadline for settlement will be throughout the whole calendar year following the date of accrual, until December 31st.

Example:
A natural person with residence in Germany is owner of a real estate located on the Balearic Islands destined to private use. The revised rateable value of the property is 140.000€.

B.I. = 140.000€ * 1’1% = 1540.-€
Amount = 1.540€ * 24’75% = 381,15.-€

2º.- Yield of leased properties.

If the property is leased, the yield to declare is the full amount received from the tenant, without deducting any expenses. However, in the case of taxpayers being resident in another State of the European Union, you may deduct the costs provided under the Law of Income Tax for Individuals, on terms to be set *.

These yields are considered to be accrued at the time of being payable by the landlord or at the date of payment (if earlier). On them a 24.75% is paid.

Example:
A natural person with residence in the USA (NO EC) is owner of a real estate located on the Balearic Islands destined for rental for 1.200.- €/month.

B.I.= 1.200.-€ * 12 months = 14.400.-€
Amount= 14.400.-€ * 24’75% = 3.564.-€

* The necessary expenses can be deducted for obtaining revenue, if it is duly justified. They are, among others:

  • The interests of foreign capital invested in the acquisition or improvement of the property. The total amount of deduction for these expenses may not exceed, for each asset or right, the full amount of income received. The excess may be reduced within the next four years.
  • Non-state taxes and surcharges, as well as state taxes and surcharges with no punitive nature.
  • The amounts accrued by third parties directly or indirectly or as a consequence of personal services, such as administration, monitoring, reception or similar services.
  • Those caused by the lease of the property.
  • Doubtful balances.
  • The amount of premiums on insurance contracts of the property or produced rights of the yields.
  • The amounts for services and supplies.
  • Amounts for amortization of the property and rights, provided that they satisfy their actual depreciation.

3º.- Yield of properties by different type of use.

It should be taxed in proportion to the period the property is intended to rent and own use, to be governed by the rules described above.

Example:
A Non-Resident leases the property during the first 6 months (182 days) of the year for 1.200.-€/month and the rest of the year (183 days) the property is destined for own use. The revised cadastral value is 140.000.-€.

Rental
Amount= full obtained yield * leased months * 24,75%
Amount= 1.200.-€ * 6 months * 24,75% = 1.782.-€

Own use
Amount = prorated cadastral value *1,1% * 24.75%
Amount = (140.000.-€ /365 days * 183 days private use) * 1,1% * 24,75%
Amount= 70.191,78.-€ * 1.1% * 24.75% = 191,09.- €

The deadline for settlement depends on the result:

  • If the result is a payment: During the first twenty days of the months of April, July, October and January regarding the income obtained in the previous calendar quarter.
  • If the result is a quote zero: From 1st to 20th of January of the year, following to the accrual of income.
  • If the result is a return: As of February, 1st of the year, following to the accrual of income.

Capital gain derived from the sale of the property:

In case of a transmission of real property, being the seller a non-resident, he is taxed for the Income Tax on natural persons in respect of capital gains. The tax rate is 21% on the capital gain from the sale of the property.

In order to reduce the capital gain, as acquisition costs, the expenses for notary fees, registration, tax paid as well as the improvements that have been performed and thus increase the cost of transmission, can be added.

Being the vendor a non-resident, the buyer (whether or not a resident) is required to withhold and pay to the Public Treasury 3% of the agreed price in a time limit of one month from the sale´s date. The retention only has to be applied to the total of the purchase price of the property, furniture excluded.

This retention has for the vendor the character of a payment on account of the taxes regarding the gains derived out of the transmission. Therefore, the buyer has to hand over to the non-resident vendor the Tax Form 211 (with this form the retention has been paid), so that the vendor may subtract the amount of the retention from the rate which results from the profit statement. If the withhold amount exceeds the amount to be paid, a refund of the exceeded amount can be requested.

In the case this retention is not paid, the property will be burdened with the payment of the amount, which results the minor one between the retention and the corresponding tax.

The vendor is obliged to present the Tax Form 210 within a time limit of three months, to count from the end of the term of payment of the purchaser (one month).

Example:
A taxpayer has transmitted an apartment for 340,000 Euros, which he had acquired in 1998 for € 100,000. To calculate the changes in net assets, he will compare:

Transfer value

340.000 Euros

Updated acquisition value (as real estate)
(100.000 × 1,2912)

129.120 Euros

Gain 210.880 Euros

Amount: 210.880€ * 21% = 44.284,8 €

This publication contains general information and does not constitute a professional opinion or legal advice.

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