Non-Resident Income Tax (IRNR): Implications For Expats In Spain
So, you’ve chosen beautiful Spain as your country to buy a second home in. Why wouldn’t you? Amazing food, perfect beaches, nice people… and endless sunshine. But getting your head around the logistics of buying a property in Spain can be difficult. Not only do things work differently, but you also have to understand what it means to be a non-resident buying in Spain.
One of the most important things to consider when buying in Spain as an expat is the Impuesto de la Renta de No Residentes, or IRNR, which translates as Non-Resident Income Tax.
Never heard of it before? Confused if it applies to you? How much will you have to pay?
We’re going to answer all these questions, so you know exactly where you stand on IRNR and so that there are no nasty surprises down the line.
When Are You Considered A Resident In Spain?
To know whether IRNR applies to you, you first have to work out if you’re considered a resident or non-resident of Spain. As is the case with many countries in Europe, Spain taxes people based on their residency status.
Here are some scenarios in which you’d be considered a tax resident of Spain:
1. You stay in Spain for more than 183 days. If you’re in Spain for more than this time in a calendar year (regardless of whether it’s continuous or not), you’re considered a resident of Spain.
2. If your spouse or children live in Spain. If you have underaged children and a current spouse living in Spain, then you’ll be considered a tax resident.
3. The majority of your economic activities happen in Spain. When the majority of your direct and indirect income (e.g. salary, investments and property) is in Spain, you’ll be considered a resident and expect to pay tax accordingly.
However, if your primary address and economic activity happens outside of Spain (and you don’t spend more than 183 days in the country) you’ll be considered a non-resident and will have to pay IRNR.
What Is The IRNR In Spain?
The IRNR is applied to any non-resident in Spain earning a form of income or having assets. For many expats, this is often related to ownership of property.
If you own, sell or rent out a property in Spain, you can expect to pay IRNR on it. Here are some common examples:
1. You have a second home in Spain. If you’ve bought a property in Spain (or are thinking of doing so) and you don’t spend more than 183 days, you’ll be required to pay IRNR.
2. You rent out your property. If you’re a non-resident and have a property that you rent out in Spain, you’ll need to pay tax on that too.
3. You sell a property. You’ll need to pay Capital Gains Tax as a non-resident in Spain when you sell your property. This is usually 19%.
How Much Do You Pay For IRNR?
To work out how much tax you’ll have to pay for owning your property in Spain as a non-resident, you’ll have to fill out Form 210 IRNR. Usually, the imputed income on a property in Spain is 1.1% of the cadastral value of the property. The fixed rate for those residing outside the EU or European Economic Area is 24% and 19% for those living in it.
So, let’s say your property is worth €300,000. The base value that can be taxed is €3,300 (1.1% of 300,000). If you’re living in Norway, for example, you’ll then need to pay 19% of €3,300 (€627) every year.
Unlike if you’re paying IRNR for owning a property (which needs to be completed once a year and the deadline is the 31st of December), IRNR for renting a property needs to be done quarterly. You may be able to deduct expenses, depending on your country of residence and, generally, IRNR in this instance is between 19%-24%.
What Other Taxes Do Non-Resident Property Owners Have To Pay In Spain?
As well as IRNR, there are a couple of other taxes that non-resident property owners should be aware of.
Non-Resident Wealth Tax
The non-resident wealth tax, or Impuesto Sobre el Patrimonio is a tax which may apply to you. Wealth tax applies to both residents and non-residents of Spain and has a minimum tax-exempt amount of €700,000. So, if your assets don’t amount to €700,000 you won’t need to pay the tax, but if they do, you’ll pay tax incrementally based on the value of your wealth.
Household Refuse Collection Tax
Another tax all property owners in Spain (including non-residents) have to pay is the Household Refuse Collection Tax. As you might imagine, this tax ensures that rubbish is collected correctly. The tax is usually collected in late spring and every local council dictates when and how much.
IBI - local property tax
All property owners in Spain also pay an annual property tax, this apply to both residents and non-residents. The value of the property is set by the townhall using a technical model - the tax is also paid to the local townhall.
Penalties For Non-Residents Who Don’t Pay Tax In Spain
As in all countries, there are penalties in place for those who don’t pay their tax on time. This could include accrual of fines, closure of bank accounts, confiscation of property and, in extreme cases, imprisonment.
It’s always best to get professional guidance when it comes to paying tax in Spain as a non-resident, and not take the risk of not being aware of how much you should be paying and when.
Final Thoughts
Buying property abroad can feel overwhelming, especially regarding the more bureaucratic aspects such as status and tax. It’s important to familiarise yourself with Non-Resident Income Tax and other forms of tax that you will be expected to pay as an expat in Spain.
Ensuring you’re both financially and emotionally prepared for taxes associated with your Spanish property purchase means there won’t be any unexpected hurdles along the way. You’ll be able to enjoy your property and all the amazing things there are on offer from owning somewhere in Spain!
Note that this article is general and is shared as information. Property, tax, finance and other legal topics are personal and can vary not only from person to person but between the different regions of Spain. We recommend that you seek professional guidance if you need advice on matters covered in this article.