If you are a foreign investor or non-resident property owner in Spain, understanding Spain’s Non-Resident Income Tax (IRNR – Impuesto sobre la Renta de No Residentes) is essential. This tax applies to anyone who earns income in Spain without being a tax resident, including income from rental properties, property ownership, and capital gains from selling real estate.
Failing to comply with tax regulations can lead to penalties, unexpected costs, and legal issues. This guide covers everything you need to know to stay compliant, reduce tax burdens, and optimize your investment in Spain.
1. What is Spain’s Non-Resident Income Tax (IRNR)?
The Non-Resident Income Tax (IRNR) is a direct tax levied on individuals and companies who are not tax residents in Spain but generate income in the country. Spain enforces this tax to ensure that any person or entity earning money within its borders contributes to the tax system, regardless of their country of residence.
1.1 Who Must Pay Non-Resident Income Tax in Spain?
You are required to pay IRNR if:
- You own property in Spain, even if it is not rented out.
- You rent out a property in Spain and earn rental income.
- You sell a property in Spain and make a capital gain.
- You receive Spanish-sourced income, such as dividends, interest, or royalties.
- You work in Spain or provide services but live in another country for tax purposes.
💡 KEY FACT: Spain considers you a tax resident if you spend more than 183 days per year in the country or if your main economic interests are in Spain. Otherwise, you are classified as a non-resident and subject to IRNR.
1.2 Differences Between Tax Residents and Non-Residents
Understanding the difference between tax residents and non-residents is crucial, as tax obligations vary significantly.
| Category | Spanish Tax Residents | Spanish Non-Residents |
|---|---|---|
| Taxable Income | Worldwide income | Only income earned in Spain |
| Tax Declaration | IRPF (Personal Income Tax) | IRNR (Non-Resident Income Tax) |
| Tax Rate | Progressive: 19%-47% | 19% (EU/EEA) – 24% (Non-EU) |
| Deductions Allowed? | ✅ Yes | ❌ No (except for EU/EEA residents) |
2. Tax on Property Ownership in Spain (Even If Not Rented)
Even if you do not rent out your property in Spain, you are still required to pay taxes. Spain applies an imputed income tax on properties owned by non-residents.
2.1 What is Imputed Income Tax and Why Does It Exist?
The Spanish government assumes that if you own a property, you derive a financial benefit from it, whether or not you rent it out. This tax exists to prevent property speculation and ensure that all property owners contribute to the tax system.
2.2 How is the Imputed Income Tax Calculated?
- The tax is based on the cadastral value of the property (official valuation for tax purposes).
- Tax Base: 1.1% – 2% of the cadastral value.
- Tax Rate:
- EU/EEA residents: 19% of the imputed income.
- Non-EU residents: 24% of the imputed income.
💡 Example Calculation of Imputed Income Tax:
- Cadastral Value of the property: €200,000.
- Tax Base: 1.1% of €200,000 = €2,200.
- Tax Due:
- EU residents (19%): €418.
- Non-EU residents (24%): €528.
📌 This tax must be declared and paid annually using Form 210, usually by December 31 of the following year.
2.3 What Happens If You Do Not Pay This Tax?
Failing to declare and pay this tax may result in:
- Fines and interest penalties from the Spanish Tax Agency (Agencia Tributaria).
- Legal action, including possible seizure of assets.
- Complications when selling the property, as outstanding tax debts can delay transactions.
3. Tax on Rental Income for Non-Residents
If you rent out your Spanish property, your rental income is subject to IRNR.
3.1 How Much Tax Do Non-Residents Pay on Rental Income?
| Tax Residency | Tax Rate on Rental Income | Expense Deductions Allowed? |
|---|---|---|
| EU/EEA Residents | 19% | ✅ Yes |
| Non-EU Residents | 24% | ❌ No |
3.2 What Expenses Can EU/EEA Residents Deduct?
If you are a tax resident in the EU or EEA, you can deduct:
- Mortgage interest.
- Property maintenance and repair costs.
- Home insurance premiums.
- Management fees and agency commissions.
- Local property taxes and service charges.
💡 Example of Rental Income Tax Calculation:
- Annual Rental Income: €18,000.
- Deductible Expenses: €6,000 (only for EU/EEA residents).
- Taxable Base: €12,000.
- Tax Due:
- EU residents (19%): €2,280.
- Non-EU residents (24%, no deductions): €4,320.
📌 Rental income tax is declared quarterly using Form 210.
3.3 Consequences of Not Declaring Rental Income
- Fines up to 150% of unpaid taxes.
- Potential property seizures for large tax debts.
4. Capital Gains Tax for Non-Residents When Selling Property
If you sell your property in Spain, you must pay Capital Gains Tax (CGT).
4.1 How is Capital Gains Tax Calculated?
- Tax Base: The difference between purchase price and sale price, minus deductible costs.
- Tax Rate:
- EU/EEA residents: 19%.
- Non-EU residents: 24%.
4.2 3% Withholding Tax on Sales
When a non-resident sells a property, the buyer must withhold 3% of the purchase price and pay it to the Spanish Tax Agency as an advance tax payment.
💡 Example Calculation:
- Purchase Price: €200,000.
- Sale Price: €250,000.
- Capital Gain: €50,000.
- Tax Due:
- EU (19%): €9,500.
- Non-EU (24%): €12,000.
5. How to Optimize Your Tax Strategy as a Non-Resident Investor
- Consider whether to buy as an individual or through a company.
- Utilize Double Taxation Agreements (DTAs) to avoid being taxed twice.
- Hire a tax advisor to ensure compliance and maximize deductions.
Avoid Costly Tax Mistakes – Get Expert Investment Advice
If you are considering investing in Spain, a tax and investment strategy session can help you save thousands of euros in improperly managed taxes.