When purchasing real estate in Spain as a foreign investor, one of the most important tax decisions you’ll face is whether to register as a tax resident or remain a non-resident. This status affects how much tax you pay on rental income, capital gains, and even your global wealth.
In this article, we’ll explain the differences between resident and non-resident taxation in Spain, the benefits and drawbacks of each, and the factors to consider before making a decision.
1. Resident vs. Non-Resident Status: Key Definitions
What is a Tax Resident in Spain?
According to Spanish tax law, you are considered a tax resident if you meet any of the following conditions:
- You spend more than 183 days in Spain during the calendar year.
- Your main economic interests or center of vital interests (e.g., family or business) are in Spain.
- You are considered a Spanish tax resident under a tax treaty with your home country.
What is a Non-Resident?
You are a non-resident for tax purposes if you do not meet any of the conditions above. Non-residents only pay tax in Spain on Spanish-sourced income, such as rental income from Spanish property or capital gains on its sale.
2. Taxation on Rental Income: Resident vs. Non-Resident
Non-Resident Taxation on Rental Income
- Flat rate of 24% on gross rental income (non-deductible expenses) for non-EU/EEA investors.
- EU/EEA residents pay 19% and can deduct allowable expenses (maintenance, property management, mortgage interest, etc.).
- Quarterly tax filings are required.
Resident Taxation on Rental Income
- Income is taxed progressively (from 19% to 47%) based on total worldwide income.
- Residents can deduct allowable expenses, depreciation, and mortgage interest.
- Additional reductions may apply, such as a 60% rebate on net rental income for long-term residential leases.
Conclusion: If you qualify for residency and intend to generate regular rental income, resident taxation can be more favorable—especially for EU/EEA nationals or high-cost properties.
3. Capital Gains Tax (CGT)
Capital Gains for Non-Residents
- Flat CGT rate of 19% on the gain.
- 3% of the sale price is withheld at the time of sale as a withholding tax.
- The gain is calculated as the difference between the acquisition and sale price, minus allowable expenses (legal fees, improvements, etc.).
Capital Gains for Residents
- CGT rates are progressive:
- 19% on the first €6,000 of gain
- 21% from €6,001 to €50,000
- 23% from €50,001 to €200,000
- 26% above €200,000
- Residents over 65 who sell their primary home may be exempt from CGT under certain conditions.
Conclusion: For investors planning to reinvest or retire in Spain, tax residency may offer long-term capital gains advantages—especially on a main residence.
4. Wealth Tax: Does It Apply Differently?
Non-Residents
- Only pay wealth tax on assets located in Spain.
- Tax-free allowance of €700,000 (can vary by region).
- Rates range from 0.2% to 2.5% depending on the value of assets.
Residents
- Pay wealth tax on worldwide assets.
- Enjoy the same personal allowance (€700,000) plus an additional €300,000 for a main home.
Conclusion: For high-net-worth individuals with global assets, remaining a non-resident may reduce exposure to Spanish wealth tax.
5. Inheritance and Gift Tax
Inheritance and gift tax varies widely across Spain’s autonomous regions. Some offer significant reductions or exemptions for residents, particularly between direct family members.
- Non-residents are generally subject to national rates, which can be higher.
- Some regional benefits may not apply to non-residents.
Registering as a resident can be beneficial if you plan to pass on property to children or spouses.
6. Practical Considerations Before Registering as a Resident
Double Taxation Treaties
Spain has double taxation agreements with many countries. These treaties help avoid being taxed twice on the same income but may require coordination between tax authorities.
Worldwide Income Disclosure
Spanish tax residents must declare their global income, as well as assets held abroad (via the Modelo 720 form). Failure to comply can result in steep fines.
Healthcare and Residency Benefits
Residency may offer access to Spain’s public healthcare system, easier long-term visa renewals, and better integration for those relocating permanently.
Compliance and Bureaucracy
Being a tax resident requires annual income tax declarations (IRPF), maintaining records, and dealing with Spanish tax authorities. It is not ideal for purely passive investors.
7. When Is It Worth Becoming a Resident?
You may consider registering as a Spanish resident if:
- You spend most of the year in Spain.
- You plan to retire or relocate permanently.
- You derive significant rental income that benefits from deductions.
- You are selling a main residence and qualify for CGT exemption.
- You want to access public services or benefits.
However, for investors with limited time in Spain or with substantial foreign assets, non-residency may offer a more flexible and tax-efficient solution.
Choose Based on Your Personal and Investment Goals
There is no one-size-fits-all answer. Deciding whether to register as a resident depends on your lifestyle, financial structure, tax planning strategy, and long-term plans.
We recommend consulting a local tax advisor to assess the implications based on your home country, income sources, and property goals in Spain.