The acquisition of a real estate in Spain by a non-resident natural person entails periodic tax obligations which go beyond the initial payment of those taxes derived from the act of acquisition (Impuesto sobre el Valor Añadido or Value Added Tax, Impuesto sobre Transmisiones Patrimoniales or Transfer Tax, or Impuesto sobre Sucesiones y Donaciones or Inheritance and Gift Tax, as applicable) or annual payment of other taxes of local nature (Impuesto sobre Bienes Inmuebles or Property Tax, Tasa de recogida de basuras or Garbage Tax, etc.).
By Ignasi Costas of Rousaud Costas Duran law firm in Barcelona, www.rcd-bcn.com
As a first consideration, under Spanish law any natural person not having its habitual residence in Spain is non-resident for domestic tax purposes, to the extent it does not spend 183 or more days in a given natural year in Spanish territory and it does not have its centre of economical interest in Spain.
Non-residents owning real estate located in Spain are liable to the following taxes: a) Non-Resident Income Tax (Impuesto sobre la Renta de No Residentes; “IRNR”); and b) Wealth Tax (Impuesto sobre el Patrimonio; “IP”). The Wealth Tax (IP) has been set at zero from 01/01/2008, which means it no longer has to be declared.
A. Under IRNR, a non-resident individual is liable for any income deriving from the rental or other form of exploitation of the real estate. In cases where the real estate is not exploited, IRNR imputes income to the non-resident, accruing a tax liability as a result of such imputed income.
In general terms, such imputed income generated by the possession of property amounts to 2% of the cadastral value of such property. However, for properties which cadastral value has been revised later than January 1st 1994, such percentage shall be fixed in 1,1% of the above mentioned value. Likewise, when the non-resident has not been the owner of the property throughout the whole taxable period (January 1st to December 31st), during the fiscal year of the acquisition or sale, or when within such year the property has been rented or used for business activities, such revenue shall be prorated according to the number of taxable days during which the conditions for imputation of the income were met by the non-resident owner.
The amount to pay in relation to the IRNR shall be the result of applying the general tax rate (24%) over the actual and/or imputed income, as the case may be. For such effects, and subject to the possibility of filing a simplified tax return as described below, the non-resident has to file the tax return and, given the case, make payment of the tax liability within the period comprised between January 1st and June 30th of the year following the fiscal year of accrual. For the case of imputed income, accrual takes place on December 31st of each year.
B. Under IP, non-resident owners are taxed on the net wealth represented by the real estate. Conversely to the regime of Spanish tax residents, no minimum value is applied as a condition to the accrual of the tax liability.
The tax base of the IP shall be the value of the property, which is deemed to be the highest of the following three values: (i) the cadastral value of the property; (ii) the value of the property determined by tax authorities for the purposes of liquidating other taxes; or (iii) the acquisition value of the property, after deduction of liabilities and encumbrances that may charge the real property.
The amount to pay in relation to the IP shall be the result of applying, over the value of the property calculated as per the description above, a progressive rate (dependant on the net value of the property) which is established between 0,2% and 2,5%. Subject to the possibility of filing a simplified tax return as described below, the non-resident owner has to file the tax return and, given the case, pay the resulting tax liability within the term established annually by the corresponding Treasury Department Order (for the year 2007 between May 2nd and July 2nd).
Finally, non-resident owners who only own one real estate property in the Spanish territory which is not rented or used for business activities are entitled to file a joint and simplified tax return for IRNR and IP: Form 214. Such form simplifies the tax return and presents the additional convenience of an extended filing term which corresponds to the natural year that immediately follows the year to which the tax return refers, that is, up to December 31st of each year.