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Non-Resident Taxation Manual (January 2023)

Return on real estate property

Internal regulations

Regulations:article 13.1.g) Law IRNR

In accordance with domestic legislation, income derived, directly or indirectly, from immovable property situated in Spanish territory or from rights relating to such property is considered to be income obtained in Spanish territory.

Agreement

The Agreements signed by Spain attribute power to tax the income from real estate assets to the State where the real estate is situated.In accordance with the Agreements, earnings from property may be subject to tax in the Statement of Financial Condition of the same, regardless of whether the earnings arise from the use or enjoyment of the real property or any other type of exploitation of the same.Therefore, earnings from property situated in Spain may be taxed in accordance with Spanish law.

Taxation

Regulations:articles 24, 25 and 26 Non-Resident Income Tax Law

Income obtained without the intermediation of EP must be taxed separately for each total or partial accrual of the taxable income.

As a general rule, the taxable base will consist of the full amount, i.e. without deduction of any expenses.

In the case of leased properties, the full amount received from the lessee for all concepts, including, where applicable, the amount corresponding to all those goods transferred with the property and excluding Value Added Tax, shall be computed as income.

If the building is only let for part of the year, the income must be determined as in the previous paragraph for the months during which it is let and for the rest of the year, the income will be the proportional part of the assessed value (1.1%, or 2% of the rateable value, if applicable).

However, in the case of taxpayers resident in another Member State of the European Union or in a State of the European Economic Area in which there is an effective exchange of information (with effect from 11 July 2021, the regulatory references made to States with which there is an effective exchange of tax information are understood to be made to States with which there are regulations on mutual assistance in the exchange of tax information under the terms set out in Law 58/2003, of 17 December, General Taxation, which is applicable.See Annex V), the following expenses may be deducted for the determination of the tax base:

  1. In the case of individuals, the expenses provided for in the Personal Income Tax Act, provided that the taxpayer can prove that they are directly related to the income obtained in Spain and that they have a direct and inseparable economic link with the activity carried out in Spain.

  2. In the case of entities, deductible expenses in accordance with the provisions of the Corporate Income Tax Act, provided that the taxpayer can prove that they are directly related to the income obtained in Spain and that they have a direct and inseparable economic link with the activity carried out in Spain.

The tax rate applicable is the general rate in force:

  • Residents EU, Iceland, Norway and, from 11-07-2021, Liechtenstein:19%
  • Rest of taxpayers:24%

Deductions:of the tax liability may only be deducted:

  • Deductions for donations, under the terms set out in the Law of IRPF and in the Law on the tax regime for non-profit organisations and tax incentives for patronage.

  • Tax withholdings that have been applied on the taxpayer's income.

If real estate is rented and at least one full-time employee is employed in Spain for the management of the activity, the activity carried out may be considered to be of a business nature through a permanent establishment and must be taxed in accordance with the rules set out in the section on "Income from economic activities obtained through a permanent establishment".