Consequences of BREXIT on IRNR without permanent establishment
Consequences of Brexit on IRNR, in the case of income obtained without the mediation of a permanent establishment, as of January 1, 2021
IRNR contemplates specific provisions applicable to residents of other Member States of the European Union, provisions that will no longer be applicable to taxpayers resident in the United Kingdom once the transitional period has ended.
However, it should be noted that there is a bilateral agreement between the United Kingdom and Spain to avoid double taxation, an agreement that will continue to be applicable. For this reason, certain income that will no longer be exempt in application of the internal regulations, however, would be exempt income invoking the right to the application of the Convention (For example, interest).
Regarding income obtained by residents in the United Kingdom accrued from January 1, 2021 the following changes arising from ceasing to be resident taxpayers in a Member State of the European Union:
Exempt income (article 14 and DA Seventh TRLIRNR)
The following exemptions will no longer apply:
-
Interest and capital gains derived from movable property obtained by residents in another Member State of the European Union (EU), or of the EEA with which there are regulations on mutual assistance in the exchange of information, with certain exceptions.
-
Profits distributed by subsidiary companies resident in Spain to their parent companies resident in another Member State of the EU, or the EEA with which there is legislation on mutual assistance in the exchange of information, or to the permanent establishments of the latter located in other Member States, provided they meet certain conditions.
-
Dividends and participation in profits obtained by pension funds equivalent to those regulated in the consolidated text of the Law on Pension Plans and Funds (Royal Legislative Decree 1/2002, of November 29), which are residents in another Member State of the European Union or the EEA with which there is legislation on mutual assistance in the exchange of information, or by permanent establishments of said institutions located in another Member State.
-
Dividends and participations in profits obtained by collective investment institutions regulated by Directive 2009/65/EC of the European Parliament and of the Council, or by collective investment institutions resident in the member States of the EEA with which there are regulations on assistance mutual exchange of information.
-
Royalties between associated companies, paid to a company resident in a Member State of the European Union or to a permanent establishment of said company located in another Member State of the EU, provided that certain requirements are met.
-
Exemption for reinvestment in habitual residence for taxpayers residing in a Member State of the EU, or the EEA with which there is regulation on mutual assistance regarding the exchange of information: Capital gains obtained from the transfer of what was your habitual residence in Spain may be excluded from taxation, provided that the total amount obtained from the transfer is reinvested in the acquisition of a new habitual residence.
Tax base (article 24.6 TRLIRNR)
The expenses provided for in article 24.6 TRLIRNR cannot be deducted, an article according to which taxpayers residing in another State of the European Union or the EEA with which there are regulations on mutual assistance in this matter exchange of information, natural persons, can deduct the expenses provided for in Law Personal Income Tax , and in the case of entities, those provided for in the Corporate Tax Law, provided that it is proven that They are directly related to the returns obtained in Spain and have a direct and inseparable link with the activity carried out in Spain.
Type of tax (article 25 TRLIRNR)
In relation to income taxed at the general tax rate, the general tax rate of 19%, typical of residents in another Member State of the EU , or the EEA, will no longer be applicable. with which there are regulations on mutual assistance in terms of information exchange, and 24% will become applicable. Among these incomes we can mention: income from real estate, income from work, imputed income from real estate,…
Option for EU residents to pay personal income tax (article 46 TRLIRNR)
The regime of article 46 TRLIRNR will not be applicable, a regime by which non-resident taxpayers, natural persons, who prove to be residents in another Member State of the European Union or in a Member State of the European Economic Area with which there are regulations on assistance mutual agreement regarding the exchange of tax information, except residents in countries or territories legally classified as non-cooperative jurisdictions, who have obtained during the year in Spain through income from work and income from economic activities, at least 75 percent of the all of your income, or that the income obtained during the year in Spain has been less than 90 percent of the personal and family minimum that would have corresponded to you in accordance with your personal and family circumstances if you had been a resident in Spain and that the income obtained outside Spain has also been lower than said minimum, and when the income obtained in Spain has been effectively taxed by the IRNR, they may choose to pay taxes as a taxpayer by the Personal Income Tax, but without losing this their status as IRNR taxpayers.