Non-resident Income Tax

Internal regulations

In accordance with the internal regulation, Legislative Royal Decree 5/2004, of 5 March, approving the revised text of the Act on Income Tax for Non-Residents (LIRNR), income obtained in Spanish territory is considered earnings derived, directly or indirectly, from real estate assets situated on Spanish territory or from rights relating to these assets.

Agreement

Agreements for avoiding double taxation signed by Spain attribute power to tax earnings on property to the State where this is located. 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

The type of taxation will depend on whether the leasing of the property in Spain is considered to be an economic activity. If it is not considered to be an economic activity, it will qualify as return on real estate.

a) Return on real estate

In this case, the rental activity must be limited to making the property available, without rending services ancillary to the hotel industry.

The income to be declared will be the whole amount received from the lessee, without deducting any expenses.

However, in the case of taxpayers resident in another European Union member state and, from 1 January 2015, also in Iceland and Norway, individuals may deduct the expenses provided for in the Personal Income Tax Act for the determination of the gross tax base, or Corporation Tax, in the case of corporate persons, provided that it is certified that such expenses are directly related to the incomes obtained in Spain and have a direct and inseparable link with the activity performed in Spain.

This income is understood to accrue when it is requirable by the lessor or on the collection date, if earlier.

The tax rate applied is the general rate, according to the year of accrual (see chart).

Tax return form Form 210, declaring income type 01 or 35.

This will be used both to declare separately each accrual of income and to declare jointly several incomes obtained in a specific period.

Grouping of income : income obtained by the same taxpayer may be grouped together provided that it originates from the same payer, is subject to the same tax rate, and originates from the same property (declaring Income type: 01). However, in the case of income from leased properties not subject to withholding, accrued after 1 January 2018, income originating from several payers may be grouped together provided that the same tax rate is applied and it originates from the same property (in this case declared as Income type: 35). Under no circumstances may Grouped income offset one another.

The grouping period will be quarterly in the case of self-assessments with positive (payable) result, or annual for self-assessments with result nil or refund.

Filing methods:

• on paper, generated as a result of printing the PDF form available on the Tax Agency website.

  Instruction on how to fill out the form: www.agenciatributaria.es/Fiscalidad of non-resident/IRNR/without OCCUPATIONAL DISEASES/Model 210/Information and Assistance/General information

• Online, via Internet.

Filing period: depends on the result of the self-assessment:

• With positive result: within the first twenty calendar days of the months of April, July, October and January in relation to the income whose accrual date falls within the previous calendar quarter.

  Direct billing of the tax payment: in the case of online filing, payment can be direct-billed between the 1st and 15th days of the months of April, July, October and January.

• With result nil: from 1 to 20 January of the year following the accrual year for the declared income.

• With refund result: as of 1 February of the year following the accrual of the income declared and within four years from the end of the period for filing the return and deposit of the withholding. The deadline for filing the self-assessment will be understood to conclude on the date it is filed.

b) Earnings from economic activity obtained from a permanent establishment (PE).

Economic activity will exist carried out through the PE if some of the following conditions are met:

• at least one person is employed in Spain with a full-time employment contract and is in charge of the management of the activity,
• if the leasing contract of the holiday home includes the rendering of services ancillary to hotel industry, such as catering, cleaning, laundry and analogous services. These services may be rendered directly or through subcontracts with third parties.

Permanent Establishments must file a Tax return for Payers of Non-Residents' Income Tax (IRNR) on the same Forms and in the same terms as resident entities subject to Corporation Tax.

Tax rate:

For tax periods starting from 1 January 2015, the applicable tax rate is the corresponding rate of those set out in the Corporation Tax regulations. The general tax rate will be 25%. However, 28% will be applied in the 2015 tax period.

Deductions and allowances

EP may apply to their overall amount, the same deductions and allowances as Corporation Tax taxpayers.

Tax period and accrual

The tax period coincides with the fiscal year of the Tax return, and shall not exceed twelve months. The tax is accrued on the last day of the taxable period.

Withholdings and payment on account

PEs are subject to the same withholding regime as entities subject to Corporation Tax for the income they receive.

Payments in instalments

PEs are obliged to pay by instalments under the same terms as those subject to Corporation Tax. The formal obligations regarding instalment payment are the following:

• Terms: Within the first twenty calendar days of the months of April, October and December.

• Model: 202

  When instalment payment is not required, it will not be mandatory to file Form 202, except in the case of PEs that are considered Large Companies. In this case, Form 202 must be filed, even when no payment is required, which will result in negative self-assessments.

Declaration

• Term: 25 calendar days following the six months after the end of the tax period.

• Model: 200

Formal obligations

Permanent establishments are obliged to undertake the same accounting, register and formal obligations as resident entities.

Before engaging in such activity, they must apply for registration in the Census of Business Owners, using Form 036. In the case of legal entities, this tax return will also be used to apply for the assignation of the tax ID number of the permanent establishment.

A representative residing in Spain must also be appointed.