Non-Resident Tax Spain

Even if you live in Spain for part of the year, you’ll be classed as a non-resident taxpayer if your permanent address is not in Spain and you only live there for less than 183 days a year. If you stay in Spain for more than 183 days out of the year, then you’ll be considered a resident taxpayer.

Even when spending less than 183 days in Spain, you must apply for residency if you intend to stay in the country for more than 90 days at a time. If you don’t formally register for residency and spend more than 183 days in Spain, but for periods of less than 90 days, you would still become a resident.

If your primary interests and/or primary professional activities are in Spain, then the authorities will also consider you a resident taxpayer even if you don’t live in Spain for more than 183 days a year. For example, if dependent family members like your spouse and children live in Spain full-time, or if you are in employment or self-employment with a business in Spain even without residing there.

Anyone who owns a property in Spain must pay municipal property tax (IBI), and anyone who earns income in Spain must pay income tax on those earnings, including from employment or property rentals. Even if you don’t rent out your property and retain it for personal use, you’ll have to pay a small amount of tax based on its accumulated value (about 2% of the property’s rateable value).

If you sell a property or other assets in Spain, you’ll be liable for capital gains tax. Or, if you have assets located in Spain whose total worth exceeds a certain amount, you may have to pay a wealth tax (ranging from 0.2% to 3.75%). Inheritance tax is applicable if you’re a non-resident beneficiary of a deceased taxpayer’s estate, whether that person was a Spanish resident or non-resident.

The good news for EU citizens who own property in Spain is that you’re entitled to deduct relevant expenses from rental income, and therefore reduce your income tax. These can include things like letting agent and management fees, insurance, and maintenance costs. However, this depends on EU residency and not nationality – you must provide a Residency Certificate with the tax return.

The fiscal year can vary from country to country, but in Spain each tax year runs with the calendar year – from 1st January to 31st December. If you’ve purchased a property in Spain or conduct professional business in the country, whether employed by a Spanish company or self-employed, you’ll have a Foreigner’s Identity Card (NIE), which you must use to register with the tax authorities.

When you register with the Agencia Tributaria (the Spanish tax authority), you must submit a tax return form declaring your income no later than the following December. For example, you’d have until December 2022 at the very latest to declare your income for 2021, with the tax payment due by 31st December 2022. If you’re in employment, your income tax should be automatically deducted.

The IBI property tax for the previous year is usually due between May and August of the following year. If you rent out your property, it gets a little more complicated, as you’ll have to file quarterly tax returns rather than an annual one. These will be due on the 20th of the month in April, July, October, and January. In cases of joint ownership, each owner must file a separate tax return.

There are no extensions for tax payments in Spain, so if you miss the deadline and haven’t paid the taxes due, you’ll receive a fine in the form of progressively added interest. The tax authorities can charge up to 15% on top of the outstanding tax value if you don’t pay over the next year. If you struggle to manage manual taxes, it’s best to hire a Spanish tax solicitor like one of our team.

If you don’t submit tax returns at all to declare income or assets in Spain, the Agencia Tributaria will catch up with you and consider this active tax evasion. They will investigate you to look for evidence of fraud, leading to the freezing of your bank accounts, and the bank reclaiming mortgaged property. They can issue urgent tax payment demands for up to 4-5 previous years of outstanding taxes.

This can get expensive when it all piles up with added financial penalties, and you can’t dodge the Spanish authorities forever, so it’s not worth attempting not to pay. If you believe that you should have filed tax returns and paid taxes in Spain within the last 4-5 years, you can make retroactive Spanish tax declarations. The Agencia Tributaria may reduce the penalties following a voluntary declaration.

Even if you already declare and pay tax on your Spanish income and assets in your current country of residence, you must still submit tax returns in Spain. If your country has a double taxation treaty with Spain, you should be able to claim the Spanish tax back.

Unfortunately, if your country doesn’t have such a treaty in place, you will have to pay the tax twice, in both Spain and your resident country. The Agencia Tributaria maintains a list of countries that have dual taxation agreements with Spain, which currently includes the following countries:

• ⦿ Albania, Andorra, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan
• ⦿ Barbados, Belgium, Belarus, Bolivia, Bosnia and Herzegovina, Brazil, Bulgaria
• ⦿ Cape Verde, Canada, Czech Republic, Chile, China, Cyprus, Colombia, Costa Rica, Croatia, Cuba
• ⦿ Denmark, Dominican Republic
• ⦿ Ecuador, Egypt, El Salvador, Estonia
• ⦿ Finland, France
• ⦿ Georgia, Germany, Greece
• ⦿ Hungary
• ⦿ India, Indonesia, Iran, Ireland, Iceland, Israel, Italy
• ⦿ Jamaica, Japan
• ⦿ Kazakhstan, Kuwait
• ⦿ Latvia, Lithuania, Luxembourg
• ⦿ Macedonia, Malaysia, Malta, Morocco, Mexico, Moldova
• ⦿ New Zealand, Nigeria, Norway
• ⦿ Oman
• ⦿ Pakistan, Panama, Philippines, Poland, Portugal
• ⦿ Qatar
• ⦿ Romania, Russian Federation
• ⦿ Saudi Arabia, Senegal, Serbia, Singapore, Slovakia, Slovenia, South Africa, South Korea, Sweden, Switzerland
• ⦿ Thailand, Trinidad and Tobago, Tunisia, Turkey
• ⦿ United Arab Emirates, United Kingdom, United States of America, Uruguay, Uzbekistan
• ⦿ Venezuela, Vietnam

States of the former Soviet Union not mentioned above won’t have double taxation exemptions.

Since the UK is no longer in the European Union, British nationals who own property or earn income in Spain will now be taxed as third-country citizens. This means that the UK is no longer eligible for previous exemptions in place for EU member states, so UK nationals are liable to pay the higher non-EU tax rates from 1st January 2021 onwards.

While British citizens previously had to pay the lower non-resident income tax of 19%, they now have to pay 24%. All EU citizen tax benefits, such as the ability to deduct expenses from rental income, no longer apply for owners of Spanish property who primarily live in the UK. Brexit does not affect the double taxation agreement between the UK and Spain.

The UK leaving the EU also means that British nationals will no longer benefit from freedom of movement between EU countries or the Schengen Area. As citizens of a third country, UK nationals must apply for a visa to visit Spain for longer than 90 days, and will have to apply for residency if they plan to stay in Spain for longer than this within any 180-day period.

The tax administration agency in Spain is the Agencia Estatal de Administración Tributaria or AEAT, more commonly known as the Agencia Tributaria. This agency is the tax authority in Spain, which is responsible for the management and collection of national taxes and customs, including:

• ⦿ Income Tax – Impuesto sobre la Renta de las Personas Físicas (IRPF)
• ⦿ Non-Resident Income Tax – Impuesto de la renta de no residentes, declaración ordinaria (IRNR)
• ⦿ Corporation Tax – Impuesto de Sociedades (IS)
• ⦿ Value Added Tax – Impuesto sobre el Valor Añadido (IVA)

Autonomous regions of Spain have the power to regulate their own municipal taxes within the framework of state tax systems, administering local taxes such as:

• ⦿ Municipal Property Tax – Impuesto sobre Bienes Inmuebles (IBI)
• ⦿ Wealth Tax – Impuesto sobre el Patrimonio (IP)
• ⦿ Inheritance Tax – Impuesto deSucesiones y Donaciones (ISD)

All Spanish residents and non-residents living and/or working in Spain must register with the tax authority and submit regular tax returns as required. Your tax liability may vary depending on the municipality and your country of origin, due to international tax treaties.

The Agencia Tributaria may carry out tax inspections at random or when triggered by ‘unusual’ financial activity, investigating whether individuals or companies have fulfilled their tax obligations accurately. As part of their tax assessments, the agency can issue demands for taxes owed from the previous four years, which is why it’s important to make accurate tax declarations on time.

Having Spanish solicitors who can speak English to liaise with the Spanish tax authority on your behalf can be very helpful if your ability to manage taxes is hindered by your lack of Spanish, so don’t hesitate to contact Manzanares Lawyers if you need our help with this.

There is a special tax regime available for foreigners working in Spain on assignment, the Special Regime for Displaced Workers (Régimen Especial para Trabajadores Desplazados). It is more commonly known as Beckham’s Law, because the famous footballer was one of the first to benefit from it when he joined the Real Madrid team in the early 2000s.

When someone becomes a tax resident in Spain while working in the country, their income is usually subject to Income Tax at progressive rates up to 48%. However, the special regime allows eligible expatriates the opportunity to pay taxes at a lower fixed rate for several years.

Instead of paying progressive tax rates on worldwide income, expats using the scheme will only be taxed at 24% on income within Spain up to 600,000€ for six years. They will effectively be considered a non-resident for Spanish tax purposes, which is beneficial for high earners.

To be eligible for the Special Regime for Displaced Workers a.k.a Beckham’s Law, you must:

• ⦿ Not have been living in Spain as a tax resident in the previous five years (reduced from the previous requirement of ten years).
• ⦿ Be moving to Spain after receiving an employment offer, transferring within an international company from a foreign country, or owning 25% or less of shares as a director of a company located in Spain.
• ⦿ Perform all employment responsibilities in Spain (anything performed abroad must be 15% or less of total working activity).
• ⦿ Apply for the regime within six months of moving to Spain.
• ⦿ Not receive income from permanent establishments in Spain (from Spanish businesses only).

Expats cannot apply for the scheme if they are self-employed or freelancers, unless they have a Digital Nomad Visa, or if they are a company director with more than 25% equity, unless they have a Start-Up/Entrepreneur Visa. Despite being commonly named after a footballer, professional athletes and sportspeople are no longer eligible for the regime.

Recent modifications to the regime also set the fixed rate for income over 600,000€ at 47%, and introduced a 3% tax rate on income over 200,000€ earned from interest, dividends, or capital gains. Depending on your income level and employment situation, this may not be the best route even if you are eligible, so you should take this into consideration before applying.

The NIE (Número de identidad de extranjero) is a tax identification number for foreigners carrying out financial activities in Spain. If you intend to work, study, or live in Spain, then you’ll need this number to conduct most kinds of day-to-day business – including:

• ⦿ Opening a bank account
• ⦿ Starting a job or course of study
• ⦿ Applying for a mortgage
• ⦿ Buying, renting, or selling a property
• ⦿ Buying or selling a vehicle
• ⦿ Getting a driving licence
• ⦿ Setting up a mobile phone contract
• ⦿ Connecting utilities
• ⦿ Registering as self-employed
• ⦿ Registering a business
• ⦿ Filing and paying taxes

Your NIE number will typically be nine digits, beginning with a letter followed by seven numbers then another letter – such as X1234567Y. Your NIE card will also include information such as your full legal name, gender, date of birth, nationality, and address, as well as the date of registration.

There are a few different ways to apply for a Spanish NIE number, but the primary options are to apply at the local immigration office if you’re already in Spain, or to apply at the Spanish embassy or consulate in your home country while you’re still living there. Successful applications should provide an NIE card in 2 weeks–1 month, as long as you’ve provided the right documentation.

To make things easier, you could assign power of attorney to a legal representative in Spain – such as Manzanares Lawyers – who can manage the application process on your behalf.

Regardless of being a Spanish tax resident or not, if a person passes away and leaves assets and property in Spain behind, their heirs must declare these as beneficiaries and pay any tax due according to regional Inheritance Tax rules (or state rules, if the region has no specifications).

The succession tax for inheritance and donations – Impuesto de Sucesiones y Donaciones (ISD) – can vary substantially at the regional level. It’s often best to claim Spanish Inheritance Tax allowances in the autonomous region where the assets are held, rather than following the national Civil Code.

For example, in Andalucía, where we provide tax management services at Manzanares Lawyers, the allowances are extremely favourable. Changes to the regional regulations in recent years mean that Spanish IHT only applies at a very low rate above a high threshold.

If the estate in Andalucía does not exceed 1,000,000€, then no ISD may be due at all for beneficiaries who are direct relatives (such as spouses or children). With up to a 99% reduction available on inheritances over 1m€, heirs could pay as little as 1% ISD in Andalucía.

Allowances and deductions depend on the inheritor’s relation to the deceased estate owner and the nature of the individual assets. As with any non-resident tax in Spain, it’s always a good idea to get advice from local experts, such as Manzanares Abogados.

While the Impuesto sobre el Patrimonio (IP) has been abolished in Madrid and Andalucía as of 2023, individuals who own assets exceeding 700,000€ elsewhere in Spain will still have to pay the wealth tax as non-residents.

However, the Impuesto Solidario a las Grandes Fortunas (Solidarity Tax on Great Fortunes) applies throughout all of Spain. This means that even non-residents whose assets are located solely in Madrid or Andalucía must pay this tax if their net worth exceeds 3,000,000€.

Some deductions and exemptions may be available, depending on the region and the nature of the assets. For example, some antiques, art objects, or historical heritage assets may be given a state exemption, but this is typically calculated on a case-by-case basis.

This temporary tax was introduced for the 2023 tax year, after which it will be reviewed for further legislation. Read our blog on non-residents paying wealth tax in Spain for more information about the standard tax and the Solidarity Wealth Tax.

Spanish tax residents have to pay taxes on their worldwide income and assets, but they’re also entitled to a range of personal allowances that offer tax relief.

These annual Spanish tax allowances include:

• ⦿ Tax-free income allowance (dependent on age)
• ⦿ Marriage allowance (when filing joint tax returns as a married couple)
• ⦿ Child allowance (for up to 4 children under 25 years old living with the taxpayer)
• ⦿ Dependent relative allowance (when they live with the taxpayer, dependent on their age)
• ⦿ Disability allowance (dependent on age and whether or not a carer is required)
• ⦿ Taxable income deductions (e.g. pension contributions, charitable donations, rental property management costs)
• ⦿ Exemptions for annual income and capital gains below a certain amount

Unfortunately, these do not apply for non-residents – nor does the progressive scale of Income Tax rates for residents. Non-tax residents simply have to pay the standard rate of 19% for EU/EEA citizens or 24% for third country citizens on taxable income and property in Spain.

However, non-residents do have the benefit of not being taxed on all of their worldwide assets by the Spanish government. As many countries have a double taxation agreement with Spain – see above in the FAQs – it’s also likely that non-residents won’t have to pay tax on their Spanish income or property in their country of primary residence as well.

Non-residents should also bear in mind that when the non-resident tax rate is applied to their property even when they aren’t earning income from renting it out, this rate only applies to a small percentage of the property’s cadastral value (typically around 1–2%).