In order to determine which tax regime is applicable for non resident tax payers under the national tax scheme, we must bear in mind, as well as the internal tax code, all possible international ramifications, as International treaties on Double Taxation may affect the ruling. In the case of a specific case with international ramifications, we must first consult the national and conventional guidelines, if such exists, and if it does not, or if such guidelines do not fully apply, we must consult the background laws ( Texto Refundido de la Ley del Impuesto sobre la Renta de No Residentes as it has been developed).
WHO IS OBLIGED TO FILE?
Payees. Payees under this law are defined as:
- Individuals and non resident entities based in Spanish territory which obtain income in the same area unless they tribute under standard IRPF income tax.
- Those Individuals with foreign nationality who are residents in Spain for their employment or position, such as members of diplomatic missions, consular offices, active civil servants who carry out their principal work here, always under a title of reciprocity.
-Those entities under the income allocation scheme setup outside national boundaries and with a presence in Spanish territory.
Individuals shall be deemed to have their principal residence in Spain if they meet any of the following conditions:
• They spend more than 183 days per calendar year in Spain. Occasional absences shall be taken into account to calculate the period of residence, except when said individuals prove they have their tax residence in another country. In the case of countries or territories classified as tax havens, the Spanish tax authorities may request proof of residence in the tax haven for 183 days per calendar year.
• Calculation of the period of residence shall not take into account any temporary stays in Spain that are the result of obligations arising from cultural or humanitarian collaboration agreements entered into with the Spanish public administration with no payment involved.
• Their main or central place of business is directly or indirectly located in Spain.
Unless there is evidence to the contrary, an individual shall be deemed to be a resident of Spain if, in accordance with the aforementioned criteria, his or her legally non-separated spouse and dependent minor children have their principal residence in Spain.
Individuals of Spanish nationality who prove they have changed their country of residence to a tax haven (Appendix III) shall continue to be liable for Personal Income Tax (IRPF) in Spain for the tax period in which the change of residence occurs and the following four tax periods.
An individual shall be deemed to be a resident or non-resident for the entire calendar year, given that a change of residence does not give rise to an interruption of the tax period.
WHICH TAXES ARE PAYABLE ON THE INCOME OF NON RESIDENTS?
INCOME OBTAINED THROUGH A PERMANENT ESTABLISHMENT
- INCOME NOT OBTAINED THROUGH A PERMANENT ESTABLISHMENT
Taxation of the most usual kinds of income obtained by non-resident taxpayers without an PE:
- Income from employment.
- Income from economic activities.
- Income from real-estate property.
- Income from dividends and interest.
- Capital gains from the sale of real-estate property
Taxation of urban buildings owned by non-resident individuals
If you are classified as a non-resident in Spain for tax purposes but you own urban real estate in this country then you are obliged to pay non-resident income tax and a local property tax.
Temporarily, the Wealth Tax for financial years 2011, 2012, 2013 and 2014 have also been reestablished.
2.- NON-RESIDENT INCOME TAX
When the property belongs to a married couple, or to more than one person, each person is an independent taxpayer, and must file an individual tax return.
Depending on the use of the property, the taxes to which it is liable are:
2.1. INCOME CALCULATED ON URBAN PROPERTY FOR PERSONAL USE.
2.2. INCOMES ON RENTED BUILDINGS
The amount to declare is the entire amount received from the tenant, without deducting any costs.
Nevertheless, as we are dealing with taxpayers resident in another European Union member state, the expenses described in the Law on Personal Income Tax (IRPF) can be deducted when calculating the taxable base, as long as proof is provided that these expenses are directly related to income earned in Spain and have a direct economic connection that is inseparable from the activity carried out in Spain.
This amount is understood to have become liable for taxation at the moment that it is demandable by the lessor or on the date that it is collected, if this is earlier.
2.3. NET GAINS DERIVED FROM THE SALE OF BUILDINGS.
This is taxable income on the capital gains obtained from the sale of real estate. This income shall be deemed accrued when the property is transferred.
In general, the amount of the capital gain is determined by the difference between the cost price and transfer value of the property.
Time period: three months from the end of the period that the person acquiring the building has to deposit the withholding (this time period, in turn, is one month from the date of the sale).
3.- WEALTH TAX
Obligation to file: Filing is mandatory for taxpayers whose tax return requires them to make tax payments. Also, those with assets and rights valued at over €2,000,000 are obliged to file a return, even if they have no tax charge to pay.