Spanish Taxes for Non-Residents: Income & Wealth Tax Guide
Spanish Taxes for Non-Residents
Income Tax
Resources & Policy
This information is based on Royal Decree-Law 5/2004 of 5 March, which approves the consolidated text of impuesto, and the Tax Regulations, developed by Royal Decree 326/1999 of 26 February.
Nature
This is a direct, personal tax levied on income.
Purpose & Taxable Income
The tax is levied on income received in Spanish territory by individuals and entities not residing there.
Non-Resident in Spanish Territory
Non-residents are defined as any natural or legal persons who do not qualify as a resident under the criteria established by the Income Tax Act (for individuals) and the Corporate Tax Law (for legal persons and other entities subject to this tax).
Taxable Person (Contributor)
Contributors are natural or legal persons not residing in Spanish territory who earn income subject to taxation therein.
Taxable Event
The taxable event is the taxpayer receiving income taxed by this tax. Income subject to Inheritance and Gift Tax is not included.
The law defines:
- Income received in Spanish territory.
- A series of exemptions.
Forms of Subject: Income Obtained With or Without Permanent Establishment
Income Derived by a Permanent Establishment
Individuals or legal entities operating in Spain through a permanent establishment are subject to tax on all profits generally derived from it.
Taxable income consists of:
- Income from activities conducted by the establishment.
- Income from assets assigned to it.
- Gains and losses derived from these goods.
Key Features:
- Taxable income is determined according to the rules of Corporation Tax.
- Separate accounting obligation.
- General tax rate is 35%, similar to sociedades tax.
- The tax period coincides with the fiscal year (maximum 12 months), with tax accruing on the last day of the period.
Revenues Obtained Without a Permanent Establishment
Natural or legal persons operating in Spain without a permanent establishment are taxed on each income source (yield and capital gains) obtained without compensation.
Key Features:
- Taxable income is the full amount of each capital gain and yield obtained.
- Certain expense deductions may be allowed in some cases.
- The general rate is 25%, subject to specific exceptions.
- The law requires withholding and payment to the treasury of an amount equivalent to the applicable tax rate on the tax base, generally with some important exceptions, for all income payers.
Wealth Tax
Regulations
The rules are contained in Law 19/1991 of June 6.
Nature
Wealth Tax is a direct, personal tax levied on the net worth of individuals.
Features:
- Direct tax
- Personal and objective
- Progressive
- Fully yielded to the Autonomous Communities (with the power to regulate allowances, rates, and deductions)
Purpose
The tax is levied on the net worth of individuals, limited according to the rules governing gravamen. Patrimonio (net wealth).
Net Worth (Patrimonio): The collective property rights and economic content held by the taxpayer, net of taxes, charges, debts, and obligations.
Taxable Fact
Ownership of an estate attributable to an individual at the time of maturity, according to tax rules.
Exemptions
The following are exempt:
- Goods and rights required for business development.
- The taxpayer’s main residence (up to €150,253.03).
Scope & Tax Criteria
Wealth Tax applies throughout Spain, subject to tax systems in the Basque Country and Navarra.
Forms of Taxation:
A. Personal Obligation: Applies to individuals ordinarily residing in Spain (based on Income Tax criteria). Taxes the entirety of their net assets, regardless of location. This encompasses the individual’s worldwide assets.
B. Real Obligation: Applies to non-resident individuals for property and rights held, exercised, or fulfilled in Spanish territory. Taxes only these specific assets and rights.
Taxable Person & Representation
Taxpayers are individuals holding the property and rights subject to the tax.
Taxable Income
The taxable amount is the net asset value, determined by:
a) Value of assets and rights held by the taxpayer.
b) Liens, encumbrances, and debts/obligations.
The law outlines criteria for assessing different asset components. Current account balances are not affected.
Taxable Base
Personal Liability: The tax base is reduced by an allowance approved by the Autonomous Community. If not regulated, the reduction is €108,182.18. This reduction doesn’t apply to Real Obligation.
Real Liability: No allowance is applied.
Accrual
The tax accrues on December 31st each year.
Tax Rate
The tax base is taxed at progressive rates determined by the Autonomous Community or the State.
Deductions
- Real Estate
- Situations Abroad
- Assets located in Ceuta and Melilla
Tax Management
Taxpayers must submit declarations, self-assess, and pay the tax as regulated.
Declaration Requirements:
a) Personal Liability: When the tax base exceeds the minimum allowance (€108,182.18) or when the asset value exceeds €601,012.
b) Real Liability: Regardless of the equity value.