This is the first part of an article, written by the CostaLuz Lawyers Team, intended to answer some fiscal questions for our readers and to help clarify some essential aspects of the Spanish Tax Laws, related to Non-Resident Individuals or organisations.
Q: How can I tell if I am a Resident?
A: On one hand, in Spain, individuals are to be considered Residents if:
- They spend more than 183 days in Spanish territory in a calendar year or,
- Their main base or centre of economic activities or interests are in Spain or,
- Their spouse and/or underage dependant children are permanent residents in Spain (unless the individual is legally separated or can prove tax residence elsewhere)
On the other hand an entity or organisation is deemed to be a resident of Spain when it meets any of the following criteria:
- It was incorporated in Spain.
- It has its registered office in Spanish Territory.
- Its effective chief office is located in Spain. An entity is considered to have its effective chief office in Spain when the management and control of the sum of its activities are performed within the territory.
Otherwise either individual or organisations will be considered as Non-Residents for the whole tax year and taxed accordingly.
Q: How can I demonstrate I am not a Resident?
A: A person or entity may prove its tax residence in a specific country by a certificate issued by the Tax Authority in that country. The period of validity of these certificates is one year.
Q: What happens if I'm a resident of both Spain and another country, according to the tax rules of both countries?
A: In these cases the international agreements, if any, will apply. These agreements describe the tax rules that apply to avoid an individual being considered resident in both countries
Q: As a Non-Resident to which and how many taxes would I be liable for?
A: As a Non-Resident individual or Organisation, you should be aware that there are different levels of taxes in Spain: National, Regional autonomous and Local (municipality) taxes. Specifically these taxes are:
National Taxes:
- Non-Residents Income Tax (IRNR – Impuesto sobre la Renta de No Residentes)
- VAT Tax (Impuesto sobre el Valor Añadido - IVA)
Regional – Autonomous Taxes:
- Wealth Tax (Impuesto sobre el patrimonio)
- Inheritance and Gift Tax (Impuesto sobre Sucesiones y Donaciones - ISD)
- Transfer Tax and Stamp Duty (ITP -Impuesto de Transmisiones Patrimoniales y Actos Jurídicos Documentados)
Local Taxes – Municipality:
- Property Tax (IBI – Impuestos sobre Bienes Inmuebles)
- Municipal Tax (BS -Basura y Alcantarillado)
- Motor Vehicle Tax (IVM - Impuesto sobre vehículos de motor)
You will probably need to comply with one or more of these taxes, according to your economic activities, incomes and/or property owned within the Spanish territory.
Generally speaking, if you are Non-Resident and you obtain incomes in Spain or you own a property within the Spanish territory, you are subject to Personal Income – as well as the property’s presumed income through the Non-Resident income tax (IRNR), Wealth tax (IP - Impuesto sobre el Patrimonio), and Property Tax (IBI – Impuesto sobre Bienes Inmuebles). You might be also deemed a Tax Payer, according to some other regional and local tax laws, in any of the following cases : a) you’ve received any inheritance or gift (ISD), b) You’ve bought a property (ITP), d) you own a motor vehicle (IVM), and a Municipal Tax (BS) if you already own a property in Spain.
In the next part of this article we’ll continue answering some questions related to each of these taxes.