Tax obligations of non-residents

Tax obligations of non-residents

In this article we will deal with the news on the taxation of non-residents.

Taxation, as well as the legal framework to which taxpayers are subject, depends on their tax residence. The tax obligations are different depending on whether one is a resident in Spain or, on the contrary, a resident in any other State. Having tax residence in Spain entails paying tax on the worldwide income obtained, while taxpayers who have their tax residence abroad will be taxed on the income considered as obtained in Spanish territory, without prejudice to the provisions of the different double taxation avoidance treaties entered into by Spain and which are applicable.

The condition of resident in another State will be determined by the issuance of a certificate of residence by the tax authorities of that State; otherwise, the taxpayer will be considered a tax resident in Spain and will be taxed accordingly.

Taxpayers who prove their tax residence in another State and, therefore, are considered non-residents, will be taxed in accordance with the rules of the Non-Resident Income Tax (IRNR), whether they are individuals or legal entities, for the income obtained in Spain, distinguishing whether such income is obtained through a permanent establishment located in Spanish territory or, on the contrary, whether it is obtained without the intermediation of the aforementioned permanent establishment.

Income obtained without the intermediation of a permanent establishment

If the income is considered as earned income obtained in Spain as a result of the activity carried out in Spain or because it comes from the Spanish tax authorities, such income will be taxed in Spain at the rate of 24%, or 19% if the taxpayer is a resident of another Member State of the European Economic Area or the European Union.

On the other hand, if the income derives from real estate capital, the taxpayer must declare such income and may deduct the expenses incurred in connection with the lease of the property, provided that he proves his residence in another Member State of the European Economic Area or the European Union. 

In the event that the property does not generate income because it is unoccupied, the rules relating to the imputation of real estate income provided for in the Personal Income Tax (IRPF) apply. Thus, through form 210, the non-resident taxpayer must declare, as income from real estate capital, 2% of the cadastral value of the property; or 1.1% of the cadastral value when this has been revised in the same tax period or in the previous 10 years.

With respect to income derived from movable capital, this includes dividends and other income derived from the participation in the equity of entities resident in Spain, interest and other income obtained from the transfer to third parties of equity paid by persons or entities resident in Spanish territory and royalties paid by persons or entities resident in Spanish territory, or by permanent establishments located in Spanish territory, or used in Spanish territory. With respect to this type of income, the applicable rate is 19%; however, various exemption cases are provided for. Thus, when the taxpayer is resident in a European Union country, income derived from Spanish Public Debt, income from nonresident accounts, dividends distributed by subsidiaries resident in Spain to their parent companies resident in another Member State of the European Economic Area or the European Union and royalties between associated companies, paid to a company resident in a Member State of the European Union or to a permanent establishment of such company located in another Member State of the European Union, among others, will be exempt.

Capital gains will be calculated on the basis of the difference between the transfer and acquisition values and will be subject to taxation in Spanish territory when they derive from securities issued by resident individuals or entities, when they derive from other movable property located in Spanish territory or from rights to be performed in Spanish territory, or when property located in Spanish territory or rights to be performed or exercised in Spanish territory are incorporated into the taxpayer’s assets.

Non-resident taxpayers who obtain income in Spain must file a tax return for each of the aforementioned incomes, through form 210. The filing deadline will vary depending on the type of income in question and the result obtained from the liquidation. Thus, the deadline will be three months, once the period of one month has elapsed from the date of transfer of the real estate, for income derived from the transfer of real estate. The calendar year following the date of accrual in the case of imputed income from real estate located in Spanish territory. For the rest of the income, in the case of self-assessments with result to pay, the term to present and pay will be the first 20 calendar days of April, July, October and January, in relation to the income whose date of accrual is included in the previous calendar quarter. In the case of self-assessments of zero tax liability, the deadline is from January 1 to 20 of the year following the accrual of the income declared. Finally, for self-assessments with a refundable amount, they can be filed as from February of the year following the year in which the declared income accrued and within the following four years from the end of the tax return and withholding payment period. 

Income obtained through a permanent establishment

It is understood that a person who carries out economic activities through a permanent establishment located in Spanish territory when, by any title, he has in the same, in a continuous or habitual manner, installations or workplaces of any nature, in which he carries out all or part of his activity, or acts in the same through an agent authorized to contract, in the name and on behalf of the nonresident, who habitually exercises such powers.

The income attributable to the permanent establishment will consist of the income from the activities or economic operations carried out by such permanent establishment, the income derived from the assets assigned to the permanent establishment and the capital gains or losses derived from the assets assigned to the permanent establishment.

The income obtained by the permanent establishments located in Spanish territory will give rise to the obligation to file the corresponding tax return, using form 200 or simplified form 201. The term of presentation of the same will be of 25 calendar days following the six months after the conclusion of the tax period; which, will coincide with the fiscal year declared by the permanent establishment, without being able to exceed 12 months.