The end of 2023 is approaching. And, as every year , before December 31, people who do not reside in Spain must complete all non-resident tax in Spain. This is the Non-Resident Income Tax or Wealth Tax.
Beyond the physical borders, the duty to comply with Spanish tax regulations imposes a series of responsibilities that must be addressed before the clock strikes the beginning of a new year. Therefore, in this article, you will find a small guide to make this path full of tax complexities a little easier for you.
What is Non-Resident Income Tax?
Non-Resident Income Tax is a tax liability that affects those individuals who do not have tax residence in Spain but obtain income from Spanish sources. This may include income derived from rentals, investments or professional activities.
One of the most relevant characteristics of the IRNR is its progressive structure, which varies according to the nature of the income.
Tax rates vary depending on the nature of the income. Some examples of rates applicable in 2022 are shown below:
- Income derived from employment and professional activities: taxed at the rate of 24%.
- Capital gains: Taxed at the rate of 24%.
- Rental income from real estate: Generally, it is taxed at a rate of 24%. However, if there is a double taxation agreement between Spain and the non-resident’s country of residence, it is possible to apply a reduced rate of 19% instead of 24%. This helps to avoid double taxation, since the non-resident may also have tax obligations in his country of residence.
Knowing the Wealth Tax
This tax affects non-residents who own assets and rights located in Spanish territory. It is essential to carefully evaluate assets and liabilities, since this tax is based on the difference between the two.
Some items included in the Wealth Tax base are real estate, bank accounts, investments, art objects and antiques, life insurance, intellectual property rights, among others.
In addition to Spain, Wealth Tax is also paid in other countries such as Liechtenstein, Norway, Switzerland and France, among others.
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A taxpayer’s wealth takes into account the total net worth of all assets. However, there are different rules applied to calculate each individual value, depending on the type of asset. For example, homes will be valued at the higher of the purchase price, the cadastral value or the value set by the administration. While bank accounts will be valued at the higher of the balance between December 31 and the average balance of the last quarter.
What to consider before filing these taxes?
Before the deadline arrives, it is essential to follow a series of steps to ensure smooth tax compliance:
- Document review: review all relevant documents, such as rental agreements, bank statements and investment records.
- Accurate calculations: accurately calculate taxable income and assets, making sure to apply applicable deductions and exemptions.
- Professional Consultation: Seek advice from tax professionals specialized in taxation for non-residents in Spain. Their experience can make the difference in the correct filing and tax benefits.
- Timely filing: Be sure to file your tax return by December 31 to avoid penalties and fines.
As we approach the end of 2023, it is essential that non-residents in Spain prepare to meet their tax obligations. With a clear understanding of the Non-Resident Income Tax and Wealth Tax requirements, along with the right advice from international lawyers such as Pellicer & Heredia, you will be able to close the tax year efficiently and smoothly.
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