If you are not a resident in Spain and are considering buying a property in Barcelona as an investment, i.e., to rent it out, you will be interested in knowing how the income derived from this lease will be taxed.
Rents obtained without the intervention of a public deed must be taxed separately for each total or partial accrual of income subject to taxation.
In general, the taxable base will consist of the gross amount, i.e., without any deduction of expenses.
In the case of leased properties, the entire amount received from the tenant, including, if applicable, that corresponding to all assets transferred with the property and excluding the Value Added Tax, must be computed as income.
If the property is only rented for part of the year, you must determine the income as in the previous paragraph for the months the lease lasted. For the remaining months, you will find the proportional part of the imputed income (1.1% or, if applicable, 2% of the cadastral value).
However, when dealing with taxpayers residing in another European Union member state or in a state of the European Economic Area where there is an effective exchange of information (effective from July 11, 2021, normative references to states with effective exchange of tax information are understood to be made to states with regulations on mutual assistance in the field of tax information exchange in the terms provided in Law 58/2003, of December 17, General Taxation, applicable. See Annex V), the following expenses may be deducted for determining the taxable base:
For individuals, the expenses provided for in the Personal Income Tax Law, provided that the taxpayer proves they are directly related to the income obtained in Spain and have a direct and inseparable economic link to the activity carried out in Spain.
For entities, deductible expenses according to the Corporate Income Tax Law, provided that the taxpayer proves they are directly related to the income obtained in Spain and have a direct and inseparable economic link to the activity carried out in Spain.
The applicable tax rate is the current general rate:
- EU residents, Iceland, Norway, and, since 11-07-2021, Liechtenstein: 19%
- Other taxpayers: 24%
Deductions
From the tax liability, only the following can be deducted:
- Deductions for donations, as provided in the Personal Income Tax Law and in the Law on the tax regime of non-profit entities and tax incentives for patronage.
- Withholdings made on income.
Capital Gains derived from the transfer of real estate
Capital gains derived from the sale of urban real estate located in Spanish territory that have been acquired from May 12, 2012, to December 31, 2012, are exempt by 50%.
The taxable base corresponding to capital gains will be determined by applying, in general, the rules of the Personal Income Tax to each patrimonial alteration. Gains will be calculated by the difference between the values of transmission and acquisition.
The applicable tax rate is 19%.
Imputation of income from urban real estate for own use or not rented
Non-resident taxpayers who are individuals, owners of urban real estate located in Spanish territory, used for their own use not related to economic activities, or vacant, are subject to Non-Resident Income Tax for the imputed income corresponding to those properties.
The taxable base corresponding to the imputed income from urban real estate located in Spanish territory will be determined in accordance with the Personal Income Tax regulations. For these purposes, the amount resulting from applying the percentage corresponding to the cadastral value of the property, which appears on the Property Tax (IBI) receipt, must be computed as income:
Properties located in municipalities where cadastral values have been revised, modified, or determined through a general collective valuation procedure, in accordance with cadastral regulations, and have entered into force in the tax period or within the last ten tax periods: 1.1%. Other properties: 2%.
Tax is levied on the aforementioned taxable base without deducting any type of expense.
The tax rate is the current general rate:
- EU residents, Iceland, Norway, and, since 11-07-2021, Liechtenstein: 19%
- Other taxpayers: 24%
If you are an investor and are thinking about buying property in Spain to rent it out, Eurofincas is your best advisor. Contact us.
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