Understanding IRNR 210: A Guide to Basic Declaration, Rental Income, and Capital Gains Tax

If you’re a foreign citizen owning property in Spain, navigating the complexities of the Spanish tax system can be a challenge. A key aspect you need to understand is IRNR 210 tax (Impuesto sobre la Renta de No Residentes), which applies to non-residents who receive income from Spanish sources, including property ownership. This article will cover three main components of IRNR 210 relevant to foreign property owners in Spain: imputed income (renta imputada), rental income, and capital gains tax.

1. Renta Imputada (Imputed Income)

   
   

"Renta imputada," or imputed income, is the basic IRNR declaration referring to tax owed on the theoretical rental value of a property that is not rented out. According to Spanish tax law, even if you don’t rent out your property, you must still declare imputed income as though you were earning rental income from it. This rule ensures all property owners contribute fairly to the tax system. If you own a home in Spain and use it personally, you need to remember the renta imputada requirement.

How It WorksImputed income is calculated based on the cadastral value of the property (valor catastral), which is the official valuation assigned by the Spanish government. The rate used to determine imputed income is generally 1.1% or 2% of the cadastral value, depending on the situation.

The tax rate is 19% for residents of the EU and EEA (Norway, Iceland, Liechtenstein) and 24% for non-residents outside of the EU/EEA.

2. Rental Income (Ingresos por Alquiler)

   
   

If you decide to rent out your property, you must declare the income received from rental activities. This income is subject to IRNR 210 tax, and understanding how to report it correctly is essential to avoid penalties.

Key Points

You need to declare the total rental income earned during the tax year. Expenses related to rental properties, such as maintenance costs, property management fees, and mortgage interest, can be deducted from the total rental income. Like imputed income, the tax rate on rental income is 19% for residents of the EU and EEA.

3. Capital Gains Tax (Impuesto sobre las Ganancias Patrimoniales)

   
   

A non-resident in Spain is required to pay capital gains tax on profits earned from the sale of property. The capital gain is calculated as the difference between the selling price and the purchase price, adjusted for deductible expenses and update coefficients (if applicable).

How Capital Gains Tax Works

Tax Rates:

• 24% for residents of non-EU/EEA countries.

• 19% for residents of EU/EEA countries (provided there is effective tax information exchange in place).

• 3% Withholding:

The buyer is required to withhold 3% of the selling price and pay this amount directly to the Spanish tax office as an advance payment on the seller’s tax liability. This amount will be deducted from the final tax due.

If the tax owed is less than this withholding, the seller can request a refund for the overpayment.

If the tax owed is higher, the seller must pay the difference.

Example Calculation:

Selling Price: €300,000

Purchase Price: €200,000

Deductible Expenses: €10,000 (notary fees, registration, etc.)

Capital Gain: €300,000 - (€200,000 + €10,000) = €90,000

Tax (EU Rate): €90,000 × 19% = €17,100

If the withholding was €9,000 (3% of €300,000), the non-resident would need to pay the remaining difference of €8,100.

Summary

Understanding the components of IRNR 210 is crucial for non-resident property owners in Spain. Whether you’re dealing with imputed income, rental income, or capital gains tax, staying informed helps you comply with Spanish tax laws and avoid potential penalties. Consulting with a tax professional specializing in Spanish property taxes can also provide personalized advice tailored to your specific situation, ensuring you meet your obligations while maximizing your investments.