WHAT INDIVIDUALS OR LEGAL ENTITIES HAVE THE CONSIDERATION OF RESIDENTS IN SPAIN?

They are individuals residing in Spain when they stay more than 183 days during a year in Spanish territory or if Spain is the main core of his professional and enterprise activities or his economics interests. We presume, except there is any prove, that they have the residence in Spain, if the partner not separate and their children under age who depend on him usually live in Spanish territory (art.12 de la Ley 18/1991, de 6 de junio, Impuesto sobre la Renta de las Personas Fisicas – I.R.P.F.)

We consider legal entities residing in Spain, the ones that have been established according to the Spanish Law, have their residence in Spanish territory and have their main board on it (art. 9 de la Ley 61/1978, de 27 de septiembre, del Impuesto sobre la Renta de Sociedades – I.R.S.)

WHO HAS NOT GOT THE CONSIDERATION OF RESIDENTS IN SPAIN?

The individuals or legal entities non-residents are individuals liabilities residing abroad, but they have their fiscal domicile in Spain, for the purpose of accomplishment of their tributary obligations, if they operate through a permanent institute or the actual management and the administrative agency of their business is situated somewhere in the Spanish territory.

If it is about real estates, the fiscal domicile of the non-resident will be his representative’s and, on his defect, the place where the property is. On the other hand, the fiscal domicile of the non-resident will be his representative’s or, on his defect, the solidary responsible’s (artículo 6 de la Ley 13/1996, de 30 de diciembre de Medidas Fiscales, Administrativas, y del Orden Social que modifica el artículo 22 de L.I.R.P.F.)

WHAT HAPPEND IF SPAIN HAS ANY CONVENTION WITH OTHER STATE?

In that case, the rule to apply is the one from such Convention. In general, that rule will respond to the arrange in the article 4 of the Convention Model of O.C.D.E. (1963, 1977, 1992 y 1994).

WHO REPRESENTS A NON-RESIDENT INDIVIDUAL IN SPAIN BEFORE THE SPANISH TRIBUTARY ADMINISTRATION?

The individual liabilities non-resident in Spanish territory has to designate a representative before the Spanish Tributary Administration (art. 46 de la Ley General Tributaria de 28 de diciembre de 1963).

WHO CAN BE A REPRESENTATIVE OF A NON-RESIDENT?

It can be any individual or legal entity that have legal ability working with the Spanish Legislation and, also, is domiciled in Spain.

WHEN CAN THE REPRESENTATIVE BE DESIGNATED?

The designation has to be made when the individual liabilities non-resident takes any tributary obligation notifying the designation to the Administration in a 2 months term since the day of it.

HOW THE REPRESENTATION GETS CREDIT BEFORE THE TRIBUTARY ADMINISTRATION?

The credit has to be in public writing of agreed authority before the Spanish greffier, of public document given before Spanish Consul abroad or of private document margined correctly (art. 43 de la Ley General Tributaria).

WHEN IS THE NON-RESIDENT NOT OBLIGATED TO DESIGNATE A REPRESENTATIVE?

The individual liabilities non-resident is not obligated to designate a representative when he is the owner of housing in Spain.

 WHAT RESPONSABILITIES HAS THE REPRESENTATIVE PRACTICING HIS JOB?

The responsibilities of the representative proceed from the bad use of the authorities given to him, but he is not responsible for the payment of the tributary debts of the non-resident (art.38 de la Ley General Tributaria).

WHAT CONSEQUENCES DESCEND FROM THE NOT DESIGNATION OF REPRESENTATIVE CONCERNING THE NON- RESIDENT? º

Yet the not designation of the representative, as well as the not communication of his designation to the Administration or the communication out of date, carries along with a fine between 25.000 ptas and 2.000.000 ptas.

WHAT REAL ESTATES PAYS TAXES IN SPAIN?

Real estates of rural nature as well as urban pay taxes. The conceiving of these can be found on the articles 62 and 63 of the Law 38/1988, 28 of December, regulator of the Locals Finances.

HAS THE CONTRIBUTION ONLY GOT PLACE WHEN ACQUIRING THE PROPERTY OR FULL POSSESION OF THE IMMOVABLE?

The tributary obligation comes up not only when acquiring the property of the immovable, but also when acquiring or establishing the rights of enjoyment, use or charge over the immovable (ex. Right of usufruct, servitude, mortgage, etc.) quotas or shares in properties.

IS THE ACQUISITION OF REAL ESTATES FREE IN SPAIN?

The change of the Directive 88/361/CEE of the Cabinet, 24 of June, with reference to the free circulation of capitals, to the Spanish Ordonnance brought therefore the publication of the R.D. 1816/1991, 20 of December, about Economics Transactions with Abroad, that came to modify the control system of the spanish changes.

The principle that presides our control system of changes is the free circulation of capitals, although in some transactions, thereamong the immovable`s, a restriction or limitations series get imposed.

So, they require previous administrative verification by part of the General Administration of International Economy and Foreign Transactions, the investment on real estates when its value exceeds 500.000 ptas or it had been made by an individual or legal entity resident in a fiscal paradise (the territories that have the consideration of Fiscal Paradises are the mentioned on the R.D. 1080/1991, 5 of July).

To obtain the verification is necessary to present in such Register of General Administration the application in the existing model for that purpose –Model MC-6-.

The acquisition "inter vivos" are subjected to verification, as an onerous title as well as lucrative.

The acquisition "mortis causa" are not subjected.

The verification has an availability term of 6 months, dated since the admission of the positive verification or since the date in which it is supposed to be granted for positive silence administrative.

On the other hand, the acquisitions "inter vivos" require authorisation of the Cabinet of Ministers, without depending of being a lucrative title or onerous, or real estates in areas of interest for the national defence, except they are situated in areas of national trust or urban nucleus of not bordering towns.

Finally, all the foreign investments on real estates must be declared before the Register of Foreign Investments.

WHAT OBLIGATIONS HAS THE FOREIGN NON RESIDENT WHO TRANSMITS A REAL ESTATE SITED IN SPAIN?

The transmission has to document before a Spanish greffier or a Spanish Consul abroad.

The settlement of the transmission of the real estate must formalised in the application Model MC-3B.

WHAT TAX CHARGES THE ACQUISITION OF REAL ESTATES IN SPAIN?

We have to distinguish depending on acquisition as onerous title or lucrative, and if the transferer is enterprise or not.

1. Acquisition as onerous title by an enterprise transferor.

If it is about the first transmission, the acquisition is subject to the Added Value Tax (I.V.A.) the Patrimony Transmissions Tax and the Documented Legal Acts (arts. 31, 32 y 33 T.R.I.T.P. and A.J.D.).

If it is about the second transmission, the acquisition is subject to the I.T.P. and A.J.D., as an onerous transmission (arts. 10 and ss. of the T.R.I.T.P. and A.J.D.).

2. Acquisition as onerous title by an individual not enterprise.

The acquisition pays taxes as an onerous transmission for the I.T.P. and A.J.D.

3. Acquisition as lucrative title by a non-resident person.

The acquisition of the real estate as lucrative title, for acts "inter vivos" (ex. donation) or "mortis causa" (ex. inheritance) is subject to the Succession and Donations tax (art. 3 of the Law 29/1987, 18 of December, from the Succession and Donations Tax).

4. Acquisition as lucrative title by a non-resident legal entity.

The acquisition of the real estate pays taxes for the Society Tax.

 

WHAT IMPOSITIVE RATE IS TO APPLY TO THE ACQUISITION OF AN IMMOVABLE?

1. If it is about onerous patrimonial transmission, the tax rate is 6%.
2. If the acquisition is subjected to the I.V.A., is about a housing or garage sited in the same building as the housing and if they transfer together, the charged rate is 7%. If the acquisition is a business premise, a garage independent of the housing, urban lands or capable to urbanize, the charged rate is 16%.
3. If the acquisition is subjected to the Successions and Donations Tax, the tributary fee is determined subject to a rate, keeping in mind the pre-existing patrimony in spanish territory of the non-resident and the grade of connection with the defunct.
4. If the acquisition pays for the Society Tax (I.S.S.), the charged rate is 35%.

DO OTHER TAXES CHARGE THE TENURE OF REAL ESTATES IN SPAIN BY FOREIGNS?

Yes, there are other taxes that charge the tenure and enjoyment of real estates in Spain. They are the following:

• Real estate tax (I.B.I.).

This is a contribution of local character, that is regulated by the articles 61 and ss. of the Law 39/1988, 28 of December, regulating the Local Finances (L.H.L.).

The taxable basis is constituted by the cadastral value of the immovable (art. 66 of the L.H.L.) and the charged rate is 0.4% for the ones with urban nature and 0.3% for the ones with rustic nature, although these ones can increase for each Town Hall on the percentage assigned by the Law (art. 73 L.H.L.). The gained tax is annual.

• Special Real Estate Tax of Entities non-residents in Spain (Additional Disposition 6_of the Law 18/1991, 6 of June, of I.R.P.F.) (I.B.E.N.R.E.).

The charged rate is 5% applied over the taxable basis –cadastral value of the immovable-. It is gained the 31 of December of each year.

• Estate Tax (I.P.).

The taxable fact is constituted by the nomination of the real estates sited in spanish territory, as well as the transfer duty over them.

The taxable basis is constituted by the estate value with deduction of the imposition. The tributary fee is determined applying a progressive charge to the settlement basis. It is gained annually (art.5 and concordant of the Law 19/1991, 6 of June, from the Estate Tax).

• Tax over the increase of the value of the urban nature lands (arts. 105 and ss. of L.H.L.).(Value increased).

This tax charge the increase of the urban immovable`s value in order to transmission.

The taxable basis is determined for the real increase of the immovable`s value during a maximum term of 20 years. The tributary fee is obtained applying a charged scale to the taxable basis that differs from each Municipality depending of their population (art. 109 L.H.L.).

The overcomes proceed from real estates sited in Spain and acquired by non-resident in it, are subject to a contribution on different scores, every time they proceed from an investment on real estates directed to obtain a rent of real estates`capital. Overcomes than may also proceed from the practice of an enterprise activity.

DOES THE CONTRIBUTION AFFECT TO INDIVIDUALS AS WELL AS LEGAL ENTITIES NON-RESIDENTS IN SPAIN?

The contribution for the overcomes proceeding from the real estates`capital affects, in the same way, to individuals or legal entities non-residents in spanish territory, without concerning if they accomplish or not enterprise activity.

They have the consideration of overcomes of the real estate the total of the utilities or rent, without concerning their denomination or nature, that come directly or indirectly from patrimonial elements, goods or rights, of which the individual non-resident is titular, if they are not affected to professional or enterprise activities, in the same way if they correspond to a legal entity non-resident (articles 31 L.I.R.P.F. and 12 L.I.S.S.).

WHEN DO WE KNOW IF AN INDIVIDUAL OR LEGAL ENTITY NON-RESIDENT IN SPANISH TERRITORY ACCOMPLISH ENTERPRISE OR PROFESSIONAL ACTIVITIES IN RELATION TO THE IMMOVABLES OF WHICH THEY ARE OWNERS IN THAT TERRITORY?

If it is about an individual non-resident they have such consideration who, independently of proceeding from a personal job or immovable`s capital, or both of them at the same time, has the disposition on their own account of production or human resources, or both of them, with the intention of intervene on the production of goods or services – ex. overcomes proceeded from extracted activities, fabrication, business or rendering of service (art. 40 L.I.R.P.F.).

If it is about a legal entity non-resident, it is considered computable incomes the ones derive from the professional or enterprise activity – overcomes proceeding from activities such as: agricultural, cattle, forestal, fishery, industrial, commercial, of services, mining, professionals and artistic – (article 12 L.I.S.S.).

WHEN HAS THE ACQUISITION OR RENTING OF THE IMMOVABLE IN SPAIN BY AN INDIVIDUAL OR LEGAL ENTITY NON-RESIDENT GOT THE CONSIDERATION OF ENTERPRISE ACTIVITY?

If the acquisition or renting of an immovable by a non-resident has the consideration of enterprise or professional activity, there must be two conditions:

1. - There must be premises with exclusive disposition for the administration of the activity development.

2. - A person with a work contract must be employed for the activity development (article 40 L.I.S.S.).

WHAT TAX CHARGES THE OVERCOMES PROCEEDING FROM THE TITULAR OF THE REAL ESTATE OBTAINED BY A NON-RESIDENT IN SPAIN?

We have to distinguish depending if it is an individual non-resident, the tax charging the overcomes are I.R.P.F., I.V.A. and I.A.E.

1. On the I.R.P.F., the taxable fact proceeds from the overcomes obtained by the non-resident and proceeding from the titular and/or the exploitation of the immovable sited in Spain, as well as the rights they expound over them.

The overcomes are calculated entirely, and give place to the determination of the taxable basis, because it is about a contribution for real obligation, the deduction of any expense is admitted. The charge rate of 25% is applied to the basis. The only deductions applied to the obtained quota are the ones proceeding from the quantities assigned to donations – ex. 10% of the quantities donated to the foundations legally recognised or declared association of public utility.

The gained period of the tax comes together with the destiny of the real estate. If it is about real estates of own use, or without use at all, the gain is placed on the 31 of December of each year. If it is about rented immovable, it is gained when the rent is required or on the date of payment, if this is before the demanded.

2. With regard to I.V.A., the operations effectuated by enterprises and professionals non-residents who have permanent premises in Spain are subjected to the I.V.A. It has the consideration of permanent premises the settled place of business where the enterprises or professionals effectuate economic activities, as the real estates used on renting or different designation, on condition that they establish their branch of their economic activity or their legal domicile, and even if they do not effectuate activities directly over them (articles 69 and 84 of the Law 37/1992, 28 of December, regulating the Tax over the Added Value – I.V.A.).

For these reasons, the renting of real estates sited in Spain and effectuated by an individual non-resident with permanent premises in spanish territory is subjected to I.V.A.

Operations subjected and exempted to I.V.A. are the ones related to renting of rustic ground and construction of agricultural use, including garages and their belongings, and the real estates if they are rented together with the housing. In this case, the landlord non-resident is not obligated to present income declaration of beginning of activity (R.D. 1624/92, 29 of December, approved the Regulations of the I.V.A. and O.M. on the 30 of December of 1992, that approve new models of Income Declaration).

The operations subjected and charged for the I.V.A. are as follow:

• Buildings or flats assimilated to the housings by the L.A.U. (vid. article 3 and concordant of the Law 29/1994, 24 of December, of Urban Renting).
• Industrial buildings.
• Buildings or flats destined to the sub-renting.
• Garages and extensions of the buildings or flats destined exclusively to the housing, when they are rented independently from the flat or housing, or in different building as the housing.
• Flats destined to offices or any other activity that is not housing.
• Lands destined to parking of vehicles, deposit or warehouse, merchandise, products or elements necessary for an enterprise activity.
• Renting with option of buying lands or housings which delivery is subjected but not exempted to the tax.
• Renting of apartments or furnished flats if the landlord gives his own services to the hostelry. The taxable basis is constituted by the total amount of the rent.

The charged rate is 17%.

The respite to present the declaration for I.V.A. expires on the 20 of the first, second or third trimesters of the year (April, July and October) of gaining, because the respite to present the declaration of the fourth trimester finishes on the 20 of January of the next year to the gained activity.

1. Economic Activities Tax (I.A.E.), is a contribution of local nature that charges the practice of an economic activity of enterprise, professional or artistic nature.

The tax charges the renting of real estates, rustic as well as urban, housings or immovable dedicated to a different use than the housing (vid. L.A.U.).

The quota is different in each case and they are enclosed in the groups 861 and 862 of the Grouping 86.

The gained period of Tax falls in with the natural year, it is calculated from the initial day until the 31 of December. It is necessary to present a declaration of register on this tax during the 10 working days before the start of the activity (vid. L.H.L.)

• If it is about a legal entity non-resident, the overcomes that charges are the ones proceeding from the real estate’s capital such as: Societies Tax, I.V.A., I.A.E. and Real Estates Tax of entities non-residents:

1. Society Tax (I.S.S.).

The overcomes of real estates of which the owners are legal entities non-residents in Spain, are subjected to the Society Tax. The taxable fact of this tax is constituted by the overcomes proceeding directly or indirectly from the exploitation of real estates or the rights constituted over them.

The overcomes are calculated entirely and give place to the determination of the taxable basis, of which any expense can be deduced. The taxable rate is 25%. Once the quota is obtained, any quantity cannot be deduced from it, if they are not the ones proceeding from the retention and payments already made. The gain of the tax has place when the rent is required or on the date of the collection of the rent if this is before the requirement. The due date for the presentation of the declaration is a month from the gained date, but if the trimestrial declarations can be shown during the first 20 days of April, July and October of the present year and the following January; these will understand the overcomes obtained in each trimester.

2. I.V.A.

This is applied to the already mentioned for the individuals non-resident.

3. I.A.E.

This is applied to the arranged for the individuals non-resident.

4. I.B.I.E.N.R.

See correspondent epigraph.

 

IS THE TRANSMISSION OF THE TITULAR OF REAL ESTATE OR A RIGHT IMPOSED OVER IT BELONGING TO AN INDIVIDUAL NON-RESIDENT IN SPAIN, SUBJECTED TO CONTRIBUTION?

Yes, the transmission of the titular of real estate or rights imposed over them of which individuals or legal entities non-residents in Spanish territory are the owners, are subjected to contribution.

• If it is about an individual, the person non-resident who transmits a real estate or right imposed over it, is or can be obliged to pay the I.R.P.F. and the Increase of the Value of the Urban Nature Land Tax.

1. I.R.P.F.

The taxable fact is constituted by the patrimonial increase obtained on the transmission of the real estate or right of which the non-resident takes part (art. 11 of L.I.R.P.F. and 70 of R.D. 1841/91, of 30 of December).

The general rule to determine the patrimonial increase consist of determine the difference between the acquisition value and the estrangement, calculating amortizements and improvements.

Once the patrimonial increase is calculated, the determination of the taxable basis is produced reducing 5.26% for each year of residence in the real estate or the right treated in the patrimony of the non-resident provided it does not exceed 2 years.

The charge rate is 35% that applied to the taxable basis, determine the tributary quota. The gained period has place the accorded day of the public contract of transmission. The respite to present the declaration is 3 months from the date the retention is enter (vid. retention epigraph)

2. I.S.I.V.T.N.U. (Value Increase).

This is a local character tax. The taxable fact is constituted by the value increase of an urban nature land as the result of the titular transmission of an immovable or the constitution or transmission of an immovable`s limited enjoyment right (ex. usufruct) by a non-resident in Spanish territory.

If the transmission is to lucrative title, the individual liability is who acquires the land. If the transmission is to onerous title, the individual liability is who transmits the land. The taxable basis is constituted by the increase of the actual value of the lands changed during a maximum period of 20 years.

The tributary quota is calculated applying to the taxable basis a charged scale that is fixed by each Town Hall depending of the number of habitants (articles 108 and 109 of L.H.L.).

The gained tax has place on the accorded date of the transmission contract of the immovable or constitution or transmission of the actual right that is treated, without concerning if it is on onerous title or free of charge, "inter vivos" or "mortis causa".

The presentation term of the declarations is 30 working days from the date of the transmission contract or constitution of immovable or actual right if it is for "inter vivos acts". If the transmission or constitution have place because of death, it is a 6 months term extended to one year, counting from the date of the transmission contract. The transferor has the obligation to communicate the Town Hall the transmission of the immovable or the constitution or transmission of actual right and in the same terms as the individuals liabilities when it is about the lucrative title and the acquirer if the operations are about onerous title.

• If it is about the transmission of a real estate by a legal entity non-resident, this can be obligated to I.S.S. and I.S.I.V.T.U.

1. I.S.S.

The taxable fact is constituted by the patrimonial increase proceeded from the transmission of a real estate by a legal entity non-resident. The taxable basis coincides with the patrimonial increased quantity, without applying any deductions.

The taxable rate is 35%.

With regard to the tributary quota, gained and presentation term, what we said before is applied to the individuals non-residents.

2. Increased Value of the Urban Nature lands Tax (I.S.I.V.T.N.U.) (Value Increase).

It is same as if it is about an individual non-resident.

 

WHAT DOES THE OBLIGATION OF RETAIN 10% OF THE REAL ESTATE`S ESTRANGEMENT CONSIST OF AND WHO GETS AFFECTED?

When an individual or legal entity non-resident in Spain, the real estate’s acquirer is obligated to retain and enter the 10% of the estrangement’s price, except when it is about real estates acquired at least 20 years before the date of transmission and they have not been improved during all that time (article 19 L.I.R.P.F.).

If the retention is not entered, the transferred property is affected when paying the tax. The acquirer must make sure that the transferor who is resident in Spain (ex. through expedited certification from the State Agency of the Tributary Administration), because if the transmission is formalised and the transferor does not live in spanish territory, the acquirer is responsible for the retention payment, the correspondent fine and the delay interests.