Tax obligations guide for non-residents in Spain: taxes, IRNR, and form 210

If you are considering investing, working, or simply enjoying a second home in Spain, you must be fully aware of your tax obligations as a non-resident. 

It’s not just about paying taxes, but about understanding how the system works to avoid future issues and, at the same time, optimize your tax situation.

In this guide we explain everything you need to know: from what it means to be considered a non-resident for Spanish Tax Authorities, to how and when to submit Form 210, including the taxes that affect you such as the IRNR, the Wealth Tax, or the well-known IBI.

We’ll show you practical cases, the most common mistakes, and tips to make the most of possible tax advantages through double taxation agreements. If you want everything under control and wish to avoid unpleasant surprises, keep reading.

Tax status before establishing your obligations: what does non-resident mean?

Tax residence in Spain is determined according to criteria established by the Personal Income Tax Law (IRPF).

A person may be considered a tax resident in Spain if they meet any of the following requirements:

• Spending more than 183 days in the country during the calendar year. Occasional absences are also taken into account unless proof of tax residence in another country is provided.
• The principal core or the basis of their economic activities or interests is located in Spain, directly or indirectly.
• If their spouse is not legally separated and their dependent minor children habitually reside in Spain.

Differences between legal and tax residence

Legal residence and tax residence are different concepts:

• Legal residence: this is the residence permit granted by immigration authorities, allowing someone to live in Spain.
• Tax residence: determines the obligation to pay taxes in Spain on worldwide income. A person may have legal residence without being a tax resident, and vice versa.

Example: a foreigner with a residence permit who spends less than 183 days a year in Spain and whose main economic interests are in another country would be a legal resident but not a tax resident in Spain.

Some common non-resident profiles are:

• Investors: people who own property in Spain for rental or investment but live and work in another country.
• Expatriates: professionals working temporarily in Spain for short periods, maintaining their usual residence in another country.
• Property owners: individuals who own a second residence in Spain for vacation purposes and do not exceed 183 days of annual stay.

These profiles must comply with the tax obligations corresponding to non-residents, such as filing Form 210 to declare income earned in Spain.

What taxes apply to you as a non-resident?

Non-residents in Spain are subject to different types of taxes such as IRNR, IBI, Wealth tax, municipal capital gains tax and income subject to taxation including rentals, capital gains, interest and dividends.

Income Tax for Non-Residents (IRNR): definition, when it applies and how it is calculated

The Income Tax for Non-Residents (IRNR) is a tax on income obtained in Spain by individuals and legal entities who do not have tax residence in the country.

This tax applies to various types of income, such as:

• Employment income: wages and fees for services provided in Spain.
• Income from real estate: income from renting properties located in Spanish territory.
• Income from economic activities: profits from business or professional activities carried out in Spain.
• Capital gains: profits obtained from the sale of assets or rights located in Spain.
• Dividends, interest and royalties: yields from investments in Spanish entities.

Additional taxes: wealth tax, municipal capital gains, IBI and others

In addition to IRNR, non-residents may also be subject to other taxes in Spain:

• Wealth tax: levied on the net wealth of non-resident individuals for assets and economic rights located in Spain. There are exempt minimums depending on the autonomous community, so the obligation to declare depends on the value of the estate.
• Real Estate Tax (IBI): a municipal tax on property ownership. Owners, whether residents or not, are obliged to pay it annually.
• Municipal capital gains tax: the tax on the Increase in Value of Urban Land is applied when selling or transferring a city property, taxing the increase in value of the land since acquisition. It is paid by the transferor.

Taxable income: rentals, capital gains, interest, dividends

Non-residents must pay taxes in Spain on the following income earned in the country:

• Rentals: income from leasing properties in Spain is subject to IRNR. The general tax rate is 24%, although it can be reduced to 19% for residents of the European Union, Iceland, and Norway.
• Capital gains: profits from the sale of real estate, shares, or other assets located in Spain are taxed at 19%.
• Interest and dividends: investment income such as interest from bank accounts or dividends from Spanish companies is subject to a 19% withholding tax.

How to comply correctly: obligations, forms, and procedures

As a non-resident in Spain, you must fulfill several tax obligations related to income and assets located in the country. 

It is essential to identify whether you must pay the Income Tax for Non-Residents (IRNR), Wealth Tax, and/or pay the Real Estate Tax (IBI).

If you also carry out economic activities, you must also meet VAT or applicable withholding obligations, as appropriate.

Filing Form 210

Form 210 is the declaration that non-residents must file to settle IRNR for income generated in Spain.

This includes income from property rentals, capital gains, and attributed income from urban properties that are not rented out.

When it is mandatory to appoint a tax representative in Spain

Non-residents are required to appoint a tax representative in Spain in the following cases: 

When they operate in Spain through a permanent establishment or if they earn income in Spain without a permanent establishment and reside in a country that does not have a mutual assistance agreement for exchange of tax information with Spain. 

The tax representative acts as a liaison with the Tax Authorities and is responsible for fulfilling the tax obligations of the non-resident.

Common IRNR return mistakes and how to avoid them

Many non-residents make mistakes that can lead to fines or surcharges. 

The most common ones are:

• Not declaring income from property rentals or sales.
• Incorrectly applying allowable deductions (e.g. not meeting the requirements to deduct expenses for rentals).
• Using the wrong tax rates, especially if a double taxation treaty applies.
• Failing to file Form 210 within the correct deadline.
• Confusing the obligation to file IRNR with IRPF, which only applies to tax residents.

Available advantages: optimize your tax situation as a non-resident

Possible exemptions and deductions available through treaties

Non-residents in Spain can benefit from tax exemptions and deductions established through double taxation agreements that Spain has signed with many countries. 

These treaties aim to avoid double taxation and may offer reduced tax rates on certain kinds of income, such as dividends, interest, and royalties. 

Always review the specific agreement between Spain and your country of residence to identify applicable tax advantages.

How to effectively apply bilateral treaties with documentary evidence

To benefit from the provisions of a bilateral treaty, you must present documentation certifying your tax residence in the other country.

For this, you need a tax residence certificate issued by the tax authorities of your country of origin, which must be valid and effective at the moment you apply the benefits of the treaty. 

It is advisable to keep detailed records of all transactions and related communications to facilitate any verification by the Spanish tax authorities.

Deductible expenses according to income type and country of residence

The possibility of deducting certain expenses depends on the type of income obtained and the specific provisions of the applicable double taxation treaty. 

The rules vary depending on the treaty and the nature of the income. For this reason, it is highly advisable to consult a specialized tax advisor to determine which expenses are deductible in your particular situation.

Cases when you pay tax as a resident of another country despite earning income in Spain

There are situations in which, even if you earn income in Spain, you may pay tax as a tax resident of another country due to the provisions of a double taxation treaty. 

These treaties generally include tie-breaker rules that determine tax residence in cases of dual residency. 

Factors such as permanent home, the center of vital interests, and nationality can influence this determination. 

If you own a business or properties: additional implications

Foreign companies and non-residents who own properties in Spain must comply with a series of specific tax obligations. 

Tax obligations for foreign companies with operations in Spain

Non-resident companies operating in Spain are also subject to the Income Tax for Non-Residents discussed at the beginning of this article. 

This tax applies to income earned in Spain and to income derived from economic activities, rental income, and capital gains. 

These companies must have a Tax Identification Number (NIF) in order to comply with their tax obligations.

Tax differences between permanent and non-permanent establishments

The taxation of a foreign company in Spain differs depending on whether or not it is considered to have a permanent establishment: 

• Permanent establishment: a company is considered to have a permanent establishment in Spain if it has facilities or fixed places of business in the country, such as offices or branches. In this case, the company is subject to Spanish Corporate Income Tax on the profits attributable to that establishment. 
• Without a permanent establishment: if the company does not have a permanent establishment, it will only be taxed on income obtained in Spain through the IRNR, applying the tax rates corresponding to each type of income.

VAT requirements and accounting for local operations

Foreign companies carrying out operations subject to Value Added Tax (VAT) in Spain must register for VAT and comply with the obligation to submit periodic tax returns. 

Tax management when hiring employees from abroad

When hiring employees to work in Spain, foreign companies must comply with the relevant tax and labor obligations, such as withholding and prepaying Personal Income Tax (IRPF) on employee payrolls as well as contributions to Social Security. 

Due to the complexity, it is better to have specialists speed up the procedures and assist you in the process.

Consequences of non-compliance: penalties and how to avoid them

Failure to meet these legal obligations may result in fines and penalties, generating extra paperwork and delays in the process.

Let’s look at some of them.

Fines for late or incorrect filing of Form 210

Late or incorrect filing of Form 210 can result in various financial penalties. 

If the return results in a refund, the Tax Agency imposes a fixed fine which is usually between 200 and 500 euros.

If a payment is due, surcharges and late-payment interest apply, varying depending on how much time has passed since the deadline. 

Late-payment interest and surcharges

Surcharges for late submission without prior notice are 1% plus an additional 1% for each full month overdue until the obligation is fulfilled. If more than a year has passed, the surcharge is 15% plus late-payment interest.

If the Tax Agency detects the non-compliance and demands payment, in addition to late-payment interest, penalties can range from 50% to 150% of the amount owed, depending on the seriousness of the infraction, plus late-payment interest.

How to correct mistakes if you have already made a wrong declaration

If you find mistakes in a return you have already filed, it is crucial to correct them as soon as possible to minimize potential penalties. 

You can file a supplementary or rectifying tax return, as appropriate, to correct the errors. Doing this proactively may reduce applicable penalties, as only surcharges and not a penalty may apply.

Importance of tax advice to avoid unnecessary penalties

Having the support of a tax advisor specialized in non-resident taxation is essential for correctly fulfilling tax obligations in Spain. 

A professional can guide you in filing Form 210 correctly, ensure deadlines are met, and help you take advantage of possible tax benefits, thus avoiding unnecessary penalties.

Stay up to date and protect your tax position in Spain

Properly managing your tax obligations as a non-resident in Spain will allow you to avoid penalties and legal complications. 

The key is to understand well the taxes that affect you, meet the deadlines for filing the relevant forms, and make use of the benefits offered by double taxation treaties and available deductions.

Having the advice of an international tax expert is an investment that can make the difference between efficient compliance and future problems. 

Remember that staying informed and acting in advance will allow you to enjoy your investments or activities in Spain with complete peace of mind and legal security.