Avoiding Double Taxation for Non-Resident Property Owners in Spain

Many non-resident property owners in Spain face the concern of double taxation, where taxes are paid on the same income in both Spain and their home country. Understanding and leveraging Double Taxation Agreements (DTAs) can mitigate this issue effectively.

Tax Obligations for Non-Residents 

As a non-resident owning property in Spain, you are required to:

• Declare and pay taxes on any income generated from your Spanish properties, such as rental income, capital gains or imputed income (deemed rental income from properties not actually rented out).
• File Form 210 with the Spanish Tax Agency, which is essential for official tax documentation and future deductions.

Despite the income typically being taxed in Spain, property owners must also be aware of their home country's tax regulations. The general principle upheld by DTAs is that while the income may be taxed in the country of origin (Spain, in this case), your home country can also tax this income. However, you can often claim a deduction for the taxes already paid in Spain, thus avoiding double taxation.

Double Taxation Agreements

Double Taxation Agreements (DTAs) play a crucial role in determining where income derived from real estate is taxed. The core principle of these agreements is that income from real estate should be taxed in the country where the property is situated. For non-resident property owners in Spain, this means that any income generated from their Spanish properties—whether from rental income or imputed income—is typically taxed in Spain.

In particular, the vast majority of DTAs assign the right to tax real estate income to the country where the property is located. In the case of properties in Spain, Spanish tax laws apply to this income.

However, DTAs are also designed to prevent the complication of being taxed in two countries and they establish clear rules that allow the property owner's home country to tax the same income but also to grant a tax credit or deduction for the taxes paid in Spain, thus avoiding double taxation.

This arrangement ensures that non-resident property owners are not unduly burdened by double taxation and can benefit from systematic tax relief provided under the terms of the relevant DTAs between Spain and their home countries.

Double Taxation Deduction

Following international tax rules, double taxation must be corrected in the country of tax residence. For this purpose, it is necessary to justify the payments made in another jurisdiction. Filing Form 210 helps document your tax payments in Spain, serving as proof for tax deductions in your home country. It is important to maintain copies of all official tax forms and receipts. These documents are vital for any future tax-related needs or audits.

It is important to note that only the non-resident tax can be deducted from the home country income tax. It is not possible to claim a tax credit for local taxes such as IBI, SUMA, or rubbish collection tax, since these local taxes are not based on income but on ownership and they are not covered by the DTAs.

At IberianTax, we specialize in simplifying the tax declaration process for non-resident property owners in Spain. We ensure that your declarations are accurately submitted within 72 hours, providing copies of all official forms for your records and future reference. All forms are duly stored in your personal dashboard and are available to you at any time and from anywhere.

Navigating tax obligations in Spain as a non-resident doesn't have to be a daunting task. With the right knowledge and support from IberianTax, you can efficiently manage your tax duties and avoid the complications of double taxation, letting you enjoy the benefits of your property investment worry-free.