Non-resident property owners in Spain are required to pay IRNR tax. It covers income from real estate, including so-called fictitious income, but does not involve large amounts. Recently, the European Commission has sided with non-residents – including Poles whose main residence is in Spain – on this issue. The EC has called on the government in Madrid to amend its legislation to withdraw from charging non-residents in this way.
What is the IRNR?
Impuesto sobre la Renta de no Residentes is a tax that covers people who are not residents of Spain. Under current legislation, residents – including tax residents – are those who live in the country for more than 183 days a year. For owners of houses or flats, this means that they have to pay IRPF on so-called fictitious income also if the property is neither their main residence nor rented out.
The IRNR tax does not involve large amounts of money – it is calculated on the cadastral value of the property. In Andalusia, it is usually 30-60% of the market value – this depends on the location, the municipality and the date it was last updated. For example, a house worth €1 million may have a cadastral value of €400,000. If it has been updated within 10 years, the IRNR taxable rate is 1.1%, and if it has not been updated, 2%. In the first case and based on a 19% EU tax rate, the tax will be €836 per year.
See also:
How have holiday rental regulations changed in Spain?
Renting a property in Spain and taxes in Poland. How to settle the tax?
EC on the side of property owners
There are now many indications that the IRNR may cease to apply. There has been a public debate for many years about the legitimacy of its calculation for non-residents, which has also involved the European Commission. It has accused Spain of discriminating against foreigners and violating fundamental EU principles. As a first step, Brussels has called on the government in Madrid to amend the regulation of the Impuesto sobre la Renta de no Residentes and to withdraw from charging it to non-residents.
The European Commission has also indicated that the continued operation of the IRNR tax could discourage investment or at least a temporary move to the Iberian Peninsula, thus creating an obstacle to the free movement of people and capital. Proceedings in this case were initiated in June and Spain has only two months to amend the legislation – otherwise the case will go to the Court of Justice of the European Union.
