TAXATION OF NON-RESIDENTS - (Non-resident Income Tax) - Agencia Tributaria

 
 
This publication is merely for information purposes.

                        TAXATION
                    OF NON-RESIDENTS

                        (Non-resident Income Tax)
                  INCOME ACCRUED FROM 1 JANUARY 2011

                                  TAX Agency                 V.12
                              MINISTRY OF THE FINANCE   16 January 2019
                                 AND CIVIL SERVICE
                                        Ó    Ú
SUMMARY
1.      THE TAXPAYER AND RESIDENCY....................................................................................... 4
1.A. Residency for natural persons. ................................................................................................ 4
1.B. Residency for legal persons .................................................................................................... 6

2.      OTHER PERSONAL ELEMENTS........................................................................................... 6
2.A. The representative ................................................................................................................... 7
2.B. The joint and several guarantor ............................................................................................... 7

3.      TAXATION OF THE MOST COMMON INCOME TYPES OBTAINED IN SPAIN BY
        NON-RESIDENT TAXPAYERS .............................................................................................. 8
3.A. Income from economic activity: ................................................................................................. 8
        3.A.1. Income from economic activity obtained through permanent establishment ............... 8
        3.A.2. Income from economic activity obtained without permanent establishment .............. 12
3.B. Other income ......................................................................................................................... 14
        3.B.1. Work income .............................................................................................................. 14
        3.B.2. Pensions .................................................................................................................... 16
        3.B.3. Managerial payments ................................................................................................. 18
        3.B.4. Income from liquid capital (dividends, interest, royalties) .......................................... 18
        3.B.5. Earnings from real estate........................................................................................... 21
3.C. Income charged from urban real estate assets ..................................................................... 22
3.D. Capital gains. ......................................................................................................................... 24
        3.D.1. Capital gains arising from the sale of buildings ......................................................... 24
        3.D.2. Other capital gains ..................................................................................................... 28

4.      WITHHOLDING ON INCOME NOT OBTAINED THROUGH PERMANENT
        ESTABLISHMENT ................................................................................................................ 30
4.A. Taxpayers obliged to withhold tax ......................................................................................... 30
4.B. Income types subject to withholding of tax. ........................................................................... 31
4.C. Documentation....................................................................................................................... 31
4.D. Amount of the withholding. .................................................................................................... 32
4.E. Obligation to file a return by taxpayers obliged to withhold ................................................... 32

5.      DECLARING INCOME NOT OBTAINED THROUGH PERMANENT
        ESTABLISHMENT BY NON-RESIDENTS. .......................................................................... 33
5.A. Obligation to file ..................................................................................................................... 33
5.B. Form and period for filing ....................................................................................................... 33
5.C. Documentation....................................................................................................................... 34
5.D. Ways to file using form 210 ................................................................................................... 36

6.      SPECIAL TAX ON REAL ESTATE ASSETS OF NON-RESIDENT ORGANISATIONS...... 39

7.      SPECIAL TAX ON PRIZES FROM CERTAIN LOTTERIES AND BETS. ............................ 40

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8.      OPTIONAL REGIMES........................................................................................................... 41
8.A. Workers who move to Spanish territory ................................................................................. 41
8.B. Taxpayers resident in other Member States of the European Union (EU) or of the
     European Economic area with operative exchange of tax information. ................................. 43

9.      SPECIAL PROCEDURE TO DETERMINE THE TAX WITHHELD ON WORK INCOME
        IN THE CASE OF CHANGE OF RESIDENCE ..................................................................... 44
9.A. Workers who move to Spanish territory. ................................................................................ 44
9.B. Workers who move abroad .................................................................................................... 45

APPENDICES ................................................................................................................................. 46
Appendix I.          Countries with Agreements ...................................................................................... 47
Appendix II.         Countries and territories with agreements to exchange tax information .................. 51
Appendix III. Coefficients for updating acquisition price ................................................................... 52
Appendix IV. Limits on taxes in the agreements ........................................................................... 54
Appendix V.          Tax Havens (1) ........................................................................................................ 58
Appendix VI. Member States of the European Union or of the European Economic area with
             operative exchange of tax information ..................................................................... 60
Appendix VII. Regulations .............................................................................................................. 61

                                                                      3
1. THE TAXPAYER AND RESIDENCY
The way in which natural or legal persons must pay income tax in Spain is determined by whether
they are resident or not resident in the country. Residents pay tax through Personal Income Tax
(IRPF) or Corporation Tax (IS); however, non-residents, both natural and legal persons, pay tax
through Non-resident Income Tax (IRNR).

1.A. Residency for natural persons.
INTERNAL REGULATIONS

Natural persons (private individuals) are considered to have their usual place of residence in Spain
when any of the following circumstances apply:

    They remain in Spain for more than 183 days during a calendar year. In order to determine
     the period of stay, the sporadic absences are calculated, except those where the tax
     residency in another country is proven. In the case of countries or territories labelled as tax
     havens, the Tax Administration can demand proof of stay in that tax haven over a period of
     183 days in the calendar year.

     In order to determine the period of stay, temporary stays in Spain that are the consequence
     of contractual obligations in agreements of cultural or humanitarian collaborations performed
     free of charge with the Spanish Public Administrations are not included.

    They situate the main base or centre of their activities or economic activities, directly or
     indirectly, in Spain.

Also, it is presumed, except when proven otherwise, that a taxpayer has their usual place of
residence in Spain when, using the above criteria, the not legally separated spouse and the under-
age dependant children are usually resident in Spain.

Furthermore, Spanish nationals who prove their new residency in a tax haven (Appendix V), will
continue to hold the condition of taxpayers for Personal Income Tax, both in the taxable period in
which they change their residence as well as in the four following tax periods.

A natural person will be considered as either resident or not resident during a calendar year, as a
change of residence does not imply an interruption of the taxable period.

    Special circumstances

Spanish nationals, their not legally separated spouse and their under-age children, who have their
usual place of residence abroad, will continue to be considered income tax (IRPF) payers if they
are:

    Members of Spanish Diplomatic Missions, including both the head of the mission and the
     members of the diplomatic, administrative, technical or service staff.

    Members of Spanish Consular Offices, including both the head of the office and the civil
     servants or service staff with the exception of honorary vice-consuls or honorary consular
     agents and the staff under them.

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    Holders of State official positions or employment as members of delegations and permanent
     representatives accredited to international organisations or who form part of delegations or
     missions of observers abroad.

    Working civil servants exercising an official position or job abroad, which is not diplomatic or
     consular in nature.

However, these considerations will not apply when:

a)   The people listed above are inactive civil servants or holders of official positions or
     employment and had their usual place of residence abroad prior to the acquisition of any of
     the circumstances listed above.

b)   In the case of not legally separated spouses or under-age children, when their usual place of
     residence was abroad prior to the acquisition by the spouse, father or mother of any of the
     circumstances listed above.

AGREEMENTS AND DOUBLE RESIDENCY

In the agreements to avoid double taxation signed by Spain, to define a person as resident of a
State, reference is made to the internal legislation of each State. Bearing in mind that each State
can establish different criteria, two States may consider a person as a resident.

In these cases, the agreements generally establish the following criteria to avoid a person being
considered resident in both States:

1)   A person will be resident in the State in which they have their permanent home available to
     them.

2)   If they have a permanent home available to them in both States, they will be considered
     resident in the State with which they have the closest personal and economic relations
     (centre of vital interests).

3)   If the above criteria could not be determined, they will be considered resident in the State
     where they usually live.

4)   If a person usually lives in both States or does not live in either of them, they will be
     considered resident of the State of which they are a national.

5)   Lastly, if they are a national of both States, or of neither, the responsible authorities will
     resolve the case by mutual agreement.

ACCREDITATION OF TAX RESIDENCY

Tax residency is proven by means of a certificate issued by the responsible Tax Authority of the
country concerned. The period of validity of these certificates is one year.

A person can have a residence permit or administrative residence in a State and not be considered
a tax resident therein.

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1.B. Residency for legal persons
INTERNAL REGULATIONS

An organisation is considered to be resident in Spain when it complies with any of the following
criteria:

      It was incorporated according to Spanish Law.

      It has its registered address in Spanish territory.

      Its effective head office is in Spanish territory. An organisation is considered to have its
       effective head office in Spanish territory when the management and control of the sum of its
       activities are exercised from said territory.

In the case of a change of address, the tax period will end when this change has taken place.

The Tax Administration will presume that an organisation located in a country or territory of no
taxation1, or considered to be a tax haven, has its residence in Spanish territory when its main
assets, directly or indirectly, consist of assets situated in or rights that it satisfies or exercises in
Spanish territory, or when its main activity is undertaken here, except when it proves that its
address and effective management take place in that country or territory, and also that its
incorporation and operations correspond with valid economic motives and substantive business
reasons that are distinct from the simple management of securities or other assets.

AGREEMENTS AND DOUBLE RESIDENCY

If there is an agreement, when an organisation is considered to be resident in both States, the
agreements establish in general that it will be considered as resident only in the State where its
effective headquarters is located.

ACCREDITATION OF TAX RESIDENCY

A legal person proves its tax residence in a specific country by means of a certificate issued by the
Tax Authority. The period of validity of these certificates is one year. The certificate shall be valid
indefinitely if the entity subject to tax is a foreign country, one of its political or administrative
subdivisions or its local entities.

2. OTHER PERSONAL ELEMENTS
In addition to the taxpayer, in the non-residents area, the following personal elements are of
special importance:

      The representative

      Joint and several guarantors

1   There is no taxation when the country or territory does not apply a tax identical or analogous to Personal Income Tax,
    Corporation Tax or IRNR, as applicable. Taxes considered to be identical or analogous are those intended to tax
    income, including partially, regardless of whether the taxable amount is income itself, revenues, or any other element
    indicating income. In the case of Personal Income Tax, social security payments will also be considered in the terms
    determined by the regulations. An identical or analogous tax is considered to be applied when the country or territory
    has signed an agreement with Spain to avoid the applicable international duplicate taxation, with the special
    provisions of each agreement.

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2.A. The representative
Non-resident taxpayers are obliged to appoint an individual or organisation resident in Spain to
represent them in dealings with the tax administration in the following cases:

      When they operate through permanent establishment.

      When the taxpayer is an organisation under the income apportionment system constituted
       abroad with “presence in Spanish territory”.

      When they provide services, technical assistance, installation or assembly works deriving
       from engineering contracts and, in general, from activities or financial operations performed
       in Spain not through permanent establishment, where the taxable base is the difference
       between gross income and the costs of personnel, materials and other supplies.

      When the Tax Administration so requires.

      When they are residents in countries or territories with which no effective tax information
       exchange agreement exists2, who are holders of assets situated in, or rights that are settled
       or exercised in Spanish territory, excluding securities traded in official secondary markets.

However, taxpayers may voluntarily appoint a representative with residence in Spain who can
serve as a communication channel with the Tax Administration.

The representatives of non-resident taxpayers who operate in Spain through permanent
establishment and of organisations in the special tax regime for income attribution established
abroad with a "presence in Spanish territory" will be jointly and severally responsible for the
payment of tax liabilities.

2.B. The joint and several guarantor
The following will be jointly and severally responsible for the payment of tax liabilities
corresponding to the earnings they have paid or the income from assets or the deposit or
management of rights they recommended:

      The payer of the income accrued without permanent establishment

      The depository or manager of the assets or rights not effected through permanent
       establishment

2   There is effective information exchange with countries and territories which are not considered to be tax havens, to
    which the following are applicable:
    a) An agreement to avoid double international taxation with an information exchange clause, provided that the
       agreement does not expressly establish that the level of tax information exchange is insufficient for the purposes
       of this provision;
    b) an agreement to exchange tax information; O
    c) he OECD and Council of Europe Convention on Mutual Administrative Assistance in Tax Matters, amended by
       the 2010 Protocol.
    Notwithstanding the above, the regulations can define the cases in which this exchange effectively does not exist,
    due to limitations on information exchange.

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Additionally, in the case of income payers, and in the case of depositories or managers of assets
or rights pertaining to residents in countries or territories considered tax havens (Appendix V), the
Tax Authorities may deal directly with the liable party, without the need for any prior action
attributing responsibility.

 However, joint and several responsibility will not exist when it results from the
 application of the obligation to withhold tax.

The representatives of non-resident taxpayers who operate in Spain through permanent
establishment and of organisations in the special tax regime for income attribution established
abroad with a "presence in Spanish territory" will be jointly and severally responsible for the
payment of tax liabilities.

3. TAXATION OF THE MOST COMMON INCOME TYPES
   OBTAINED IN SPAIN BY NON-RESIDENT TAXPAYERS
Non-resident natural and legal persons will be considered non-resident income taxpayers insofar
as they obtain income in Spanish territory, as defined in the tax.

In the case where the taxpayer is resident in a country with which Spain has signed an Agreement
to avoid double taxation, it will be necessary to be familiar with its provisions as in some cases
taxation is less, and in others, income may not be submitted for taxation in Spain if specific
circumstances are present.

In these cases where income cannot be taxed in Spain (exempted by agreement) or is taxed with a
limit, the non-resident taxpayer must prove residency in the country with which Spain has signed
the agreement, using the corresponding certificate of residency issued by the tax authorities of
their country, which should indicate explicitly that the taxpayer is resident in the sense given in the
agreement.

The criteria for the most significant income types to be understood as obtained in Spanish territory,
taxation according to internal Spanish regulations and agreements to avoid duplicate taxation are
given below.

3.A. Income from economic activity:
This type of income can be obtained through or without permanent establishment in Spanish
territory.

3.A.1.      INCOME  FROM ECONOMIC ACTIVITY OBTAINED THROUGH PERMANENT
            ESTABLISHMENT

INTERNAL REGULATIONS

According to Spanish law, income from economic activity through permanent establishment in
Spanish territory is understood to be obtained in Spanish territory.

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In accordance with Spanish law, a natural or legal person is considered to operate through
permanent establishment when they have the following in Spanish territory:

Head office                                        Oil or gas wells
Branch offices                                     Quarries
Offices                                            Farming, forestry, livestock operations or any
Factories                                          other place of exploration or extraction of
Workshops                                          natural resources.
Warehouses, shops or other establishments          Construction, installation or assembly works
Mines                                              whose duration exceeds six months.

In short, when a non-resident has available in Spain, in any capacity, facilities or places of work of
any type in which they usually perform all or some of their business or when they act in Spain
through an agent authorised to contract on behalf of and for the account of the non-resident person
or organisation, provided they habitually exercise these powers, they are considered to be non-
residents acting through permanent establishment.

AGREEMENT

When an agreement to avoid duplicate taxation is applicable, the definition of permanent
establishment in the agreement must be taken into account. This is normally more restrictive than
in Spanish law.

Also, as a general rule agreements confirm the authority of the State where the permanent
establishment is located to levy tax, ruling that business profits, if obtained through permanent
establishment situated in Spain, or income from professional activity, if obtained through a fixed
base, can be subject to taxation in Spain, in which case they will be taxed according to domestic
Spanish law.

TAXATION

According to Spanish law, non-residents who obtain income through permanent establishment in
Spain will pay tax on the totality of the income attributable to this establishment, wherever the
income is obtained.

Attributable income comprises earnings from the economic activities or operations undertaken by
this permanent establishment, those derived from elements related to the permanent
establishment and the liable capital gains or losses derived from the related elements.

Liable capital gains or losses are those linked functionally to the undertaking of the activity. Liable
capital gains or losses are considered to be those reassigned within the three tax periods following
the time when they were made.

The assets representative of holdings in the capital of an organisation are only considered liable
capital gains or losses when the permanent organisation is a branch office registered in the
Companies Register, these assets are reflected in the accounts of the permanent organisation
and, being a permanent organisation that can be considered to be parent organisation, this
permanent organisation has a corresponding organisation of material resources and staff available
to direct and manage these shares.

The taxable base of the permanent establishment will be determined according to the provisions
of the general Corporation Tax system, applying the system of compensation for negative taxable
bases, with the following special areas of activity:

     Application of the rules for related party transactions performed by the permanent
      establishment with the head office, or with another permanent establishment of the same

                                                  9
head office and with other individuals or organisations connected to the head office or its
     permanent establishments, either those situated in Spanish territory or abroad.

    Generally, non-deductibility of the payments that the permanent establishment makes to the
     head office for fees, interest, commissions, technical assistance services and for the use or
     assignment of assets or rights. (See section “Estimated outgoings and attributed income
     from the internal operations of a PE“)

    Deductibility of part of the general management and administration overheads charged by
     the head office to the permanent establishment, as long as they are reflected in the accounts
     of the permanent establishment and are charged continually and rationally. For the
     determination of these expenses, it is foreseen that the taxpayers can submit proposals to
     the Tax Administration for the valuation of the part of the general management and
     administration overheads that will be deductible.

    From 1 January 2015, the taxable base will include the difference between the market value
     and the book value of the following assets:

     a) Assets forming part of a permanent establishment located in Spanish territory which
     ceases trading.

     b) Assets which had previously formed part of a permanent establishment located in Spanish
     territory and which are transferred abroad.

     The payment of the tax debt resulting from the application of b) above, in the case of assets
     transferred to a member State of the European Union, or of the European Economic Area
     with an effective exchange of tax information, will be deferred by the Tax Agency at the
     request of the taxpayer, until the date on which the assets in question are transferred to third
     parties.

Estimated outgoings and attributed income from the internal operations of a permanent
establishment.

From 1 January 2015, in the cases where, due to the application of an agreement to avoid double
international taxation signed by Spain, the deduction of estimated outgoings from the internal
operations of its head office or one of its permanent establishments located outside Spanish
territory is permitted for the purposes of determining the income of a permanent establishment
located in Spanish territory, the following will be taken into account:

1. The general non-deductibility of the payments that the permanent establishment makes to the
head office for fees, interest, commissions, technical assistance services and for the use or
assignment of assets or rights, will not be applicable.

2. The income attributed to the head office or any of the permanent establishments located outside
Spanish territory which corresponds to the aforementioned estimated outgoing will be considered
to be income obtained in Spanish territory, but not through a permanent establishment.

3. The tax corresponding to attributed income will accrue on 31 December each year.

4. The permanent establishment located in Spanish territory will have to make withholdings and
interim payments on the attributed income.

5. Article 18 of the Corporation Tax Act will be applicable to the internal operations of a permanent
establishment located in Spanish territory with its head office or any of its permanent
establishments located outside Spanish territory, to which this additional provision is applicable.

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Tax Rate

Until 31 December 2014

The general tax rate: 30%

From 1 January 2015

For tax periods beginning on or after 1 January 2015, the corresponding tax rate of those set out in
the Corporation Tax regulations will be applied.

The general tax rate will be 25%. However, 28% will be applicable in the 2015 tax period.

Deductions and refunds

Permanent establishments can apply the same deductions and refunds as Corporation Tax payers
to their net tax liability.

Tax period and accrued amount

The tax period coincides with the financial year declared, without exceeding twelve months. The
tax becomes payable on the last day of the taxable period.

Permanent establishments are obliged to comply with the same accounting obligations, registered
or formal, that are required of resident organisations.

Supplementary taxation

When permanent establishments of non-resident organisations (not natural persons) transfer
income abroad, a supplementary tax will be due on the quantities transferred.

 Year of return    2011     2012-2014                   2015                  2016 and following

                                            Up to 01-01        Up to 12-07
                                            from 11-07         from 31-12
    Tax rate       19%         21%                                                   19%
                                                20%             19,50%

However, this tax will not be applicable to those permanent establishments whose head office
has its tax residence in another Member State of the EU (Appendix VI), except in the case of a
country or territory considered as a tax haven, or in a State that has signed an Agreement for
avoiding double taxation with Spain, in which no other situation is expressly established, provided
that there exists reciprocal treatment.

The supplementary tax will be deposited using form 210 in the first twenty days of the months of
April, July, October or January; the payment deadline is that immediately following the close of the
natural quarter in which the income was transferred abroad..

Tax withheld (retenciones) and deposits on account (ingresos a cuenta)

Permanent establishments are subject to the same regime of tax withheld at source as
organisations subject to Corporation Tax.

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Staged payments (pagos fraccionados)

Permanent establishments are obliged to make staged payments towards the tax under the same
conditions as the organisations subject to corporation tax. The formal obligations relating to staged
payments are:

    Filing periods: The first 20 calendar days of the months of April, October and December.

    Form: 202
     When no deposit need be made as a staged payment, filing of form 202 is not obligatory,
     except for permanent establishments classified as Large Companies, which must file the
     form, even if no deposit is required, which will lead to the existence of negative self-
     assessments.

Tax return

Permanent establishments must file the return for the tax on the same forms and in the same time
periods as resident organisations subject to Corporation Tax.

    Period: 25 calendar days following the 6 months after the conclusion of the tax period.

    Form: 200

3.A.2.       INCOME  FROM ECONOMIC ACTIVITY OBTAINED WITHOUT PERMANENT
             ESTABLISHMENT

INTERNAL REGULATIONS

According to Spanish law, income from economic activity without permanent establishment in
Spanish territory is understood to be obtained in Spanish territory in the following cases:

    When the economic activity is carried out in Spanish territory.

     However, income obtained from the installation or assembly of machinery or facilities coming
     from abroad is not considered to be carried out in Spanish territory when these operations
     are performed by the supplier and their amount does not exceed 20% of the cost price; nor
     those arising from the international buying and selling of goods, including additional
     expenses and brokerage fees.

    When income is from providing services in Spanish territory. When these provisions of
     services partially support economic activities performed in Spanish territory, only the income
     supporting the activity performed in Spain will be considered to have been obtained in Spain.

    When income derives from the personal performance of artists and sports people in Spanish
     territory, even when they are received by a different person or organisation.

AGREEMENT

When an agreement to avoid duplicate taxation is applicable, as a general rule, and without
prejudice to the particular characteristics of the different agreements, most agreements treat
income from economic activities or operations without permanent establishment as follows:

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       Company profits: Normally, company profits obtained without permanent establishment can
        only be subject to taxation in the taxpayer's country of residence and are exempt in Spain,
        due to the application of the agreement.

       Professional activities: In general, as in the previous case, the Agreements attribute the
        authority to levy taxes on this income, obtained without a fixed base in Spanish territory, to
        the country in which the taxpayer is resident, and they are exempt in Spain; however, some
        agreements establish tax authority for Spain under certain circumstances (due to the
        duration of the stay, the amount of income, etc.).

       Artistic and Sports activities: As a general rule, income for performances carried out in
        Spanish territory can be taxed in Spain in application of its domestic law. However, there are
        special circumstances in various Agreements with respect to this type of income.

TAXATION

When, in keeping with the internal regulations and, if applicable, the agreement, the income from
economic activity carried out without permanent establishment can be subject to taxation in Spain,
the general tax rate will be applicable.

                                                      2015
     Year of
                 2011 2012-2014                                                 2016 and following
     return                          Residents in the EU,          Other
                                     Iceland and Norway          taxpayers

                                                                             Residents in the EU,
                                    Up to 11-07:   From 12-07:               Iceland and Norway: 19%
Tax rate         24%     24,75%                                    24%
                                        20%          19,50%
                                                                             Other taxpayers: 24%

In general, the taxable base will be the difference between the gross revenues and the costs of
personnel, materials used in the work, and supplies.

In the case of taxpayers resident in another member State of the European Union, and for accruals
from 1 January 2015, in a State of the European Economic Area with an effective exchange of
information (see Appendix VI), the following expenses can be deducted in order to determine the
taxable base:

A)      If the earnings have been accrued up to 31 December 2014: Expenses for each income
        category listed in Act 35/2006 on Personal Income Tax may be deducted from income
        obtained since 1 January 2010, provided the taxpayer accredits that these are directly linked
        to income obtained in Spain, and can accredit a direct and indissoluble link to the activity
        pursued in Spain

B)      If the earnings have been accrued since 1 January 2015, the following shall be deductible:

        1.     In the case of natural persons (private individuals), expenses listed in Law 35/2006 of
               28 November, the Personal Income Tax Act, provided that the taxpayer accredits that
               these are directly linked to income obtained in Spain, and can accredit a direct and
               indissoluble link to the activity pursued in Spain

        2.      In the case of corporations, deductible expenses listed in the Corporation Tax Act,
               provided the taxpayer accredits that these are directly linked to income obtained in
               Spain, and can accredit a direct and indissoluble link to the activity pursued in Spain.

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The taxable base corresponding to the earnings deriving from reinsurance operations will be
constituted by the amounts of the premiums paid, in reinsurance, to the non-resident reinsurer.
This income will be liable for a special tax rate of 1.5%.

Deductions: Only the following deductions are allowed from the taxable income:

-    Deductions for donations, under the conditions described in the Income Tax Act and in the
     Act on the tax regime of non-profit organisations and of tax incentives for patronage.

-    Tax withholdings that have been applied on the taxpayer's income.

3.B. Other income

3.B.1.     WORK INCOME

INTERNAL REGULATIONS

According to Spanish law, work income is understood to be obtained in Spanish territory in the
following cases:

    In general, when this income is derived directly or indirectly from a personal activity
     performed in Spanish territory.

    Public remuneration paid by the Spanish Government, except where the work is wholly
     performed abroad and such income is subject to a personal tax abroad.

    Remuneration of employees of ships and aircraft in international traffic paid by resident
     employers or organisations or by permanent establishments located in Spanish territory,
     except where the work is performed wholly abroad and such income is subject to a personal
     tax abroad.

Also, according to Spanish law, certain income types are exempt:

    Public grants and grants awarded by non-profit organisations falling under the special regime
     governed by Section II of Law 49/2002, of 23 December, on the tax regime of non-profit
     organisations and tax incentives for patronage, and from 1 January 2015, grants awarded by
     bank foundations governed by Section II of Law 26/2013, of 27 December, on the social work
     activities of building societies and bank foundations, to be used for official courses of study in
     Spain or abroad, at all levels of the educational system. Likewise, public grants and those
     awarded by non-profit organisations, and from 1 January 2015, the bank foundations
     mentioned above, for research in the field described by Royal Decree 63/2006, of 27
     January, approving the Statute of research staff in training, and research grants awarded by
     those organisations to civil servants and other Public Administration personnel, and to
     university teachers and research staff.

    Scholarships and other amounts received by natural persons, paid by Public Administrations,
     by virtue of international cultural, educational and scientific agreements or treaties or by
     virtue of the annual international co-operation plan approved by the Council of Ministers.

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AGREEMENT

In the case of residents in countries which have signed an agreement to avoid duplicate taxation
with Spain, usually the income earned for employment performed in Spain can be taxed by the
Spanish State, except if these three circumstances coincide: That the non-resident does not
remain in Spain more than 183 days during the tax year in question, that the remunerations are
paid by a non-resident employer and that these remunerations are not supported by a permanent
establishment or a fixed base that the employer has in Spain.

TAXATION

The income obtained from sources other than a permanent establishment must be declared
separately for each partial or total accrual of income subject to tax.

Generally, the taxable base is the whole amount, i.e. without deduction for any expenses.

In the case of taxpayers resident in another member State of the European Union, and for accruals
from 1 January 2015, in a State of the European Economic Area with an effective exchange of
information (see Appendix VI), the following expenses can be deducted in order to determine the
taxable base:

A)      If the earnings have been accrued up to 31 December 2014: Expenses for each income
        category listed in Act 35/2006 on Personal Income Tax may be deducted from income
        obtained since 1 January 2010, provided the taxpayer accredits that these are directly linked
        to income obtained in Spain, and can accredit a direct and indissoluble link to the activity
        pursued in Spain

B)      If the earnings have been accrued since 1 January 2015, the following shall be deductible:

        1.     In the case of natural persons (private individuals), expenses listed in Law 35/2006 of
               28 November, the Personal Income Tax Act, provided that the taxpayer accredits that
               these are directly linked to income obtained in Spain, and can accredit a direct and
               indissoluble link to the activity pursued in Spain

        2.     In the case of corporations, deductible expenses listed in the Corporation Tax Act,
               provided the taxpayer accredits that these are directly linked to income obtained in
               Spain, and can accredit a direct and indissoluble link to the activity pursued in Spain.

When, according to Spanish law, and if applicable the agreement, work income can be subject to
taxation in Spain, it will be paid at the general tax rate.

                                                     2015
     Year of
                 2011 2012-2014                                                 2016 and following
     return                        Residents in the EU,
                                                        Other taxpayers
                                   Iceland and Norway

                                                                             Residents in the EU,
                                   Up to 11-07: From 12-07:                  Iceland and Norway: 19%
Tax rate         24%     24,75%                                   24%
                                       20%        19,50%
                                                                             Other taxpayers: 24%

        Special cases:

        -      Earnings from work by non-resident individuals in Spanish territory, provided that they
               are not income tax payers, who perform their services in Diplomatic Missions and
               Spanish Consular Representations abroad, when there are no specific rules deriving
               from International Treaties to which Spain is party, are taxed at a rate of 8%.

                                                   15
-      Work income received by non-resident natural persons by virtue of a fixed term
              contract for seasonal workers, in accordance with labour regulations, will be taxed at a
              rate of 2%.

Deductions: Only the following deductions are allowed from the taxable income:

      Deductions for donations, under the conditions described in the Income Tax Act and in the
       Act on the tax regime of non-profit organisations and of tax incentives for patronage.

      Tax withholdings that have been applied on the taxpayer's income.

3.B.2.        PENSIONS

INTERNAL REGULATIONS

According to Spanish law, pensions and other similar benefits are understood to be obtained in
Spanish territory in the following cases:

      When these derive from employment in Spain.

      When they are paid by a resident person or organisation or by a permanent establishment
       situated in Spanish territory.

Also, Spanish law includes some cases of exempt pensions:

-      Old age pensions recognised by Royal Decree 728/1993, of 14 May, establishing old age
       pensions in favour of Spanish emigrants.3

-      Pensions which are exempted for residents by the Personal Income Tax Act, such as:
       Pensions recognised by Social Security as a consequence of absolute permanent disability
       or severe disability or for retired public servants as a consequence of being unfit for work or
       permanent disability.

AGREEMENT

If an agreement to avoid duplicate taxation is applicable, it must be taken into account that
pensions, understood as payments due to formerly performed employment, are treated differently if
they are public or private. A public pension is understood to be that received for being a former
public employee; i.e. that which is received for services provided to a State, to one of its political
subsections or a local organisation. A private pension is understood to be any other type of
pension received by being a former private employee, as distinct from that defined as a public
employee.

-      For private pensions, most of the Agreements establish the right to impose taxation
       exclusively in favour of the State of residence of the taxpayer.

-      In general for public pensions, the State where the pension comes from has the right to tax it,
       except in the case of residents and nationals of the other State, in which case the right to tax
       will correspond to that State.

However, the particular characteristics of each agreement should be consulted.

3   The present regulations for old age pensions are contained in Royal Decree 8/2008, of 11 January, regulating
    benefits according to need for Spanish citizens resident abroad and returned, derogating Royal Decree 728/1993, of
    14 May, which established old age pensions for Spanish emigrants.

                                                         16
TAXATION

When, according to Spanish law and, where applicable, the agreement, the pension is subject to
Spanish tax, tax will be paid according to the following tax rate scale:

             Annual pension amount                             Charge               Remainder of pension               Rate applicable
                      ---                                        ---                        ---                              ---
                 Up to (euros)                                  euros                  Up to (euros)                      Percent
                             0                                     0                            12,000                       8%
                           12,000                                 960                            6,700                      30%
                           18,700                                2,970                         and over                     40%

Deductions: Only the following deductions are allowed from the taxable income:

        Deductions for donations, under the conditions described in the Income Tax Act and in the
         Act on the tax regime of non-profit organisations and of tax incentives for patronage.

        Tax withholdings that have been applied on the taxpayer's income.

    Example:

    Mr. J.C.G., resident in Paraguay (a country which does not have an agreement with Spain) during 2011, receives a
    retirement pension paid by Spanish Social Security, which yields a gross monthly amount of €1,100. He receives 12
    payments in the year.

    Determine the amount of the corresponding tax on the pension obtained by this taxpayer.

    Solution:

    1.   Determination of the annual pension amount for the application of the tax scale.

         1,100 x 12 = 13,200

    2.   Application of the tax scale.

         Up to 12,000 at 8% .................................................................................... 960

         Remainder 1,200 (13,200 – 12,000) at 30% .............................................. 360

         Resulting charge..................................................................................... 1,320

    3.   Determination of the average tax rate.

         Average tax rate = (1,320 / 13,200) x 100 = 10%

    4.   Determination of the amount of tax corresponding to the monthly pension.

         1,100 x 10% = €110

    Note: As this is income subject to and not exempt from non-resident income tax, the organisation making the
    pension payment (Social Security), as the Withholder organisation, should withhold tax of an amount equivalent to
    the tax due by the taxpayer. i.e. on the gross amount of the pension (€1,100), a withholding percentage of 10%
    (€110) will be applied, resulting in a net amount to be received by the taxpayer, once the tax has been deducted of
    €990.

                                                                                17
3.B.3.        MANAGERIAL PAYMENTS

INTERNAL REGULATIONS

According to Spanish law, payments to managers and members of boards of directors, of boards
that either representative bodies of an organisation, are understood to be obtained in Spanish
territory when paid by an organisation resident in Spanish territory.

AGREEMENT

In general, agreements to avoid duplicate taxation rule that shares, per diems and other similar
benefits which taxpayers obtain thanks to being members of a board of directors of a company
resident in Spain, can be subject to taxation by the Spanish State.

TAXATION

These benefits are taxable at the general tax rate.

                                                   2015
    Year of
                2011 2012-2014                                               2016 and following
    return                        Residents in the EU,          Other
                                  Iceland and Norway          taxpayers

                                                                           Residents in the EU,
                                 Up to 11-07:   From 12-07:                Iceland and Norway: 19%
Tax rate        24%   24,75%                                    24%
                                     20%          19,50%
                                                                           Other taxpayers: 24%

Deductions: Only the following deductions are allowed from the taxable income:

      Deductions for donations, under the conditions described in the Income Tax Act and in the
       Act on the tax regime of non-profit organisations and of tax incentives for patronage.

      Tax withholdings that have been applied on the taxpayer's income.

3.B.4.        INCOME FROM LIQUID CAPITAL (DIVIDENDS, INTEREST, ROYALTIES)

INTERNAL REGULATIONS

According to Spanish law, the following work income is understood to be obtained in Spanish
territory:

      Dividends and other income derived from participation in funds belonging to organisations
       resident in Spain.

      Interest and other income obtained by assignment to others of own capital paid by resident
       individuals or entities or by a permanent establishment situated in Spanish territory or
       repayments of loans of capital used in Spanish territory.

                                                 18
      Royalties4 paid by resident individuals or organisations or by permanent establishments
       situated in Spanish territory or which are used in Spanish territory.

In relation to this type of income, Spanish law provides several cases of exemption.

For example, in the case of interest, the following are exempt:

      Those obtained by residents in a European Union country, as long as they are not obtained
       through a tax haven.

      Income from Public Debt.

      Income from non-resident accounts.

Dividends are exempt (except when received through a tax haven):

      The dividends and shares in profits obtained by individuals resident in another Member State
       of the European Union or in countries or territories with which there exists an effective
       exchange of tax information, with a limit of €1,500, which will be applicable to the totality of
       the earnings obtained during the calendar year. (This exemption applies exclusively to
       dividends accrued up to 31 December 2014.)

      Those distributed by subsidiary companies resident in Spain to their parent companies5
       resident in other EU Member States (appendix VI) or to the PEs of the parent companies
       located in other EU Member States, or to parent companies resident in the States of the
       European Economic Area or the PE of these parent companies located in other States with
       operative exchange of tax information (appendix VI), provided that certain conditions are
       met. For this exemption to be applicable, the parent company must not have its residence or
       the permanent establishment must not be situated in a country or territory defined as a tax
       haven (Appendix V).

      The dividends and shares in profits obtained from pension funds equivalent to those
       regulated in the Pension Plans and Funds Act, by residents in another member State of the
       European Union or by permanent establishments of these institutions located in another
       member State of the EU or residents in the States forming the European Economic Area with
       operative exchange of tax information (appendix VI).

      Dividends and profit sharing obtained by unit trust institutions regulated by Directive
       2009/65/EC of the European Parliament and of the Commission; or residents of the States
       comprising the European Economic Area with operative exchange of tax information
       (appendix VI); this is a partial exemption, given that the taxation cannot be less than the
       result of applying the tax rate paid by Unit Trust Institutions based in Spanish territory.

Effective from 1 July 2011, in the particular case of royalties between associate companies paid to
a company resident in a European Union Member State or to a permanent establishment of said
company in another EU Member State, these will be exempt provided that certain requirements
are fulfilled.

4   Royalties are understood to be the sums paid for the use or licence to use rights to works of literature, art, science, or
    cinema, patents, trademarks, secret drawings, plans, formulas or procedures, computer programmes, information
    relating to industrial, commercial or scientific experiments, personal rights which can be ceded such as image rights,
    industrial, commercial or scientific equipment, and any similar right.
5   A parent company is, from 1 January 2011, a company which holds a share in another company of 5%, or (as from 1
    January 2015) where the purchase value of its holding exceeds 20 million euros. The investee company is the
    subsidiary.

                                                             19
AGREEMENT

When an agreement is applicable, in relation to dividends, interest and royalties, this must be
consulted specifically. In general, the regime followed is of shared taxation between Spain and the
State where the taxpayer is resident; in this case, Spain has the right to impose tax on these
earnings, but with the limitation on tax indicated in each Agreement (Appendix IV).

TAXATION

The income obtained from sources other than a permanent establishment must be declared
separately for each partial or total accrual of income subject to tax.

Generally, the taxable base is the whole amount, i.e. without deduction for any expenses.

In the case of taxpayers resident in another member State of the European Union, and for accruals
from 1 January 2015, in a State of the European Economic Area with an effective exchange of
information (see Appendix VI), the following expenses can be deducted in order to determine the
taxable base:

A)      If the earnings have been accrued up to 31 December 2014: Expenses for each income
        category listed in Act 35/2006 on Personal Income Tax may be deducted from income
        obtained since 1 January 2010, provided the taxpayer accredits that these are directly linked
        to income obtained in Spain, and can accredit a direct and indissoluble link to the activity
        pursued in Spain

B)      If the earnings have been accrued since 1 January 2015, the following shall be deductible:

        1.     In the case of natural persons (private individuals), expenses listed in Law 35/2006 of
               28 November, the Personal Income Tax Act, provided that the taxpayer accredits that
               these are directly linked to income obtained in Spain, and can accredit a direct and
               indissoluble link to the activity pursued in Spain

        2.      In the case of corporations, deductible expenses listed in the Corporation Tax Act,
               provided the taxpayer accredits that these are directly linked to income obtained in
               Spain, and can accredit a direct and indissoluble link to the activity pursued in Spain.

The tax rate applicable to dividends and interest is.

 Year of return        2011      2012-2014                   2015                  2016 and following

                                                  Up to 01-01       Up to 12-07
                                                  from 11-07        from 31-12
      Tax rate         19%         21%                                                    19%
                                                     20%             19,50%

The tax rate applicable to royalties is the general.

                                                      2015
     Year of
                 2011 2012-2014                                                   2016 and following
     return                         Residents in the EU,           Other
                                    Iceland and Norway           taxpayers

                                                                              Residents in the EU,
                                   Up to 11-07:    From 12-07:                Iceland and Norway: 19%
Tax rate         24%    24,75%                                      24%
                                       20%           19,50%
                                                                              Other taxpayers: 24%

                                                     20
Particular case: In the case of royalties between associate companies, paid to a company
      resident in a European Union Member State or to a permanent establishment of said
      company in another EU Member State, until 30 June 2011, 10%, provided that certain
      requirements are fulfilled (exempt from 1 July 2011).

Deductions: Only the following deductions are allowed from the taxable income:

     Deductions for donations, under the conditions described in the Income Tax Act and in the
      Act on the tax regime of non-profit organisations and of tax incentives for patronage.

     Tax withholdings that have been applied on the taxpayer's income.

Reduction under agreement: If an agreement is applicable which sets a limit on the taxation of
dividends, interest or royalties, the taxpayer can take this limit into account by reducing the liability.

3.B.5.      EARNINGS FROM REAL ESTATE

INTERNAL REGULATIONS

According to Spanish law, income derived directly or indirectly from property assets in Spanish
territory or rights relating to them is considered to be obtained in Spanish territory.

AGREEMENT

The Agreements signed by Spain attribute power to tax the income from real estate assets to the
State where the real estate is situated. In accordance with the agreements, income from property
assets can be subject to taxation in the State where they are located, whether the income derives
from direct use or usufruct, from leasing or from any other way in which they are exploited.
Therefore, the income derived from real estate assets situated in Spain can be taxed in
accordance with Spanish law.

TAXATION

The income obtained from sources other than a permanent establishment must be declared
separately for each partial or total accrual of income subject to tax.

Generally, the taxable base is the whole amount, i.e. without deduction for any expenses.

In the case of leased properties, the earnings are calculated by taking the gross income that is
received from the tenant, including all the assets transferred with the building and excluding the
Value Added Tax.

If the building is only let for part of the year, the income must be determined as in the previous
paragraph for the months during which it is let and for the rest of the year, the income will be the
proportional part of the assessed value (1.1%, or 2% of the rateable value, if applicable).

In the case of taxpayers resident in another member State of the European Union, and for accruals
from 1 January 2015, in a State of the European Economic Area with an effective exchange of
information (see Appendix VI), the following expenses can be deducted in order to determine the
taxable base:

                                                   21
A)      If the earnings have been accrued up to 31 December 2014: Expenses for each income
        category listed in Act 35/2006 on Personal Income Tax may be deducted from income
        obtained since 1 January 2010, provided the taxpayer accredits that these are directly linked
        to income obtained in Spain, and can accredit a direct and indissoluble link to the activity
        pursued in Spain

B)      If the earnings have been accrued since 1 January 2015, the following shall be deductible:

        1.     In the case of natural persons (private individuals), expenses listed in Law 35/2006 of
               28 November, the Personal Income Tax Act, provided that the taxpayer accredits that
               these are directly linked to income obtained in Spain, and can accredit a direct and
               indissoluble link to the activity pursued in Spain

        2.      In the case of corporations, deductible expenses listed in the Corporation Tax Act,
               provided the taxpayer accredits that these are directly linked to income obtained in
               Spain, and can accredit a direct and indissoluble link to the activity pursued in Spain.

The applicable tax rate is the general.

                                                      2015
     Year of
                 2011 2012-2014                                                 2016 and following
     return                          Residents in the EU,          Other
                                     Iceland and Norway          taxpayers

                                                                             Residents in the EU,
                                    Up to 11-07:   From 12-07:               Iceland and Norway: 19%
Tax rate         24%     24,75%                                    24%
                                        20%          19,50%
                                                                             Other taxpayers: 24%

Deductions: Only the following deductions are allowed from the taxable income:

       Deductions for donations, under the conditions described in the Income Tax Act and in the
        Act on the tax regime of non-profit organisations and of tax incentives for patronage.

       Tax withholdings that have been applied on the taxpayer's income.

    In the case where buildings are let and the individual has available in Spain for managing this
    activity a full-time contracted employee, the activity performed can be considered to be a
    business performed through permanent establishment and must be taxed in accordance with
    the rules described in the section on "Income from economic activity obtained through
    permanent establishment".

3.C. Income charged from urban real estate assets
INTERNAL REGULATIONS

According to Spanish law, natural persons that are non-resident taxpayers who own urban
buildings in Spanish territory, used for their own use rather than for economic activity, or vacant,
are subject to non-resident income tax for the charged income corresponding to these buildings.

                                                    22
AGREEMENT

In accordance with the agreements to avoid duplicate taxation, income from property assets can
be subject to taxation in the State where they are located, whether the income derives from direct
use or usufruct, leasing or from any other way in which they are exploited.

TAXATION

The taxable base corresponding to the charged income from urban property assets in Spanish
territory will be determined according to Personal Income Tax regulations. For these purposes,
income must be calculated the amount found by applying the corresponding percentage to the
rateable value of the property, which appears on the Property Tax (IBI) receipt:

      Accruals up to 31 December 2014

           Buildings whose property register value has been reviewed or changed with
            effect from 1 January 1994 ....................................................................................... 1.1%

           Other buildings ............................................................................................................ 2%

      Accruals from 1 January 2015

           Buildings whose rateable value has been reviewed or changed and has come
            into effect within the tax period or the within the ten previous tax periods ............... 1.1%

           Other buildings ............................................................................................................ 2%

Tax will be liable for this taxable base without deducting expenses of any kind.

The resulting amount is understood to refer to the full calendar year. The number of days is
proportionally reduced when ownership has not been throughout the entire year or when it has
been rented for part of the year.

If, at the time of accrual of the tax (31 December), the building has no rateable value or none has
been reported to the owner, the taxable base for the property will be 50% of the higher of the
following: The price, consideration or cost price of the property, or the value of the same
established by the administration for other taxes. In these cases, the percentage shall be 1.1%.

In the case of buildings under construction and in cases in which the building cannot be used for
town planning reasons, no income whatsoever shall be considered.

In the case of time-sharing, the tax is payable by the holder of the right in rem, distributing the
property register value on the basis of the annual period of use. If, at the time of accrual of the tax,
the building has no property register value, or none has been notified to the owner, the purchase
price of the right to use will be taken as the taxable base. The taxation of property income for
owners of property time-share rights shall not apply when the duration is no longer than two weeks
a year.

If the building is owned by several natural persons, the income from the building or usufruct is
considered obtained by each owner, proportional to their ownership share.

                                                                 23
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