Key differences between IBI Tax and Non-Resident Tax for properties in Spain

As a non-resident property owner in Spain, understanding the various taxes that apply to your property is crucial. Among these, the Local Property Tax (IBI) and Non-Resident Income Tax (NRIT - Modelo 210), are particularly important. Though both taxes relate to property ownership, their bases, management and application are significantly different.

1. Tax Administration

The Non-Resident Income Tax is managed by the Spanish Tax Agency (Agencia Tributaria), a national body, and requires self-assessment by the taxpayer. This means the property owner is responsible for calculating, declaring, and paying this tax without prior review by the Agency.

Conversely, the Property Tax (IBI) is collected not only by the respective Municipalities but also by specific entities in certain regions, such as SUMA in Alicante, Patronato de Recaudación in Malaga, or ATIB in the Balearic Islands. These entities issue a payment notice indicating the amount the owner needs to pay, based on the calculation performed by the entity.

2. Tax Calculation

The calculation basis also differs between these taxes. 

The Local Property Tax (IBI) is calculated by applying a municipal rate to the cadastral value of the property. This rate varies significantly depending on the property's location and the range of public services provided by the local authorities. It is a reflection of how municipal services—such as infrastructure, parks, and public safety—are funded through property taxes. The IBI rate typically spans from 0.4% to 1.3%. This calculation results in the property’s annual tax bill.

Conversely, the Non-Resident Income Tax related to property ownership, declared through form 210, uses a fixed percentage of the cadastral value to calculate the tax base. This fixed rate is applied uniformly across Spain, set at 2% of the cadastral value, or at a reduced rate of 1.1% if the cadastral value has been revised or updated within the last ten years under a general collective valuation procedure (not individual revisions). This calculation method aims to approximate the potential income that the property could generate for the owner and applies solely to non-resident individuals, focusing on urban properties not utilized for economic activities. It’s a measure to ensure that property ownership contributes to the national tax revenue, irrespective of the property’s direct use or income production.

This imputed income figure is then subjected to a further tax rate to obtain the final tax due. Non-resident individuals from within the EU, Norway, Iceland and Liechtenstein are taxed at a rate of 19%, while those from outside these regions face a higher rate of 24%. 

3. Declaration of taxes and the impact of ownership

Declaring the Non-Resident Income Tax involves submitting form 210 for each taxpayer, which means in the case of co-owned properties, each non-resident property owner must file their own tax return. This requirement highlights the personalised nature of the tax, as it is based on individual ownership interests in the property. Therefore, if a property is co-owned by multiple non-residents, each must submit a separate tax return for their share of the property, ensuring the tax obligations are accurately met according to each owner's stake.

In contrast, the Local Property Tax (IBI) is levied on the property itself, regardless of the number of owners. This tax is assessed per property, not per owner, simplifying the process for properties with multiple owners. The issued payment notice for IBI will cover the total tax due for the property, and it is the responsibility of the co-owners to arrange how they split and pay this cost. This system streamlines the payment process for IBI, as only one bill is issued for each property annually, reducing the administrative burden on property owners.

4. Tax period and filing deadlines

The Non-Resident Income Tax must be declared and paid retrospectively, covering the previous full fiscal year, whereas the IBI is paid within the same fiscal year it refers to. This underscores the importance of understanding deadlines to avoid non-compliance.

Another difference relates to the filing period. For the non-resident tax, the filing deadlines are uniform across Spain, providing a consistent timeframe for all non-resident property owners regardless of the property's location. Specifically, for the tax year 2023, the filing period extends throughout the calendar year 2024. This means that no matter where your property is situated in Spain, you have from January 1st, 2024, to December 31st, 2024, to file your tax return for the income attributed to the 2023 tax year. This uniformity simplifies planning and compliance for non-resident owners, ensuring that everyone follows the same schedule for their tax filings.

Contrastingly, the Local Property Tax (IBI) exhibits regional variations in its filing and payment schedules, which are determined by the local municipality or the designated regional collection agency. This means the specific period within which you must pay your IBI can vary significantly depending on where your property is located. Some municipalities might set the IBI payment window in the spring, others in the summer, or even in the fall, reflecting a diversity of administrative practices across Spain. This variability underscores the importance of being aware of local tax calendars to ensure timely payment and avoid any penalties.

5. Imputed income only applies to individuals

A notable distinction lies in the application of imputed income under the Non-Resident Income Tax (IRNR). This tax, specifically in the context of income imputation, is applicable solely to non-resident individuals. It targets owners of urban properties not engaged in economic activities, emphasizing the personal use aspect of property ownership. While the IBI applies to both physical and legal persons, covering a wider range of properties, including urban and rustic real estate.

A critical distinction in the realm of Spanish property taxes lies in the application of imputed income under the Non-Resident Income Tax (IRNR). This tax, specifically in the context of income imputation, is applicable solely to non-resident individuals. It targets owners of urban properties not engaged in economic activities, emphasizing the personal use aspect of property ownership. This means that the IRNR's imputed income provisions do not extend to companies or legal entities. Such entities, while still obligated to the Non-Resident Income Tax, are taxed solely on actual income generated from the property, such as rental income or capital gains, rather than imputed income.

In contrast, the Local Property Tax (IBI) is far-reaching, applying to both physical persons and legal entities without distinction. It encompasses a broad spectrum of properties, including both urban and rustic real estate. This inclusivity ensures that any entity, regardless of its nature, holding property rights is subject to IBI, reflecting the universal obligation towards local infrastructure and services financed by this tax.

This delineation means that companies owning property in Spain are subject to both the IBI and the Non-Resident Income Tax. However, for the latter, their liability is tied to actual economic benefits derived from the property—such as from leasing or selling—rather than the concept of imputed income, which presupposes a benefit from merely owning the property.

6. Tax Declaration

Declaring the Non-Resident Income Tax is done through the Spanish tax form Modelo 210. This declaration must be completed and submitted by the taxpayer themselves, implying their responsibility to determine the owed amounts based on the calculation of the tax base. This self-assessment process allows non-residents to comply with their tax obligations independently, without prior review by the Tax Agency.

In contrast, the declaration of IBI is not conducted through a self-assessment process by the owner. Instead, the corresponding Municipality or designated entity, such as SUMA in Alicante, Málaga Collection Agency, or ATIB in the Balearic Islands, determines the owed amount and issues a payment notice. This notice specifies the amount the owner needs to pay, based on the cadastral value of the property and the tax rate applied by the local entity. Owners have the option to arrange for the IBI payment to be directly debited from their bank account, facilitating compliance with this tax obligation.

At IberianTax.com, we offer expert services to assist non-resident property owners in managing their tax obligations in Spain, ensuring IRNR is correctly declared and paid. 

Contact us for more information on how we can assist you in optimizing your tax burden and ensuring regulatory compliance for your properties in Spain.