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Non-resident income tax: what you need to know

August 3, 2023

The Non-Resident Income Tax is a tax of the direct type levied on income obtained in Spanish territory, both by individuals and by entities that do not reside in Spain. In this blog post, we will tell you the most important thing you need to know about this tax. Started?

The first thing you should know about Non-Resident Income Tax, also known as IRNR, is that it applies throughout Spain, without prejudice to the tax regimes in force in the Basque Country and Navarre. In Melilla, the Canary Islands and Ceuta, the specialties that are applicable according to their specific regulations are taken into account. The IRNR is regulated by Royal Legislative Decree 5/2004 and Royal Decree 1776/2004.

What is the income levied on the income tax of non-residents made of?

The income obtained in Spanish territory that is levied on the income tax of non-residents can be in cash or in kind. It should be noted that income from economic activities carried out entirely outside the country is not considered. Income from work performed abroad is also not considered when the person is subject to a foreign country tax. As well as the income from real estate located outside Spanish territory.

At the same time, it is valid to point out that the territory of Spain is formed by the airspace, the internal waters, the territorial sea, and the areas outside it, in which the State of Spain exercises jurisdiction or sovereignty rights of the seabed, the subsoil, the overlying waters and the natural resources.

Who are the taxpayers?

Now, let’s see who are the taxpayers of this tax:

Individuals and entities that obtain income in Spanish territory, but do not reside in it. With the exception that they are taxpayers of Personal Income Tax (IRPF). That is, if a subject is not considered a taxpayer of Personal Income Tax, or a taxpayer of Corporation Tax (IS), he is subject to Non-Resident Income Tax.

That said, as established in article 9 of the Consolidated Text of the Personal Income Tax Law, you should know that the residence of natural persons is considered to be those who stay for more than 183 days in Spanish territory. Secondly, a person is considered a resident when the centre of their economic activities is in Spain, either directly or indirectly. Also, those whose spouse and minor children reside in Spanish territory are considered residents of Spain.

In the case of entities considered resident in Spain, only those that were constituted according to Spanish law, those that have their registered office in Spain, and those that have their effective domicile in Spanish territory are contemplated.

Individuals who reside in Spain due to their type of employment or position, but who have foreign nationality, are also considered IRNR taxpayers.
Finally, entities that obtain income incorporated abroad and that carry out economic activities in Spain are considered taxpayers. That on a regular basis and through work facilities they act in said territory under authorization.

When is a tax representative appointed?

Non-resident taxpayers are obliged to appoint a natural or legal person as resident representative of Spain, in the following cases:

When operating in Spain through a permanent establishment.
When providing services of economic activities in Spanish territory without permanent establishment.
When requested by the Tax Administration, due to the amount or characteristics of the income obtained.

In all cases, one of the two parties, either the taxpayer or the representative, must communicate the appointment of the representative to the institution in which the tax return is to be filed, before the end of the declaration period.

The tax representative must ensure the effective collection of the tax. Law 11/2021 provides that representatives shall be jointly and severally liable for the payment of tax debts corresponding to taxpayers operating through a permanent establishment. Or, on the other hand, in the cases of article 38, those who have been designated as their representatives. It should be noted that joint and several liability does not exist when the obligation to withhold or pay into account is applied. Since the advance payment serves as a guarantee of collection for the Administration.

Who is the retainer?

The withholder is a figure provided by the legislator that is created to ensure the collection of the tax debt, in order to control the IRNR taxpayers. The amount of the withholding tax is equivalent to the tax debt.

What are the forms of fastening to the IRNR?

There are two ways of being subject to the tax. These are:

Income obtained through permanent establishment:

Taxpayers are taxed on the entire income attributable to the establishment, regardless of where it was obtained. As a general rule, the tax base is determined in accordance with the same provisions that apply to companies resident in Spanish territory and, consequently, is taxed at 25% on net income. The tax period in this case will be the calendar year, if no different one is declared.

Income obtained without the mediation of a permanent establishment:

In this type of tax, the income obtained must be taxed separately for each total or partial accrual of the income obtained in Spain. The legislation establishes for these cases tax rates lower than the general rate applicable to resident entities or natural persons.

Now you know everything you need to know about non-resident income tax. If you have any questions or need advice, do not hesitate to contact us. We solve and manage all types of tax, labor, commercial and legal procedures as self-employed, small or medium enterprises. We are the only law firm that encompasses all your needs with commitment, dedication and energy.