What are the consequences of Brexit on the Non-Resident Tax, in the case of income obtained by individuals without a permanent establishment in Spain?
This tax affects income obtained in the Spanish territory by non-resident taxpayers, both individuals and entities (article 1 of Spanish Non-Resident Taxation Law). However, in this article we will just focus on individuals.
The following exemptions will no longer apply:
- Interest and capital gains derived from movable property obtained by residents of another Member State of the European Union (EU) with certain exceptions.
- Exemption for reinvestment in habitual residence for taxpayers of the EU, Iceland and Norway: the capital gains obtained by the transfer of the property that was their habitual residence in Spain may be excluded from tax, provided that the total amount obtained by the transfer is reinvested in the acquisition of a new habitual residence.
Taxable base (article 24.6 of Spanish Non-Resident Taxation Law) : Expenses as per article 24.6 will no longer be deductible. As per previously applicable article, taxpayers residing in another Member State of the European Union, individuals, could deduct expenses following requirements of the General Spanish Taxation Law. For example, in the case of property rentals located in Spain will from now on be taxed for the full amount of the rent without the possibility of deducting any expenses.
Tax rate (article 25 of Spanish Non-Resident Taxation Law): In relation to income taxed at the general tax rate, the general tax rate of 19% applied to EU residents will no longer be applicable and 24% will be the new applicable rate.
Option for EU residents to pay taxes as Spanish tax residents (article 46 of Spanish Non-Resident Taxation Law): It will no longer be applicable the special regime by which non-resident taxpayers, individuals, who prove that they are residents in another Member State of the European Union or in a Member State of the European Economic Area, and who have obtained income from work or any economic activities in Spain, could choose to pay taxes as a regular resident taxpayer under the General Spanish Taxation Law without losing their status as non-resident taxpayers.