Imputed income under Non-Resident Income Tax (IRNR)

Under the Spanish tax system, owning an urban property that is neither the main residence nor rented out generates an explicit tax obligation. The tax authorities (Agencia Tributaria) consider that holding property demonstrates financial capacity or generates a deemed income, known as presumed income or imputed income.

This concept applies directly as a non-resident empty property tax. Although the property yields no actual rental income, the owner is required to file the corresponding tax return and pay the net tax calculated based on the rateable value assigned by the Land Registry (Catastro Inmobiliario).

It is important to note that tax regulations impose this ongoing charge as long as the individual holds ownership of the property and maintains their tax status as a non-resident in Spain.

How to calculate the tax base and the amount payable

The calculation of this tax obligation does not depend on rental market prices or subjective estimates, but on administrative parameters based on the property's rateable value.

To determine the tax base to which the tax rate will be applied, the following steps outlined by IRNR regulations must be followed:

• Revised rateable value: If the property's rateable value has been modified or updated in the municipality during the last ten tax periods, the tax base will be 1.1% of that value.
• Unrevised rateable value: If the rateable valuation has not been updated in the last ten years, the tax base will be 2% of the rateable value.

Once the tax base is calculated, the tax rate is applied based on the owner's country of tax residence:

• 19%: For individuals whose tax residence is in an EU member state, Iceland, Liechtenstein, or Norway.
• 24%: For individuals with tax residence in any other country outside the European Union or the European Economic Area.

Practical example of calculating the tax

To illustrate how the assessment works, consider a property located in Spanish territory with a revised rateable value of 100,000 euros:

1. The tax base is calculated as 1.1% of 100,000 euros, resulting in 1,100 euros.
2. If the owner resides in an EU country, the 19% tax rate is applied to 1,100 euros, resulting in an annual tax payable of 209 euros.
3. If the owner resides in a non-EU country (for example, the United Kingdom or the United States), the 24% rate applies to the same tax base, resulting in an annual amount of 264 euros.

Filing the tax return: Form 210 (Modelo 210) and deadlines

The self-assessment for IRNR on unrented properties is completed by submitting Form 210 (Modelo 210) to the Agencia Tributaria. This procedure follows a specific process that differs from taxing standard rental income.

The filing deadline for imputed income spans the entire calendar year following the accrual year. For example, the tax due for a given tax year can be declared and paid from 1 January until 31 December of the following year.

If the property is owned by multiple individuals (such as a married couple or co-owners), each co-owner must submit their own Form 210 individually, attributing their respective ownership percentage in the property.

Other taxes and obligations linked to empty properties

Imputed income tax under IRNR is not the only tax obligation facing non-resident owners in Spain. Other taxes levy property regardless of its use or occupancy status:

Property Tax (IBI)

IBI is a local municipal tax levied directly by town halls. It is charged annually on all individuals or legal entities owning real estate on 1 January. Paying this municipal tax does not exempt the owner from complying with national IRNR obligations.

Municipal waste collection fees

Depending on the municipality where the home is located, the local council may charge fixed fees for municipal services such as waste management or sewage, which must be paid regardless of actual property usage.

Wealth Tax and Solidarity Tax

Non-residents with high-value real estate assets in Spain may also be required to pay Wealth Tax or the Temporary Solidarity Tax on Large Fortunes if the net value of their properties exceeds the tax-free thresholds set by national or regional law.

Financial and regulatory considerations for property

When planning the purchase of a second home or holiday property in Spain, international buyers should take into account both recurring tax costs and the specific requirements of accessing local financing.

If you need to finance the purchase, it is advisable to consult mortgage credit intermediaries to review the home loan options available to non-residents, maximum loan-to-value ratios, and standard collateral requirements in Spanish banking.

On the other hand, it is important to review any administrative restrictions on the property. For example, if the property is classified as official protection housing (VPO) in the Comunidad de Madrid, specific requirements regarding usage, permanent residence, and maximum sale or rental prices apply, preventing the property from being left vacant without proper regional authorisation.

Consequences of non-compliance with tax obligations

Failing to file the IRNR self-assessment for imputed property income carries financial and administrative risks for non-resident owners:

• Surcharges and late payment interest: The tax authorities (Agencia Tributaria) can demand payment for unprescribed tax years (up to the last four years), applying surcharges for late filing and late payment interest.
• Financial penalties: Willful failure to declare income can result in disciplinary proceedings with fines proportional to the unpaid tax amount.
• Obstacles when selling: When a non-resident decides to sell their property in Spain, the buyer is legally required to withhold 3% of the purchase price and pay it to the tax authorities on account of the seller's IRNR. If the seller has outstanding tax debts linked to the property, processing tax refunds or completing final tax clearance can be hindered.