Non-Resident Income Tax (IRNR — Impuesto sobre la Renta de No Residentes)

What Is IRNR?

IRNR (Impuesto sobre la Renta de No Residentes) is the Spanish tax charged on income that arises in Spain and is received by a person or entity that is not a Spanish tax resident. If IRPF is the tax for residents and Corporate Tax for Spanish companies, IRNR fills the gap for everyone else who earns income with a Spanish source.

The tax is governed by Real Decreto Legislativo 5/2004 and administered by the AEAT.

Who Is Affected?

IRNR applies to:

• Foreign individuals who own property in Spain (rental income, deemed income on vacant property, capital gains on sale)
• Foreign shareholders of Spanish companies receiving dividends or interest
• Foreign companies earning income in Spain without a permanent establishment (PE)
• Foreign companies operating through a Spanish PE (taxed similarly to Corporate Tax)

Key IRNR Rates (Without Permanent Establishment)

The disparity between EU and non-EU residents on rental income is significant: an EU resident can deduct allowable expenses (mortgage interest, repairs, management fees, depreciation) and pay 19% on net profit; a non-EU resident pays 24% on gross rent with no deductions.

Non-Resident Property Owners: Two Tax Obligations

Foreign owners of Spanish property face two distinct IRNR obligations each year:

1. Rental income tax (if rented): Quarterly or annual returns on actual rental income received.
2. Deemed income tax (if not rented or only partially rented): Even if a property sits empty or is used solely as a holiday home, Spanish law imputes a deemed income (1.1% or 2% of the cadastral value) which is subject to IRNR.

This deemed income obligation surprises many foreign property owners, particularly those who bought as a pure investment or holiday asset.

Capital Gains on Selling Spanish Property

When a non-resident sells Spanish real estate, the buyer is required to withhold 3% of the sale price and pay it to the AEAT on account of the seller’s IRNR liability. The seller then files a return settling the actual gain (19% rate for EU residents). If the 3% withholding exceeds the actual tax due, a refund can be claimed — but the process takes time and requires correct documentation.

How Double Tax Treaties Interact

Spain has more than 100 double tax treaties (DTTs). Most treaties reduce or eliminate withholding tax on dividends and interest paid from Spain to treaty-country residents. For example, the Spain–UK treaty reduces the dividend withholding rate to 10% (or 0% for qualifying corporate shareholders), and the Spain–US treaty reduces it to 15% (or 5% for significant shareholdings).

To benefit from treaty rates, the recipient must provide a certificate of fiscal residence from their home country tax authority.

Filing Forms

• Modelo 210: Used by non-residents without a PE for most types of income (rental, capital gains, deemed income, dividends if not withheld at source).
• Modelo 216: Withholding return filed by Spanish payers of non-resident income (e.g., Spanish companies paying dividends to foreign shareholders).
• Modelo 200 / 206: Used by non-resident entities with a PE in Spain.

How BMC Can Help

We advise foreign property owners, shareholders, and companies on their Spanish IRNR obligations. Our services cover initial analysis of treaty entitlements, annual return filing, capital gains planning before property disposals, and refund claims on over-withheld tax.