Ingrid Solberg lives in Bergen and lets a house in Mijas all year round for 1,400 € a month. Harold Grant lives in Toronto and lets a flat in Estepona for the same amount. Both file Modelo 210, the Spanish non-resident income tax return; both have similar expenses; and both ask the same question after seeing a table of rates online: if I cannot get the residence certificate, do I pay 24 % instead of 19 %?
For Ingrid, the answer is yes, and she also loses the right to deduct expenses. For Harold, the answer is that the certificate changes nothing on that point, because he never had access to 19 % in the first place. The difference lies in where they live, not in the piece of paper.
What the non-resident income tax law says
Article 25.1.a) of the consolidated text of the Non-Resident Income Tax Act (IRNR) sets a general rate of 24 %. The same provision lowers it to 19 % for taxpayers resident in another member State of the European Union or of the European Economic Area with which there is an effective exchange of tax information. In practice, that includes residents of Iceland, Norway and Liechtenstein.
Article 24.6 adds the other advantage: those same residents may deduct the expenses provided for in the IRPF Act (the Spanish personal income tax), provided they prove that they are directly related to the income obtained in Spain. Anyone resident outside that area is taxed on the gross amount, with no expenses.
And article 7 of Order EHA/3316/2010, which regulates Modelo 210, provides that, when expenses are deducted under article 24.6, a certificate of tax residence issued by the tax authority of the State concerned must be attached.
| Taxpayer | Rate on the rent | Deductible expenses | Role of the certificate |
|---|---|---|---|
| Resident in the EU | 19 % | Yes | It is the proof of both advantages |
| Resident in Iceland, Norway or Liechtenstein | 19 % | Yes | The same, subject to the effective exchange of information |
| Resident in any other country | 24 % | No | It changes neither the rate nor the base |
Ingrid's figures, step by step
Ingrid receives 1,400 € a month. Her expenses for the year are the IBI (the local property tax), the community charges, home insurance, mortgage interest and depreciation of the property, and they come to 7,250 €.
- Gross income: 1,400 × 12 = 16,800 €.
- With residence in Norway proved, taxable base: 16,800 − 7,250 = 9,550 €.
- Tax at 19 %: 9,550 × 0.19 = 1,814.50 €.
- Without proving it, taxable base: the full 16,800 €.
- Tax at 24 %: 16,800 × 0.24 = 4,032 €.
- Cost of not having the certificate: 4,032 − 1,814.50 = 2,217.50 € in one year.
The jump does not come from the rate alone. If 24 % were applied to the net base, the tax would be 2,292 €. What drives the difference is losing the expenses: the base goes from 9,550 € to 16,800 €.
Harold and the certificate mirage
Canada belongs neither to the European Union nor to the European Economic Area. Harold pays tax in Spain at 24 % on his 16,800 €, that is 4,032 €, whether or not he has a certificate. Handing one to Hacienda, as the Spanish tax office is commonly called, does not give him access to 19 % or let him deduct the IBI.
Is it any use to him, then? It may help him in his own country, to prove there that he has paid tax in Spain, or if a particular item of income is covered by the treaty. How Canada treats that rent and which documents its administration will ask for is confirmed by his adviser there; we express no view on that country's rules. There is a neighbouring question, also frequent, on whether you can deduct expenses while living outside the EU.
When the tenant is a company
If the rent is paid by a company, or by a professional renting for their business, the tenant is obliged to withhold. Article 31.2 of the IRNR Act says that withholding is calculated by applying the rules of the tax but disregarding article 24.6, that is, without deducting expenses. To know whether 19 % or 24 % applies, the payer needs to know where the owner lives, and it is reasonable for it to ask for the certificate.
Suppose Ingrid's tenant were a clinic. It would withhold 19 % of 16,800 €, that is 3,192 €. In her annual 210, Ingrid would calculate tax of 1,814.50 €, subtract what had been withheld and obtain a refund of 1,377.50 €. Without a certificate, the clinic would have to withhold at the general rate, 4,032 €, and the refund would disappear.
Modelo 210 is filed without anyone checking the certificate at that moment. That does not mean it is not needed. If the Agencia Tributaria, the Spanish tax agency, reviews the return and the taxpayer cannot prove residence in the European area, it may reassess at 24 % on the gross income, with the interest and, where appropriate, the penalty that apply. Filing at 19 % without the document in the folder means taking on that risk.
What does not depend on the certificate
On the sale of a property, article 25.1.f) sets 19 % for the capital gains of all non-residents, whatever their country. The same applies to Spanish-source dividends and interest, unless a treaty or an exemption provides otherwise. For that income, the certificate may matter for other reasons, such as applying a treaty limit or an exemption, but not to move from 24 % to 19 %.
Nor does it affect the imputed income charged for the days on which the property stands empty and at your disposal, which never allows expenses.
What to ask for, and when
If you live in an EU or EEA country, you need a certificate from your administration stating that you were tax resident there during the year you are declaring. If you are also going to invoke the treaty for some other income, ask for the one that mentions the treaty. It is valid for one year from issue, and the timetable that fits best with the annual 210 is covered in how long the certificate is valid. The guide to the certificate for Modelo 210 explains exactly what content it needs.
If you have several properties, co-owners or a tenant who withholds, things get complicated quickly; for those cases there is how many Modelo 210 returns you have to file. And if you would like us to review your case before the April filing season, you can tell us about it in the certificate form.
If you have already filed years without a certificate
Anyone who declared at 19 % without having the document can try to obtain it now for those years, provided their administration will issue it with reference to past years; that is confirmed by the client's adviser there. Anyone who declared at 24 % for lack of one, while being a European resident, may consider correcting their self-assessments. The right to claim refunds becomes time-barred after four years under article 66 of the Ley General Tributaria (the General Tax Act), and the correction requires the certificate for the year being corrected, not the current one. The outcome of a correction is not guaranteed: it depends on what is proved.
The Salama Tax page explains the procedure as a whole and how it fits with Modelo 210 each year. What is decided here is not the rate that suits you, but the rate you can justify.