After several months of parliamentary negotiations, and being pending only a couple of amendments, it appears that soon the new tax rules will apply to be fully applicable from January 1, 2015. As is well known, the Personal Income Tax (IRPF), the non-Resident Income Tax (IRNR) and Corporation Income Tax (IS) will suffer important changes that deserve to be analyzed by the affected groups.
In the present article, we will explain the changes in the area of Personal and non-Resident Income Tax which could affect natural person’s Spanish tax residencywho ceases to be Spanish resident, non-resident natural persons with incomes in Spain, and non-resident natural persons who becomes Spanish tax resident.
Specifically, we will base our discussion on the following measures that will be approved, as we said before the end of the year:
• Reduction in the Tax Rate for non-residents who earn incomes in Spain.
• New system of support for non-residents with properties in Spain (Draft real estate’s incomeimputation)
• Capital gains exemption for non-residents who sell their main residence in Spain.
• Amendment Law Beckham for impatriates.
a) As the first measure concerns, is interesting to note that from January 1, 2015, the standard tax rate for non-residents will be set at 24% from the current 24.75%.
The main novelty lies not in the percentage decrease of 0.75%, but residents of the European Union (EU) will see their tax rate reduced to 20% (for the year 2015) and 19% (for the following years).
This measure, will mainly benefit residents of the EU that have in Spain a real estate leased or receive employment incomes for their work developed in Spain, as they see their tax bill reduced to 5, 75%.
b) Another measure is the possibility that non-resident owners in Spain of non leased real estates can request a draft to the Tax Administration in order to fulfill their obligations to the Spanish Tax Agency. In this respect, we must remember that non-resident must attribute the real estate’s presumed income for its own use (1.1% of the cadastral value) fulfilling Tax Form 210 which must be submitted annually while we are owners of those properties.
Unfortunately, we believe that this measure will have little impact on State coffers,while non-resident hardly were taxed by this concept, now are going to do so. And this, not so much for fraudulent mood (remember that the tax bill for this item is minimal unless we are owners of luxury properties) but by the lack of the law and its obligations.
Therefore, we dared to predict that non-resident, who did not submit Tax Form 210, hardly will ask for a draft. Hopefully we will be proved wrong…
c) Another measure, as we understand it successful, is that from now on capital gains from the sale of EU resident’s main residency in Spain will be exempt. The condition to apply this exemption, involves allocating the amount charged for the sale of the property to the purchase of a new main residency, obviously principal residence located outside Spain.
We must remember that this measure is intended for the Spanish tax resident who ceases such consideration and sells their home to buy another abroad (EU).
As happened with the previous initiative, we believe that it is rather a measure to please the «European legislation”, not a useful measure while we must think that there are a few expatriates to EU countries that actually begin the process of expatriation with a irrevocable intention, since the most usual thing is the temporary expatriation keeping in most cases, investment properties in Spain.
Anyway, obviously this measure will be highly applauded for those new non-residents who can benefit from it.
Notwithstanding, we miss that the legislator has not exonerated the buyer, in such cases, from the obligation to withhold 3% to non-residents, while this withholding no longer make sense in reinvestment cases and undertakes non-residents to request the return by filling a self-assessment tax form.
d) Finally, we briefly want to refer to developments that will suffer the Beckham Law from 2015. This Law indeed owes its name to the soccer player, among others Real Madridand mainly consists of a lower taxation than the tax residents by applying the non-resident tax rates avoiding progressivity.
Well, the first novelty to note is that no longer applies to professional sportsmen, so it would be good to go changed its name which has become commonly known…
Furthermore, the limit on employment incomes subject to this special regime is abolished; even though the taxation, which at the moment was 24.75%, goes to tax in two installments, 24% and 45% becoming a progressively regime and less discriminatory for Spanish tax residents.
As we see, there are many new developments that should be analyzed in each case and we expect that besides implementing European law and satisfying certain sectors, could be capable of generating what the country needs now: trust, financing, hiring and after all, growth.