The income tax return for taxpayers with income from housing abroad

Do you have properties abroad and do you rent them or have you sold them? If your answer is yes, you should know that if your tax residence is in Spain you will have to pay tax on the profits obtained. We explain how it works:

What to do with real estate abroad?

It may happen that, as a consequence of the death of a relative living abroad, you have inherited an apartment in France, for example, and you decide to sell it after some time. The sale, in general, could give rise to a capital gain that you will have to declare in your personal income tax self-assessment as a capital gain.

The valuation of the transfer of the property for tax purposes will be calculated taking into account the IRPF laws from article 33:

33.1. Existence of an alteration in the composition of the taxpayer’s wealth.

33.2. That as a consequence of this alteration there is a variation in the value of the taxpayer’s patrimony.

33.3. That there is no legal rule that expressly exempts such gain from taxation or makes it taxable as income.

The double taxation deduction

The problem is that in the country where the property is located, it may also be necessary to pay tax on the gain obtained in the sale.

To avoid the problem of double taxation, it will be necessary to analyze the application of the International Double Taxation Agreements with the country where the property is located and article 80 of the Personal Income Tax Law regarding the deduction for international double taxation, which establishes the following:

When the taxpayer’s income includes income or capital gains obtained and taxed abroad, the lesser of the following amounts shall be deducted:
The effective amount of the amount paid abroad by reason of a tax of an identical or analogous nature to this tax or to the Non-Resident Income Tax on said income or capital gains.
The result of applying the average effective tax rate to the part of the taxable income taxed abroad. (…)
Let us take as an example the laws of the Spain-France agreement to exemplify the deduction for double taxation.

The first thing to determine is where the person’s tax residence is located. Based on Spanish regulations It will be understood that a natural person resides in Spain when any of the following circumstances occur:

That he/she stays more than 183 days, during the calendar year, in Spanish territory. In order to determine this period of permanence, sporadic absences will be computed unless the taxpayer proves his tax residence in another country.
That the main nucleus or the base of his activities or economic interests is located in Spain.
That the spouse and the minor children who depend on the individual habitually reside in Spain.
In the case in which income is obtained from real estate according to article 6 of the Spanish-French Agreement, it can be taxed in Spain and in France, but the taxpayer will be able to apply in Spain the deduction for international double taxation that has already been mentioned before.
In the case of the alienation of the real estate, the same thing happens, the taxpayer will have to pay tax in Spain and in France and will be able to apply the deduction for international double taxation.
As a consequence of all the above, it is important to analyze each case and to consult with an expert tax advisor who knows the legislation in depth and who will carry out the IRPF self-assessment correctly in order to avoid errors or penalties.

How do you declare a situation of residing abroad, whether for a long or short stay?

For these circumstances, it is necessary to determine which is the habitual residence, in order to specify the condition of resident or non-resident, since one does not pay the same IRPF tax as a Spanish resident taxpayer and as a taxpayer of the Non-Resident Income Tax (IRNR).

The taxpayers who are displaced outside Spanish territory and the Spanish civil servants and public employees abroad will be able to file their income tax return and, if applicable, make the payment or request the refund electronically (with reference, electronic certificate or PIN Code) under the same conditions as the other taxpayers.

In the case of returns to be refunded with waiver of the refund or negative returns, they can be sent by registered mail, addressed to the Tax Agency Delegation or Administration in whose territorial demarcation the last habitual residence in Spain is located.

Non-resident citizens in Spanish territory who have a NIF can obtain an electronic certificate from the FNMT through all Spanish Consular Offices abroad, without the need to travel to our country.

With the electronic certificate the person will be able to relate with the Spanish tax administration through the web, without the need to travel. Per diems and travel expenses also have a special treatment if the person has resided abroad.

An individual is a resident in Spanish territory when he/she stays more than 183 days, during the calendar year, in Spanish territory when the main core of his/her activities or economic interests are in Spain.

Also if the spouse who is not legally separated and the minor children who depend on this individual habitually reside in Spain. In such cases, income obtained both in Spanish territory and in any other part of the world must be taxed in Spain.

If an employee moves from one country to another temporarily for work purposes, the number of days of work abroad must be taken into account. If the stay is less than the 183 days mentioned above, the worker will continue to be considered a taxpayer of the IRPF. If he/she exceeds this time limit, unless the basis of his/her economic interests is in Spanish territory, the income from work must be taxed under the IRNR.

There are two exceptions: Spanish diplomats and consular officers are taxed under IRPF as Spanish residents even though they have their habitual residence abroad.