What taxes do non-residents have to pay in Ibiza?

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What taxes do non-residents have to pay in Ibiza? The growing popularity of Ibiza as a destination for second homes and businesses has increased the complexity of the tax landscape.

This article aims to clarify the main taxes affecting non-residents in Ibiza. Avoiding penalties and maximising tax benefits depends on complying with the tax rules.

Who is considered a non-resident in Spain?

According to Spanish regulations, a person is non-resident if they do not live in Spain for more than 183 days a year or if they do not have their main economic interests in Spain.

Common examples of non-residents in Ibiza:

• Owners of second homes who visit the island during holiday periods.
• Foreigners who work remotely and spend time in Ibiza.
• Investors who acquire properties for rental purposes.

Why is this classification important?

Resident or non-resident status determines the applicable tax regime and, therefore, tax obligations. 

Non-residents are taxed on income obtained in Spanish territory and on real estate located in Spain, although they are not obliged to file a tax return in Spain if they do not obtain income from work or capital.

What taxes do non-residents have to pay in Ibiza?

Non-Resident Income Tax (IRNR)

This tax is levied on income earned in Spain by non-resident individuals. The most common types of income are income from the rental of property and capital gains from the sale of property.

This tax is levied on income earned in Spain by non-residents. In Ibiza, the most common sources of income subject to IRNR include

• Property rental: If you rent a property in Ibiza, you must declare and pay tax on that income.
• Profits from the sale of property: If you sell a property, the profit you make will be subject to this tax.

Applicable tax rates:

• 19% for residents of EU countries, Norway or Iceland.
• 24% for residents of other countries.
  

Real Estate Tax (IBI)

This is a municipal tax levied on the ownership of real estate. All property owners in Ibiza, both residents and non-residents, are obliged to pay it.

IBI is a local tax that must be paid by all property owners in Ibiza, whether they are residents or non-residents.

• Taxable base: Calculated according to the cadastral value of the property.
• Tax rate: Determined by the municipality where the property is located.

This tax is paid annually and is one of the most important recurring costs for property owners.

Wealth tax

Wealth tax is levied on net wealth as at 31 December and applies to both residents and non-residents with assets in Spain.

Non-residents are taxed only on the value of their assets and rights located in Spain, such as real estate, bank accounts or shares. 

The tax will be applied to the amount in excess of the €700,000 minimum tax-free threshold, unless other regional rules apply.

In the Balearic Islands, the minimum tax-free amount for non-residents remains at €700,000.

The tax rate is progressive, between 0.2% and 3.5% in the Balearic Islands, depending on the value of the assets. 

In order to calculate it, debts and charges affecting assets in Spain are deducted.

In the Balearic Islands there are tax allowances for residents, such as the partial exemption of the main residence. 

These allowances do not apply to non-residents, whose taxation is limited to assets located in Spain.

You can reclaim part of what you paid for your assets in Spain, find out how in our previous blog.

What taxes do non-residents have to pay in Ibiza: Municipal Capital Gains Tax

Municipal capital gains tax is levied on the increase in the value of the land from the time it was acquired until it is sold. 

Based on the cadastral value of the land and the time that has passed since the purchase.

Taxes on the purchase of a property in Ibiza

When buying a property in Ibiza, non-residents must be aware of two main taxes:

Property Transfer Tax: Applies to second hand properties, with a general rate of 8-11% depending on the value of the property.

Value Added Tax (VAT): This is payable on the purchase of a new property and amounts to 10% of the price. There is also a stamp duty (Impuesto de Actos Jurídicos Documentados, IAJD) which varies between 1% and 1.5%.

Tourist rentals: If additional services such as daily cleaning or reception are offered, the rent may be subject to 21% VAT.

Inheritance and gift tax

This tax is levied on inheritances and gifts with assets located in Spain.

• The conditions for non-residents are generally less advantageous than for residents, although there are specific agreements within the EU.
• In the Balearic Islands, tax relief may be limited for non-residents.

*It is essential to make a proper calculation and consult an expert to avoid tax surprises.

Consequences of non-compliance with tax obligations

Failure to comply with tax obligations can result in significant financial penalties, such as fines and surcharges. 

It can also make it difficult to carry out future real estate transactions in Spain.

Benefits of tax compliance

There are many advantages to complying with your tax obligations in Ibiza:

• Legal certainty: Your property and investments are protected from tax inspections.
• Savings: The right advice can help you identify tax deductions and reliefs.
• Peace of mind: Avoid legal problems and concentrate on enjoying your property or business.

In summary, non-residents in Ibiza should consider taxes such as IRNR, IBI, VAT, municipal capital gains and others related to real estate or property. 

The key to avoiding problems and optimising profits is proper tax management. A professional will help you to

• Identify your specific tax obligations.
• Optimise your tax burden.
• Comply with all legal requirements.

Remember: The information contained in this article is general in nature and is not a substitute for professional advice.

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