During the latest years, it has been (surprisingly) understood by the Tax Authorities in Spain, that a property situated in our country owned by a Non Resident entity, was supposed to “generate” rental income in Spain, for the mere availability of the asset for related parties such as directors or shareholders of the entity, and consequently, the entity had to pay Non Resident Taxes in our country.
The criteria of the Tax Authorities has been maintained during a long period, and it was supposing that the foreign entities had to declare in Spain rental income when the real estate assets were used by nobody, at market values.
A recent tax consultation of “Dirección General de Tributos” (consulta vinculante v2993-21 ), has led to a massive change on this criteria : the entities will not have to pay taxes in Spain if the properties have been vacant and the company can prove it sufficiently.
This change of criteria will minimize significantly the tax cost of having a property in Spain, owned by a foreign entity.
We trust you find this information useful, and we remain at your disposal for any clarification you may need.
MDG Advisors – Non Residents Department
