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Setting up a business in Spain: must you pay the Income Tax for Non-Residents?

Thinking of setting up a business in Spain, but ignore everything about tax legislation?

Do you need a supporting tax representative? The Income Tax for Non-Residents is one of the taxes you will have to analyze in order to know whether you have to pay it or not.

Nowadays, mercantile operations between people or companies coming from different countries are very common, so the Income Tax for Non-Residents (IRNR) was created in Spain in order to keep control on income earning in our country.

The IRNR is a direct tax charged on the incomes earned within the Spanish territory by natural persons and entities which do not reside in Spain.

The IRNR is charged in all the Spanish territory, without prejudice of the provincial laws of the Basque Country and Navarra, the special features of Canary Islands, Ceuta and Melilla and the international agreements concerning double taxation subscribed by Spain with other countries.

Who must pay the Income Tax for Non-Residents (IRNR)

The law which regulates the IRNR establishes that the taxpayers for this tax are the following:

The residence in Spain is established according the IRPF and Corporate Tax (IS) Law, which means that if a person or entity is not considered a taxpayer of the IRPF or IS, then they can be a taxpayer of the IRNR.

Why do you have to pay the IRNR when setting up a business in Spain?

Now that you know what the IRNR is and who has to pay it, it is time to see why it has to be paid: the chargeable event.

The chargeable event of the IRNR, that is, what it charges, is the income earned (in money or in kind) by the taxpayers in the Spanish territory after setting up a business in Spain or for other reasons.

The incomes considered earned in Spain are the following:

In addition to the above, we must consider that some incomes (such as grants or scholarships received by natural persons) are exempt from paying this tax.

Why do you need a tax representative?

The IRNR taxpayer resides out of Spain so it is difficult to be controlled by the Spanish Tax Agency. This is why all IRNR taxpayers must appoint a tax representative who can be a natural or legal person (company) and will have to reside in Spain.

The tax representative will have to represent the taxpayer in different occasions:

From the moment when you appoint your tax representative in Spain, you will have a period of two months to communicate the appointment to the Tax Administration.

When and how must the IRNR be filled in?

The deadline for submitting this tax will depend on the incomes to be declared:

The tax must be filed for by filling in models 210, 211, 213, 216 and 247, either electronically or printed, once the Tax Agency form has been filled in online.

What happens if you default on payment?

The law which regulates the IRNR (article 10.3 of LIRNR) establishes the application of a sanction of 2.000 €, as the non-compliance is considered a serious tax violation. The same article points out that if the tax violation is carried out by a non-resident from a country that does not have an effectiva tax information exchange with Spain, the penalty would be increased to 6.000 €.

How can LEIALTA help you in setting up a business in Spain?

If you are setting up a business in Spain, you will need to hire a business consultancy service which will help you with the procedures and advise you about how to comply with tax and law commitments in Spain.

In order to help you with the procedures we offer you the following services:

As you can see, investing and setting up a business in Spain can be simple if you are properly advised by experts who know well the Spanish regulations and can help you when in doubt. Do you need advice to set up a business in Spain? Do not hesitate to contact us.