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“Agencia Estatal Administración Tributaria”

Consequences of Brexit on Non-fiscal Residents. Income Tax from 1 January 2021


This tax is regulated by Royal Legislative Decree 5/2004, of 5 March, approving the revised text of the Law on Non-Resident Income Tax (TRLIRNR).
Income tax obtained in Spanish territory by non-resident taxpayers, both individuals and entities (Article 1 TRLIRNR). There are two forms of taxation (Article 15 TRLIRNR): a) income obtained without a permanent establishment; and b) income obtained through a permanent establishment. This tax contains specific provisions applicable to residents of other EU Member States, which will no longer be applicable to taxpayer’s resident in the United Kingdom after the end of the transitional period. However, it should be noted that there is a bilateral convention between the United Kingdom and Spain for the avoidance of double taxation, which will continue to apply.For this reason, certain income that will no longer be exempt under domestic law would nevertheless be exempt by virtue of the right to apply the Convention (e.g. interest).

Consequences of Brexit on IRNR, in the case of income obtained without the mediation of a permanent establishment.

For income earned by UK residents on or after 1 January 2021, the following changes arising from ceasing to be a taxpayer resident in an EU Member State. Exempt income (Article 14 TRLIRNR). The following exemptions shall cease to apply:

  • Interest and capital gains deriving from personal property obtained by residents in another member state of the European Union (EU), with certain exceptions:
  • Profits distributed by subsidiary companies’ resident in Spain to their parent companies’ resident in another member state of the EU or the EES with effective information exchange, or to their permanent establishments located in other member states, provided that they fulfil certain conditions.
  • Dividends and shares in profits obtained by pension funds equivalent to those regulated in the Revised Text of the Pension Plans and Funds Act (Legislative Royal Decree 1/2002 of 29 November), resident in another member state of the European Union or the EES with effective information exchange, or by permanent establishments of such institutions located in another member state.
  • Dividends and shares in profits obtained by collective investment institutions regulated by Directive 2009/65/EC of the European Parliament and the Council, or by collective investment institutions resident in member states of the EES with effective information exchange.
  • Fees between associated companies paid to a company resident in an EU member state or to a permanent establishment of this company in another EU member state, provided that certain requirements are fulfilled.
  • Exemption for reinvestment in usual residence for taxpayers from the EU, Iceland and Norway: capital gains obtained from the transfer of the habitual residence in Spain may be excluded from taxation, provided that the total amount obtained from the transfer is reinvested in the acquisition of a new habitual residence.

Taxable amount (Article 24.6 TRLIRNR)

The expenses provided for in Article 24.6 TRIRNR may not be deducted, pursuant to which taxpayers residing in another State of the European Union, individuals, may deduct the expenses provided for in the Personal Income Tax Law, and in the case of entities, those provided for in the Corporate Income Tax Law, provided that it is proven that they are directly related to the income obtained in Spain and that they have a direct and inseparable link with the activity carried out in Spain.

Tax rate (Article 25 TRLIRNR)

In relation to income taxed at the general tax rate, the general tax rate of 19% for EU residents will cease to be applicable and 24% will become applicable. The following incomes can be cited: income from real estate, income from work, imputed income from real estate, etc.

Option for EU residents to pay personal income tax (Article 46 TRLIRNR)

The system of Article 46 TRLIRNR shall not be applicable, a system whereby non-resident taxpayers, natural persons, who can prove that they are resident in another Member State of the European Union or in a Member State of the European Economic Area with which there is an effective exchange of tax information, except for residents in countries or territories qualified by regulation as tax havens, who have obtained, during the financial year in Spain, at least 75 percent of their total income from work and economic activities, or that the income obtained during the financial year in Spain has been less than 90 per cent of the personal and family minimum that would have corresponded to them in accordance with their personal and family circumstances had they been resident in Spain and that the income obtained outside Spain has also been less than said minimum, and when the income obtained in Spain has effectively been taxed by the IRNR, they may choose to pay Personal Income Tax as taxpayer, but without losing their status as taxpayers by the IRNR.

Consequences of Brexit on IRNR, in the case of income obtained through a permanent establishment:

Complementary taxation

It is required of permanent establishments of non-resident entities when transferring income abroad. The complementary deposit will not apply in the case of incomes obtained in Spanish territory via permanent establishments by companies with tax residence in another member state of the European Union, unless it is a country or territory classified as a tax haven, or in a State which has signed a double taxation agreement with Spain which does not rule otherwise,  provided that there is reciprocal treatment. With the United Kingdom there is an Agreement on the avoidance of double taxation, which is not covered by Brexit, and which does not provide for this type of complementary taxation, so complementary taxation would still not be applicable via an agreement.