May.05 2024

Differences between the IBI and the IRPFNR

Very often the Property Tax (IBI) is mistaken by the Non-resident Legal Person Income Tax (IRPFNR) and many owners think that both are the same tax and that paying one of them (usually the Property Tax) is enough to keep their taxation settled in Spain. In this article we are going to explain in a practical (not legal) language the differences between each tax. However, remember that you must always check on your specific case, as besides this tax you might also be required to declare the Wealth Tax (Impuesto sobre el Patrimonio) or other taxes.

What is the IBI (Property Tax) and what is the IRPFNR (Non-resident Legal Person Income Tax?

The Real Estate Tax is a local tax which is paid to the city council of the town where the property is located. Sometimes, though, its management and collection is entrusted to superior administration bodies such as Consell Comarcal or Diputació Provincial (each town works in a different way so it has to be determined which method applies in each case).

The Non-resident Legal Person Income Tax is a state-wide tax that must be declared before the Spanish Tax Office disregarding the location or town.

Differences between the IBI and the IRPFNR

How is the payment made?

The Property Tax is paid to the relevant administration body (be it the city council, Consell Comarcal or Diputació) and you may receive payment notification in two different ways: first, a letter sent to your home (which you can use to settle the tax at the bank) or second, it may be debited to your bank account, one or several times a year according to your choice, if you have previously decided this method of payment.

On the other hand, the Non-resident Legal Person Income Tax must be declared by you, your lawyer or your tax advisor. Unlike the Property Tax (IBI), you must take care of submitting this tax as you will not be automatically reminded about the payment.

It is important to be aware of this because if you do not file the tax return for the Non-resident Legal Person Income Tax, you may be fined by the Spanish Tax Office and compelled to produce and/or settle the taxation for the last few years.

Our office provides the tax return and advisory service on the Legal Person Income Tax.

How can I know if what I have paid is the Property Tax or the Non-resident Legal Person Income Tax?

Going back to the previous paragraph, if you have made your bank payment without any help and without having submitted your tax return, it is quite possible that this is the Property Tax (IBI). Please click on this link to see what the IBI receipt looks like. 

If you have submitted the model 210 form by yourself or with professional help, you might have submitted the Non-resident Legal Person Income Tax (IRPFNR).

In any case, as these annual declarations are rather complex, and especially the Non-resident Legal Person Income Tax changes if you have your property rented out, we recommend that you have a previous assessment of your particular case carried out.

Do these taxes change if I have my property rented out?

The IBI does not change but the Legal Person Income Tax does if you happen to rent out or sell the property, as in each case a different model 210 form must be filled in.

If one of these taxes is submitted, is the other one exempted?

No. Both taxes are independent and both are subject to payment. Lastly, please remember that the objective of this article is to provide you with practical information to understand the way this tax system works, but it does not replace a customized legal or tax advice, and therefore our office shall not accept any liability in this regard. Should you wish to have customized information please click here to ask for an appointment:  E-porcel.