Tax Obligations in Spain: Residents vs Non-Residents on the Costa del Sol

If you live on the Costa del Sol or own property here understanding your tax obligations in Spain is essential. Spanish tax rules can feel unfamiliar, especially for international residents and second-home owners, but knowing whether you are considered a tax resident or non-resident makes everything much clearer.

This distinction determines what you are taxed on, how much you pay, and what you must declare.
Tax Residency in Spain: Why It Matters
In Spain, your tax status is not based on nationality, but on where and how you live. You are usually considered a Spanish
tax resident if any one of the following applies:
• You spend more than 183 days per year in Spain
• Your main economic or professional interests are based in Spain
• Your spouse and dependent children live in Spain
Tax residents are taxed on their worldwide income, not just income earned in Spain.

Tax Obligations for Spanish Residents
If you are a tax resident, Spain requires you to declare all income, regardless of where it comes from. This includes:
• Employment or self-employment income
• Pensions and retirement income
• Rental income
• Dividends, savings, and investments
• Overseas income and assets
Residents pay personal income tax (IRPF) on a progressive scale, meaning tax rates increase as income rises.

In Andalucía, higher income levels can be taxed at over 40%.
In addition to income tax, residents may also be required to:
• Pay Wealth Tax, depending on the total value of assets
• File Modelo 720, declaring foreign assets above certain thresholds
• Pay Capital Gains Tax when selling property or investments
While resident tax obligations are broader, residents also benefit from allowances, deductions, and access to Spain’s public healthcare system.
Tax Obligations for Non-Residents
If you do not meet the residency criteria, you are considered a non-resident for tax purposes. Non-residents are taxed only
on income and assets located in Spain, which often makes their tax situation more limited and straightforward.

Non-residents who own property on the Costa del Sol are typically responsible for:
• Non-Resident Income Tax (IRNR)
o If the property is rented, tax is paid on rental income
o If the property is not rented, Spain applies an imputed income tax
• IBI (local property tax)
• Capital Gains Tax when selling a Spanish property
Non-residents do not declare worldwide income in Spain, but they also have fewer tax deductions available.

The Key Differences Explained Simply
The biggest difference between residents and non-residents is the scope of taxation:
• Residents - taxed on worldwide income, with access to deductions
• Non-residents - taxed only on Spanish income, with fewer allowances
Another important difference is reporting requirements. Residents often have more complex declarations, particularly if they hold assets abroad, while non-residents usually focus on property-related taxes.

Why Professional Advice Is Important
Spanish tax rules can be detailed and, at times, confusing especially on the Costa del Sol, where many property owners live abroad or split their time between countries. Misunderstanding your tax status can lead to penalties, double taxation, or unnecessary payments.
Working with a Spanish tax advisor or lawyer who understands international situations can help ensure you stay compliant while managing your tax obligations efficiently.

Final Thoughts
Knowing whether you are a tax resident or non-resident in Spain is the foundation of understanding your tax obligations.
While residents face broader taxation, they also benefit from greater protections and deductions. Non-residents enjoy simpler reporting, but must still meet specific property-related tax requirements.
If you own property, plan to relocate, or spend extended time on the Costa del Sol, getting clear tax advice early can save time, stress, and money and help you enjoy life in Spain with confidence.