Our fiscal representation department provides services for you if you do not live permanently in Spain but you own property here on Spanish soil. We will also represent you if you are a resident expat.
Whatever group you’re in you may be liable to a series of inescapable fiscal obligations.
Appointing a legal representative in Spain to handle these applicable tax obligations has proved to be a wise decision for most non-resident property owners and resident expats.
Additionally, we feel that it is important for our clients have rapid, direct access to a solicitor in the event of requiring assistance regarding any aspect of Spanish Law.
For more information, see SWEET HOME.
Tax obligations for non-resident owners of real estate
As non-resident owner of a property in Spain you must be aware that you are obliged to pay certain taxes in this country.
The taxes are due in all cases, irrespective of whether the property is used often or kept empty.
Personal Income Tax (I.R.P.F.)
Irrespective of whether the real estate assets are rented or not, the income derived from them is subject to non-resident income tax. However the tax treatment is different depending on whether or not they are rented.
URBAN BUILDINGS NOT RENTED.
- Non resident taxpayers who are titleholders of urban buildings, whether they use the building themselves or not, are subject to non-resident income tax, even if they are left unoccupied. In general terms, the income is calculated by taking into account the building’s assessed value or “valor catastral” (by applying different rates depending on revisions made by the Town Hall). The tax rate on the income thus calculated is 24,75%.
- This tax is prorated for the days you are owner of the property during the accrued year.
- Tax is paid in arrears on a yearly basis.
- Taking into account all these facts, your solicitor will be able to determine which are the accurate values which must be applied.
- The term for payment goes from the 1st of January to the 31st of December every year, and the tax paid corresponds to the previous calendar year.
- Payment must be made direct to the Tax Office. There is no possibility of setting up a direct debit for the payment of this tax. It is the owner’s obligation, through his solicitor, to fill in the tax return and take it to the Spanish Treasury.
The earnings are calculated by taking the GROSS INCOME that is received from the tenant. SOME EXPENSES ARE DEDUCTABLE (mortgage interests, local rates, community fees etc). PLEASE ASK US FOR INFORMATION.
The applicable rate is 24%.
If the property has been rented for only part of the year, then it is necessary to make a prorate to calculate which part corresponds to income generated from rentals and which part corresponds to income generated from “the owner’s direct use”.
Tax on real estate.
This is a direct tax based on the value of the house. It is known as LOCAL RATES, COUNCIL TAX or IBI (and SUMA BILL in the Alicante Area). All these names mean the same. Each Town Council determines the percentage to be applied to the cadastral value of the property. Every year, Town Councils increase the value of the tax according to inflation.
This is an annual tax and we strongly recommend you setting up a direct debit.
The person who is the owner of the property on the 1st of January is liable for the payment of this tax. So, as an example, even though you sell your property on the 5th of February you will still be liable for the total payment of the local rates.
PLEASE NOTE THAT IT IS VERY IMPORTANT YOU ARE UP TO DATE WITH THE PAYMENT OF BOTH STATE & LOCAL TAXES OTHERWISE YOU MAY FIND YOUR BANK ACCOUNT FROZEN DUE TO UNPAID TAX BILLS.
Tax obligations for expat residents in Spain
If you live in Spain more than 183 days a year you are considered a Spanish Resident for tax purposes.
If this is so, you are obliged to declare all your income –regardless of the place where it is generated or paid – in Spain.
A wrong idea is often spread out among expat residents: “my pension is already taxed at home so I don’t need to serve any tax return in Spain”.
Nothing further from truth! The obligation is to pay income tax in the country of residency.
This matter is regulated in depth by DOUBLE TAXATION AGREEMENTS signed between Spain and different countries (United Kingdom, Ireland etc).
These agreements clearly establish that income tax must only be paid in the state of residence. With one exception: if the pension received is from local or central government (Armed Services, Police, Firemen, teachers…) it can only be taxed in the country of origin.
So are you going to pay twice on the same income? Not at all. Expats must submit an application for tax relief at source in the country of origin, or claim a repayment of any income tax paid in the country of origin. This form is called form FD9.
UK citizens can download it from www.hmrc.gov.uk/cnr/spain-individual.pdf
Irish citizens can download it from www.revenue.ie/.
In Spain, the fiscal year is the same as the calendar year and tax is paid in arrears. The income tax return campaign is from May to June and unlike in other countries, you must complete and serve your own tax returns.
It is very important you ask your solicitor to check if you are obliged to serve your income tax return or if your income is too low, in which case you might well be exempt.