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.
1.- STATE TAX:
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 catrastral” (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 COULD BE DEDUCTED (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”.
2.- LOCAL TAXES:
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 Alicante Area). All these names mean the same. Each Town Council determines the percentage to be applied to the cadaster value of the property. Every year, Town Councils increase the value of the tax by applying the percentage given by the Government in the Nation Budget act.
This is also a yearly tax and there is the possibility –strongly recommended- of 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.
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