Non resident property owners taxes – Spain

Filed under : Property, Tax Planning - Inheritance

The Spanish tax authorities – Hacienda – have begun a new campaign to ensure that non-residents who own property in Spain do pay their taxes. For many years we have been advising property owners of the importance of paying this tax annually. Now the tax authorities are actually sending demands giving an estimated or provisional figure for the tax payable. With the new policy in place they are also adding interest and fines which can be charged for the last 4 years of non-payment. The tax authority have wide powers to embargo bank accounts and property.

The tax is a personal tax so if you are joint owners each of you needs to present the tax declaration separately. All non-residents who own a property in Spain have to pay this tax as follows:

1. Income from lettings/rentals at 19% on the net rent received. A number of expenses can be offset against your income from rentals. These include Community fees; Town Hall rates (IBI) Insurance, utilities, marketing and some maintenance costs.

2.Deemed income on any property you own which is for your own use. This applies to second homes, holiday homes and any property you own in Spain as a non resident. This is taxable at 19% and assessed at 2% or 1.1% of the rateable (catastral) value depending on the date the catastro was last updated. This applies during the period while you own the home, it is not an annual fixed sum. For example if you purchase in July it is payable from July to December 31st.

In both cases the rate applicable in the EU, Iceland and Norway is 19% and for those outside of these countries the rate is 24%.

It is not possible to set up a standing order for this as each year the taxpayer has the obligation to complete the forms and present them to the bank for payment before the 31st of December. The tax authorities are able to claim unpaid non-resident tax for the previous 4 years of ownership if you fail to declare.

Please bear in mind this tax is charged for property owning non-residents of any nationality. The rate for British nationals may vary after Brexit. The best way to avoid any problems is to appoint a Fiscal representative who will advise you of the tax payable and ensure your returns are up to date. We have an independent tax consultant  who is dedicated to assisting you. If you would like more information do contact our tax team on [email protected] or ring +34 952 527014 to make an appointment.