Spanish Taxes for non-resident owners |
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This is a broad summary of what you have to do to meet your obligations under Spanish Tax Law. 1) It is advisable for all individuals named on an Escritura to appoint a Formal Legal Fiscal Representative, who can help in keeping them up-to-date with changing legislation in order that they may comply with Spanish Law, without the inconvenience of trying to find things out for themselves. 2) Each owner named on an Escritura must make an INCOME TAX RETURN based on the period that the property is NOT rented out. When a property is being rented out, then a RENTAL INCOME TAX RETURN must be made every three months or if this is rented out occasionally, within the following month after the rent has been received. The period during which the property has been rented out (if taxes on this rent have been paid), will be deducted from the period on which an Income Tax Return for non-rented properties has to be made. If a property is rented during the whole year (and of course, taxes have been paid on this rent), the Income Tax Return for non-rented properties has not to be made at all. 3) Every named owner of an Escritura must make an ANNUAL WEALTH TAX RETURN. This information is to help enable you to determine your tax obligations and liabilities in view of the changes that are being introduced in the legislation. Unfortunately, this type of information is not published too frequently in other Countries (or in Spain for that matter) and owners usually only become aware whilst on holiday, or through other owners, with the risk of receiving wrong information. To appoint a Formal Legal Fiscal Representative will help you to: a: submit your WEALTH TAX, INCOME TAX and RENTAL TAX (if applicable) Returns to the Spanish Authorities, and obtain the necessary receipts of payments on your behalf. b: obtain a N.I.E. Number for you if required. c: obtain all information regarding the tax liabilities and correspondence and their interpretation wherever possible in English. The Responsibilities of a Formal Legal Fiscal Representative 1) Advising you as his/her client of your legal and fiscal responsibilities as a non-resident property owner. 2) Paying over any taxes from you and representing you before the Authorities. 3) Receiving communications from the Authorities on your behalf and informing you of your obligations. Annual Standing Charges Our fees for Fiscal Representation during 2006 are 110,00 Euros plus 16% VAT, adding 15,00 Euros when more than a property or more than two owners. Contribucion Urbana (Local Rates) This is a Municipal Tax that is to be paid to the Town Hall annually, based on the cadastral value of the property (which is increased every year by 5% approximately), and the amount to be paid is 0.78% approx. of this value. Demands are usually issued in the summer of the year of charge and sent directly to the owner by the Town Hall, and as they cannot be intercepted by anyone else, we would recommend you to sign a direct debit form to be charged in your bank account in Spain, to avoid a late payment penalty. PLEASE NOTE THAT WE, AS FISCAL REPRESENTATIVES, DO NOT DEAL WITH THESE LOCAL RATES. YOU WILL BE RECEIVING THE ANNUAL BILLS DIRECTLY FROM THE TOWN HALL. THE URBANA RATES HAVE NOTHING TO DO WITH THE WEALTH TAX, INCOME TAX, OR RENTAL TAXES, WHICH ARE CALCULATED BY YOUR FISCAL REPRESENTATIVE AND PAYABLE TO THE TAX OFFICE. Spanish Taxes Wealth Tax (Impuesto sobre el Patrimonio) Non-residents must file a Wealth Tax return if they own a property in Spain on 31st December of each year. Based on your total asset value in Spain. For property the value would be either the Rateable or Escritura value, whichever is the highest and the rate is 0.2% on the first € 167.129,45, 0.3% on the rest up to € 334.252.88, 0.5% on the rest up to € 668.499.75, etc. Please note that if there is a mortgage on the property, the capital outstanding at the end of the fiscal year will be deducted. from the property value which will reduce the tax. Each individual must file a separate return. Accordingly, if a property is owned by a married couple or by various persons, each one of them must file a single return for their corresponding part. Filing period: From 1st May to 30th June the year immediately following the one to which the return refers. Income from property for own use (Imp.sobre la Renta de las Personas Físicas) If you have a property which is used as your home or holiday home or even rented, there is a presumed income equal to 2.00% of the rateable value of the property, or 1.10% if the rateable value has been object of a revision by the Municipality. From this figure you will have to pay 25% as quoted above. This means that the tax payable will be equal to either 0.5% or 0.275% of the rateable value (2% X 25% or 1.10% X 25%). Any period during which the tax for rental income has been declared and paid during the year may be deducted next year when presenting the annual taxes. If the property was leased for part of the year, you must declare the corresponding proportion for the non-rented period. This income is chargeable once per year, on the 31st December. Filing period: The same as for the Wealth Tax. Rental Income Tax (I.R.P.F. derivados de Bienes Inmuebles). The income to be declared in this case is the total amount collected from the tenant, without deducting any expenses. This income is chargeable when it is claimable from the tenant or when it is collected (if earlier). Each rent due is taxed separately and, consequently, a return must be filed for each rent due. Nevertheless, collective returns may be filed which may include various chargeable income of one or more taxpayers falling within a calendar quarter. If the collective return includes the income of several tax payers, the person filing it must be a representative or one of the persons which the law regulating this tax defines as being jointly and severally liable (payer or administrator). Filing period: for ordinary returns the deadline is one month after the date on which the rent is due. Collective returns relating to a quarter must be filed within the first 20 calendar days of the month of April, July, October or January following the first, second, third or fourth calendar quarter, respectively. Tax rate: 25%. Wealth and Income Tax from property for own use (simplified return) A non resident whose only taxable property in Spain is a dwelling fundamentally for own use may elect to use a single form for declaring Wealth Tax on the property owned in Spain and Income Tax on the estimated income from the use of that property. Filing period: the entire calendar year immediately following the one to which the return refers. In many cases, and according to the national treaties for avoiding double taxation, you will generally be able to offset the Income Tax you pay in Spain against the Income Tax you pay in your own Country: and the same applies to the Wealth Tax in those Countries where this tax has been established. The above taxes are currently payable between 1st of January and 31st December in arrears for the previous year, for owners of no more than one property in Spain that has not been rented out during the previous year. For owners of more than one property or with a bank account in Spain (such as a deposit account), or whose property has been rented during the previous year (only if the rental tax has been paid), the annual Wealth and Income Tax are payable between 1st of May and 20th June also in arrears. In both cases (Wealth and Income Tax) official forms supplied by the Tax Office have to be completed. |
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