Non-Resident Property Taxes In Spain.
Something that many people are not aware of when they decide to buy a property in Spain is that they will become liable to non-resident property taxes in Spain.
Don’t panic! For most people lucky enough to afford a property in Spain the taxes are not particularly onerous. However you should be aware of them and your obligations under Spanish tax law.
Your obligation to pay these taxes is not something that the authorities will ordinarily draw your attention to, however you still need to comply with the tax rules and it is your responsibility to find out about them and what you need to do…. Fortunately that is what we are here for!
Below we have provided some basic guidance regarding the property taxes you will need to be aware of if you have a property in Spain but are not a resident of Spain.
What are non-resident property taxes in Spain and do they apply to me?
In this article we are referring only to property taxes that apply to non-residents in Spain.
The first task then is to identify whether you are a resident or a non-resident in Spain for tax purposes.
You will be a resident in Spain for tax purposes if:
- You spend more than 183 days in a calendar year in Spain (or its islands).
- Your centre of financial interests is located in Spain.
- Your husband/wife or underage children live in Spain.
If none of the above apply, you will be regarded as non-resident for tax purposes.
Non-resident property owners in Spain will be subject to Non-Resident Income Tax.
Non-resident income tax is charged in Spain on a yearly basis if you are non-resident and own property in Spain. You will need to be aware that this is payable whether you generate an income from your property (i.e. rent it out) or not! (Sorry about that!).
How to calculate Spanish Non-Resident Income Tax.
The amount payable will depend on whether you rent the property out or not and whether you are resident in an EU or EEA country or not.
Non-resident income Tax – When not renting out property
Even if you are not renting your property you still have to pay income tax on it- we know bizarre, but true. It is known as a “deemed” income tax, the logic is that you have the benefit of a property that you could rent out if you wanted to.
If you are not renting out your Spanish property, in order to calculate the tax due you will start with 2% of the cadastral value of your property (or 1.1% if the cadastral value was amended after the 1st of January 1994).
The cadastral value is the value the local town hall gives to a property, not the market value. The Cadastral value is usually a fair bit lower than the market value (often by around 1/3 although this of course varies). You can find out the cadastral value of your property on your IBI tax bill (council tax equivalent).
This value is then multiplied by the appropriate tax rate: The rates are:
19% if you are resident in E.U or E.E.A country (2016)
24 % if you are resident outside of the E.U or E.E.A
So if the cadastral value of your property is €100,000, and the value has not be amended you start with €2,000 (2% of €100,000). If you are a resident of a EU country you multiply €2,000 x 19% = €380.00
The annual tax would be €380.00.
If you buy your Spanish property part way through a year, you are only liable to pay in proportion to the months you have owned the property.
Non-resident income Tax – When you are renting out property
If you rent your property out in Spain, the tax you pay is calculated on the amount of rental income received instead of the cadastral calculation.
To calculate the amount of non-resident income tax payable you simply multiply the rental income by the relevant tax rate (19% for residents of E.U or E.E.A countries and 24% for those resident outside of the E.U E.E.A).
So if, for example, you are a resident of a country outside of the EU or E.E.A and generate €5,000 of rental income from your Spanish property, you would have to pay €5,000 x 24% = €1,200 non-resident income tax in Spain.
There are some reliefs available for residents of EU or E.E.A countries who may deduct, for example, costs of mortgage interest, maintenance, home insurance etc.
Will I get notified when my Spanish non-resident income tax is due?
You will only be notified at your Spanish property address so by the nature of the fact that you are non-resident, it is likely that you will not be at your Spanish property the majority of the time and may miss the notifications and deadlines.
It is therefore advisable for non-residents to appoint a fiscal representative in Spain– someone appointed to look after your tax obligations for you and ensure tax requirements are complied with.
Are there any other taxes in Spain that I should be aware of?
IBI Tax (Impuesto sobre Bienes Inmuebles)
The IBI is a local tax imposed by the local town hall and is the equivalent to the UK’s council tax. It applies to both residents and non-residents. In some parts of Spain, it is called SUMA.
The amount o the IBI tax varies from area to area. It is based on the rateable value of your property (0.4 – 1.1% of cadastral value). It is due once a year.
Wealth Tax in Spain
If you are lucky enough to own over €700,000 worth of assets in Spain you may be liable to Spanish Wealth tax.
If you are liable for Wealth Tax, you must appoint a fiscal representative in Spain. In reality, only a very small minority of people are liable to pay this. If you feel this may apply to you, please do not hesitate to contact us.
What should I do to make sure that I comply with my tax obligations in Spain?
For most people, non-resident taxes are not overly onerous and most people just consider them as part and parcel of the general running costs for their Spanish property.
You do however need to be aware of how to report and pay these taxes and the relevant deadlines. Spanish tax authorities are becoming increasingly vigilant in ensuring that these tax laws are complied with.
For many non-residents it makes sense to appoint a fiscal representative to receive all tax notifications, prepare the relevant tax returns and ensure compliance with your tax obligations in Spain.
Lawyers in Spain are usually specially qualified to act as your fiscal representative in Spain and can act in this capacity to help you to avoid you falling foul of the law and making costly mistakes.
Ignorance is no defence and will not be accepted as an excuse to avoid payment. Tax authorities in Spain are not known for their helpfulness so you can not expect to rely on them to explain what your responsibilities are. It is up to you to find out and comply with them.
If in doubt, contact us and we will be happy to put you in touch with someone who can assist you with you taxes in Spain. Call us on 01244 478 911 or email email@example.com.
To find out more about buying and owning property in Spain, download our Total Buying Abroad in Spain guide.
Please note that the above information is for general guidance only and should not be relied upon. Specific advice about your particular circumstances should be obtained from a qualified professional.
Article published: May 4, 2018