Tax when renting out

Can anyone give advice on what to do about Spanish and UK tax if you are renting an apartment out?

Try these sites for some useful information:

http://www.propertyinspain.net/guide/bg/property_taxes.aspx

http://www.strongabogados.com/taxes.php#PropertyTaxes

thats easy.you can offset all your costs .i.e mortgage interest.cleaning bills community charge elec and water charge.if you are employed and you get these figures to match and dont fill in an anuual tax return im pretty sure you need do nothing.if you fill in a form just put the net prices down tell your accountant and  as long as the rental income doesnt exceed the outlays youre home and dry.(ask your accountant to confirm this)btw from the pw forum it seems we are letting at too low a price.they suggest a minimumn 250 euros pw.if we all do this and dont undercut each other it has to be in all our best interests.i know the gc isnt opened till the summer but this has to be considered.

I just got a response from my lawyer/taxation adviser who says that my tax on lettings is 24% payable quarterly and that expenditure cannot be offset against the income.  They are quoting €90 per return  (ie 4 per year) - which is probably more than the tax is going to be!!!!???? Anyone got any more info/thoughts?  Thanks, Arlene.

The info I received was the same as Arlene - that tax is payable in Spain at 24 or 25% and that you cannot offset anything against that.  Tax is payable at that rate on all rental income with no allowances made for expenditure.   It seems that if you are renting out, you cannot avoid losing one-quarter of all rental income in tax!

I also spoke to the Inland Revenue in the UK and was advised that if you are a 40% taxpayer, then you could be required to pay "top up" tax in the UK on your Spanish rental income.   Apparently they deduct the 24 or 25% that you have already paid and you are then allowed to offset things such as mortgage interest, advertising costs, replacement of furniture/furnishings, water and electricity bills etc.  They did tell me that unless you are renting out every week of the year, then if you have a mortgage on the property it is unlikely that you would ever have to pay the top up tax. 

With regard to the electricity and water bills, they apportion the annual bills to allow for own use of the apartment - for example they divide the annual bills by 52 weeks and if you use the apartment yourself for four weeks per year, they will deduct four weeks and allow you to offset the balance against tax liability. 

It doesn't matter whether you normally fill in a Tax Return in the UK or not - the Tax Office said you are supposed to request a Tax Return once you start receiving rental income.  If you don't bother to do that, you run the risk of being caught out and having to pay heavy penalties for tax evasion.  

By the time we've paid tax and the arrears of community charges, there'll be nothing left!!!

Debbie

Wasn't there a form that was part of the completion process because all owners pay a tax now whether they rent or not? owners who rent out then are taxed on their income as well.

Ages ago there was something on the general threads about taxes on properties. The main posts were from long term owners who hadnt been declaring anything from their rental and as a result of changes to the system they were being brought into line and taxed on what is essentially an income. However the general theme was that no one was becoming a millionaire from their rental merely covering outgoings with minimal profit that was now to be lost in taxes. Plus others were complaining that they were now to be taxed but dont rent  and there is a presumptiion that everyone who isnt a resident rents to family and friends at some point.

http://www.properties-in-europe.com/info_spain_tax.htm

This whole question of tax is getting confusing!

I am copying a private message received from George (thanks George!) and would appreciate it if anyone can throw any further light on this.   I think George is getting confused between the "property tax" which is applied to all second homes on the basis that people are probably renting out, and the Spanish INCOME TAX which is payable at 24% on declared rental income.  I am fairly sure that this property tax cannot be offset against anything in the UK, as it is not  based on income.  My understanding is the same as Arlene's posting and also JHMurcia. 

Subject: wrong

As George says, the small tax is charged because it's a second home and they presume people are renting out but it does not avoid liability for paying Spanish Income Tax on rental income and also the possibility of paying top up tax in the UK for 40% taxpayers.  As Arlene has been advised, you cannot offset anything against the Spanish Income Tax, such as mortgage interest, electricity and water etc although you can offset these items against possible top up tax in the UK.  I spoke to a very knowledgable and helpful guy at the Inland REvenue, who specialises in income from foreign property and investments. 

What we perhaps should be asking is if we are declaring rental income in Spain and paying 24% tax, should we still be liable for the small "property tax" as well.  My understanding of the small "property tax" is that the Spanish authorities assume most people with a second home in Spain will be renting out, even if only to family and friends, and will not be declaring rental income.  But surely if you are renting out, declaring rental income and paying 24% tax, then you shouldn't have to pay the extra property tax as well.

Can anyone clarify this? 

Just found this posting on the general forum, which confirms the 24% tax liability with no set-offs for expenses.  Interesting point about the discrimination between residents and non-residents and case being taken to the European Court.  It is certainly a very valid point that by allowing Spanish residents to offset expenses against their tax liability, but not allowing other EU citizens to do the same, there is clear discrimination. 

Still interested in knowing whether you can be liable for both the tax charged based on the rental value and also the 24% income tax - surely they can't have it both ways!

Debbie

check with your accountant.

Ok, well this is how I understand it:

If you are renting your property you will pay 24% of any rental income without any offset.

If you are not renting your property you will pay 2% of 24% as a non-resident.

Fair..........???

Thanks 1098.

That confirms my understanding - certainly with regard to the 24% tax with no set-off.

I did read somewhere that the other tax for new properties is only 1.1% - not sure whether this is 1.1% of the 24% or 1.1% of the rentable value put on the property by the local council.  I will try to find the article and post the link as others may interpret it differently!  All ideas welcome!

I believe it's 2% or 1.1% of 24% of the rateable value.

Not quite sure as to whether it's 2% or 1.1% on Condado properties?

As a rough rule my solicitor gave me these figures for our 3 bed.

all Taxes 550 EUR per anum

Local Tax (town hall) 220 EUR per anum

and 60 EUR each to be our fiscal rep.

Hopes this helps

Dan

Dan

Is that 550 Euros in total or 550 + 220 + 60 = 830?

What is this Cadastrol value thing?  Is that the same as the Purchase Price, the Valuation or something else?

I have a 3 bed apart, and will have no rental income as I want to keep it to myself.  How much should I expect to pay in this regards for tax?  Any estimates, and frequency of payments?

Cheers

Foz

We dont rent out, have just had e-mail from our  solicitors giving us our non-resident tax bill for tax year.

Amount 87.33 euros

fees to work this out were LOTS more than the tax bill.

Now 87 Euros sounds more like this tax charge I was expecting - hope this is correct.

Do we need to arrange for the charge ourselves (hence you went through solicitor) or do the Local council get in touch with a bill.  Once I have a bill, if this is the annual fee, then I would prefer to just set up as a direct debit.

As you say, seems non-cost effective to have a solicitor do this as his fees will be more than the bill itself!

Cheers

Foz

foz that was 830 EUR, I am not renting either!

just looking at the figures now he typed out for me at completion, here they are below.

Form 211 (murcia) - every year - first payment 2009

Tax calculated on Value of property x 0.2% = +/- 550 EUR per anum

Local rates +/- 250 EUR per anum, will recieve letter from town hall Alhama 2010?

i am pretty sure that the bank will just debit your account.it wont happen for a while as it takes ages for it to be set up .also suma(council tax) will have to be set up.my advice-just sit tight and dont go asking to be debited.polaris will let you know i am  pretty confident of that.you will be pleased to know suma is a very small figure in comparison to the robbing gits in the uk.but they dont pay for asylum seekers.ill be surprised if its more than 150 euros.but why not sit tight and dont panic.thats what the spanish do.its called manana.