non resident tax murcia - advice please

Hi

We purchased our house last July in the Murcia region.

Please could someone advise when we need to complete our non-resident tax form and whether we can complete them on line or do we need a solicitor?

thanks

Official, english version of Non Resident Tax:

http://www.agenciatributaria.es/AEAT/Contenidos_Comunes/No_residentes/Tributacion_de_no_residentes/Folletos_divulgativos/irnringles.pdf

We plan to retire to Murcia in around 2 years time at which time we will become resident and maybe tax resident depending on whether the Spanish tax rates change in the mean time in particular IHT which is extremely harsh in Murcia.

We purchased a property in Murcia last summer and our taxes are due this year. My question is what would if anything be the difference between becoming resident for the next two years or remaining non-resident for that period. Would the tax we pay be any different?

I realise if we stay more than 6 months per year in two years time we would become tax resident

thanks again for any help

To be honest with you IMHO the non-resident tax is inconsequential, let's say around 150 Euros per year on average. We have been going through the same though process for specific reasons and I would strongly advise you you seek independent financial advice to manage your affairs before a move. This would involve reviewing assets in the UK, pensions arrangements, inheritance, trusts etc, plus timing of any move. We have a good "abogado" in Spain who does our NRT, but more importantly offers clear advice, plus an accountant in UK. Both are worth their weight in gold. Forums are great but individual circumstances vary so much.

Saludos

Juan

Juan   the non-resident tax is inconsequential, let's say around 150 Euros per year on average.

That sweeping statement is not is correct.  

The amount of tax is based on the purchase price or the catastral value, whichever is the higher. My son has two average apartments on the coast, one with two bedroom two  other with 3.  He pays around 350 euros in tax on each.   

If one owns a large villa, then the tax would be considerably higher.  

This, from the internet,  explain when patrimonial tax is also payable by non-resident owners:-  

Wealth Tax in Spain – Deductions

Residents and non-residents are entitled to the following deductions per person:
- Individual deduction: €700,000 

Residents are also entitled per person to:
- Main home / permanent dwelling deduction: €300,000

Non-residents, by definition, cannot benefit from a permanent dwelling deduction

A married couple would each be entitled to the individual deduction as well as the deduction on their share of the main home owned in joint names (residents only).

So, for example, a married couple, resident and non-resident alike, has a combined tax-free allowance of €1,400,000 on their net estate. Taking into account a main home, a resident married couple has a total tax free allowance of €2,000,000.

Also note that this tax is on net assets, which means you can deduct mortgage debts (residents and non-residents alike)

I still would not recommend any decision to become tax resident or not on the basis of one tax, be it 150 Euros or 300 Euros. Any decision to become resident is far more complex than that.

JOHNZX, I believe the purchase price option baseline is used where there is no catastral value in the property register and then a different rate applies as per the following:

Section 210 I must only be used to declare earnings from urban buildings used by natural persons for their own enjoyment.
 
Taxable base [4]: Enter the result of applying one of the percentage amounts below, whichever corresponds, to the property register value of the building.
 
Applicable percentage: 

4 - Buildings whose property register value has been reviewed or changed with effect from 1 January 1994 ....................... 1.1% 

- Other buildings ............................................................................................................................................................. 2%
 
No expenses may be deducted from the resulting amount. 
The resulting amount is understood to refer to the full calendar year. The number of days is proportionally reduced when ownership has not been throughout the entire year or when it has been rented for part of the year. 
If at the date of accrual of the tax (31 December) the buildings have no property register value, or the owner has not been notified of this, the taxable base of the same is calculated as 50% of that calculated for the purposes of wealth tax. This amount is the greater of the following: The price, consideration or 
cost price of the property, or the value of the same established by the administration for other taxes. In these cases, the percentage shall be 1.1%. 

This might be useful

https://www.agenciatributaria.gob.es/static_files/AEAT_Sede/Ayuda/GF00/en_Instr_210.pdf

Thanks Campo. I think the question from original poster is not clear. Perhaps a clarifiying question would help?

Saludos

Apologies to all for perhaps not making myself clear.

The question I was trying to ask was for the next 2 years before we retire and spend more time in Spain would it make any difference to us and owning our property in murcia whether there was any difference between becoming resident or remaining non-resident.

I was not sure whether as a resident we would still be liable for non resident tax on the property.

After 2 years and we retire we realise that if we spend more than 6 months per year in Spain that we would automatically become tax resident in Spain with further problems that brings such as higher spanish income tax and Spanish IHT considerations with Murcia's pathetic £16k allowance, but it was more of a short term question would there be any differnce for the next 2 years to be resident or non resident.

hopefully above makes it clearer

apologies again for any confusion caused.

Kerry

Hi Kerry, I keep coming back to my recommendation about seeing an abogado, There are matters to be dealt with on both sides. Once you become resident in Spain, you have to complete the infamous Modelo 720 declaring assets in each class  of property, cash, bank accounts, trusts. So simple example, you have a property in both locations. You become resident in Spain. You then sell your property in the UK. This is now taxable to Spanish authorities. Equally, you can declare yourself as non-resident in the UK. However, if you maintain a property ihe UK for you own use,   then you are deemed to be resident in the UK. It is really not so simple. You then have to factor into the equation big issues such as medical care,  then it really does become somewhat of a Rubiks cube. We know people who have now become non-resident. We want to become resident and we saw our abogado who was not so concerned about the IHT issue, given certain scenarios. It is money well spent!

Saludos

Juan

Cheers Juan.

I thought you could become resident and not tax resident if you spend less than 6 months in Spain. We could therefore maintain paying UK taxes on our assets, not ideal as retirement for us is spending maximum time in the sun but dont want the Spanish Government taking a big chunk of our worldwide assets so perhaps spending maximum 6 months in Spain may be the best compromise

We will take your advice and speak to a Abogado in our next visit to Spain

thanks again

Kerry

Kerry 

If you have been in Spain for 3 months permanently, then you must register on the EU Citizens Register.

The Hacienda will then treat you as being Tax Resident.  A friend of mine's non-resident bank account was frozen because of this.   I spoke to Hacienda and they confirmed that they considered  as she was on the register as a ‘resident’  she was tax resident.  However, some here are of the opinion that that is not so.

But if you are in Spain for a total of 183 days in 12 months, or your home is here, then you are tax resident..    without any doubt. 

The double taxation treaty between Spain and UK stipulates where one must pay tax, there  is no possibility that one can choose where to do so.

You will become resident for tax purposes in Spain if:

• You spend more than 183 days in Spain in one calendar year. You become liable whether or not you take out a formal residency permit. These days do not have to be consecutive. (Temporary absences from Spain are ignored for the purposes of the 183-day rule unless it can be proved that the individual is habitually resident in another country for more than 183 days in a calendar year.)
• Or, your “centre of vital interests” is in Spain, e.g., the base for your economic or professional activities is in Spain.
• Or, your spouse lives in Spain and you are not legally separated even though you may spend less than 183 days per year in Spain

Note that the Spanish tax years is the same as the calendar year (1 January – 31 December), unlike the UK, which is from 6 April to following 5 April.

The UK/Spain Double Tax Treaty (“DTT”) overrules the Spanish residence determination. You cannot be tax resident in both countries under the DTT. Registering on the EU Citizens Register does not make you a tax resident in Spain. When we came to Spain for about 4 months a year, our solicitors got us registered but told us that we would not become tax residents until we submitted our first tax return. Hacienda saying you become a tax resident after 3 months goes against all the rules of the DTT unless you declare Spain as being your main base of operations.

However, on the original question. If you become full tax residents in Spain for those two years, you will be liable for CGT on your property in UK if you decide to sell it before moving over permanently. If you stay a non-resident, you can sell your UK property and not be liable for CGT as it will be classed a your main home. Becoming resident in Spain will mean your Spanish property is your main home. Just something to be aware of for the future.

The advice on consulting an abogado is the best you have received on here.