NON RESIDENT TAX

No doubt a subject raised many times.

Why do non residents pay non resident tax (or whatever you wish to call it) to the Spanish tax authorities when they are UK tax residents responsible to HMRC for all their worldwide financial affairs.

Is HMRC being diddled here?.

Why??

Because it is just a law of the land ! It applies to all non resident property owners not just the British! I would imagine the original thinking was  - if you want and can afford a second home here, you can afford the tax. It is a property tax, no more than that.

The 'news ' with this, will the current rate enjoyed by EU and EAA countries (20%) be increased to the rest of world rate (24%) for the British after brexit?

Thank you team GB. I was looking for more of an explanation to my question than it’s just the law. All laws should be justifiable and not just taken for granted. At one time it was the law that children should work down coal mines.

Affording the tax is not the issue, although ‘non resident tax’ was mostly kept secret until your purchase had completed. The issue is who should it be due to if you are a UK tax resident and a Spanish non tax resident.

I am told Residents in Spain have to pay imputed tax on all properties, apart from their main residence in Spain, which they own in Spain or anywhere worldwide.

For example:  tax residents in Spain,  who own a garage space which is separate from their main residence,   another apartment or house,  a house in UK on which they do not have any rental income, etc. must declare that additional property when making their annual tax declaration and pay any tax due.

Should this not be the same in the UK for UK tax residents?.

I am confused why a UK tax resident has anything to do with the Spanish tax authorities. He/She should be paying anything due to HMRC.

Duncan.   it’s never been a law that children work anywhere.   

Looking back at the history of my family some mid 19th century distant relatives worked in coal mines at the age of 12.   That was because the family needed money to survive; it was nothing to do with any laws.   

If there  are any taxation laws to justify, it’s a revolution and ballot box issue.  

"Why do non residents pay non resident tax (or whatever you wish to call it) to the Spanish tax authorities when they are UK tax residents?"

Simple - because that's the tax law of Spain. A tax resident of Spain, with a property rented out in the UK, or a UK govt. pension, must pay tax on the income in the UK, because that's the tax law of the UK. The double taxation treaty between Spain & the UK will ensure tax is not paid twice on the same income. And strictly speaking, it's not a "non-resident" tax anyway, it's a tax on second (or any additional) properties other than your main residence, which as you know, even Spanish nationals and residents must also pay (as a non-resident, it is by definition not your main residence, so there's no escaping it). So British, or other nationalities, are not being treated differently.

"...non resident tax’ was mostly kept secret until your purchase had completed."

It's never been a secret - what you mean is that most non Spanish property buyers were/are ignorant of the law, and as I've said many times, a Spanish lawyer will answer all your questions but will not tell you what questions you should be asking (with a few notable exceptions, Maria!)

"...will the current rate enjoyed by EU and EAA countries (20%) be increased to the rest of world rate (24%) for the British after brexit?"

Unless a new agreement is struck between Spain & the UK (or the UK stays in the EU or EEA after all), then yes, one would have to assume so.

Hello Roberto

I do not dispute what you say, but confused by conflicting opinions and statements. Nothing new there.

‘’Resident income tax

If  you’re a resident, you have to pay income tax at Spanish rates on all your income, even if  it originates outside Spain.

Statement by TransferWise is authorised by the Financial Conduct Authority.''

I suppose the contentious issue here is that HMRC does not tax second homes (unless you let them out). Whereas Spain does to foreigners who are not tax residents and do not receive any income or consumption, therefore being taxed on nothing.

Is there any other EU counties that impose a similar non resident tax?.

If this thread is becoming too sensitive please close it, I do not want to get banned.

This message was last edited by DuncanThickett on 13/11/2017.

Roberto

I think there may be '2 sides to this coin'

No matter what nationality, if you are renting your property then of course you should pay tax on the income.

I believe the confusion is that there is a 'imputed tax' for those that are not renting out their property, so what income is there to tax on?

BigAl

Duncan: "If  you’re a resident, you have to pay income tax at Spanish rates on all your income, even if  it originates outside Spain." (Statement by TransferWise)

I'm certainly no tax expert, but then again. being a member of the FCA doesn't necessarily make a currency transfer company one either, and this statement was almost certainly lifted from some other unknown and unofficial source. It's true that a Spanish tax resident should declare all their worldwide income, but there are some types of income on which tax will not be paid in Spain, examples of which I mentioned before. But nayway, this htread is about the so-called non-resident tax....

I have no idea if other EU (or indeed non-EU) countries impose a similar tax on second properties, but it wouldn't surprise me. 

Duncan: "Spain (taxes) foreigners who are not tax residents and do not receive any income or consumption, therefore being taxed on nothing."

Spain taxes all owners of additional properties to their main residence - it has nothing to do with being resident, Spanish, non-resident or foreign. You said so yourself in your previous post.

BigAl: "the confusion is that there is a 'imputed tax' for those that are not renting out their property, so what income is there to tax on?"

Perhaps the confusion arises because it's known as "income" tax. There are plenty of taxes that aren't charged on actual monetary income - the example that springs to mind is the tax charged on company car drivers in the UK; the car doesn't produce any income for the driver, but it confers a perceived benefit on the user, and that benefit is taxed. Same goes for a second property - it's perceived (by the greedy money grabbing Spanish taxman) as a luxury & a benefit that the owner enjoys, so he want shis share of that enjoyment. 

"All laws should be justifiable and not just taken for granted" - well, perhaps, but two things you can be sure of will never change: death & taxes!

Does anyone know

What tax on second (or any additional) properties other than their main residence, do Spanish nationals and residents pay, other than IBI and wealth tax?.

Details on any imputed tax seem difficult or impossible to find. I am sceptical it actually exists and it is being confused with IBI and wealth tax.

However if residents do pay a totally separate tax on second homes at the same rate as non residents then that makes ‘’non resident tax’’ fair and the end of the thread.

But if they don’t that makes ‘’non resident tax’’ unfair and extortion.

I repeat: Spain taxes all owners of additional properties to their main residence - it has nothing to do with being resident, Spanish, non-resident or foreign. You said so yourself in your previous post. It's a tax on owning more than one property, and totally seperate from  IBI and wealth tax.

With regards to non-residents' tax, including imputed income on (by definition, second) properties, there's plenty of info all over the 'net.

http://www.agenciatributaria.es/static_files/AEAT/Contenidos_Comunes/La_Agencia_Tributaria/Modelos_y_formularios/Declaraciones/Modelos_200_al_299/210/Instrucciones/OrdenIRNR2010instrucciones210_en_gb.pdf

Duncan (and any others), if you are a non-resident and own a property in Spain, you really need to know about this!

Hello Roberto

''I repeat: Spain taxes all owners of additional properties to their main residence - it has nothing to do with being resident, Spanish, non-resident or foreign.''

If you are sure of this where have you found this information? Do you have a link?

Is the tax the same to all?.

If you are correct it would seem the term ‘’non resident tax’’ is misleading because it implies a tax to non residents only.

I did say I'm no tax expert, so please take what I say purely as my opinion - based on my own experience.The easiest way to prove this to you would be to publish my own tax returns on here - but for obvious reasons, I'm not going to do that. I could trawl through the AEAT website to try and find the relevant information (in Spanish) for you - but that would probably take hours, and I'm not going to do that either. I suggest that perhaps you download the BF tax guide here: https://www.blevinsfranks.com/download/tax-guides/87  .Maybe in there you'll find whether the imputed tax  on second homes is charged at the same rate for residents and non-residents alike - I don't kow the answer to that. 

You said "I am told Residents in Spain have to pay imputed tax on all properties, apart from their main residence in Spain", so perhaps you could ask whoever told you this as well. 

I don't think the term "non-resident" tax is necessarily misleading; the form (modelo 210) for non-residents is different from the forms used for residents filing their personal tax returns (IRPF), so it makes sense to differentiate. Also, I suppose it helps to call it "non-residents" tax so that non-residents are aware of it's existence?

All governments will get tax off you some way or the other. In Spain, the "imputed income tax" is a tax you derive on the benefit of owning a second home. Residents will pay income tax, non-residents will not so they get you that way (until you do rent it in which case you no longer pay imputed tax but actual tax on the rental income).

 In UK, you pay 3% more stamp duty on a second home and from a lower rate. You will also pay Capital Gains Tax when you sell it which you would necessarily do on a main residence.

OK, I said I wouldn't, but I was bored and had a few minutes free. I always prefer to get my information from official government websites - even such highly regarded agencies as BF have been known to get things wrong sometimes (again, personal experience, not hearsay). I can't post every relevant link, but go to https://www2.agenciatributaria.gob.es/ES13/S/IAFRIAFRC12F?TIPO=T&CODIGO=00116 and click on IMPUTACIÓN DE RENTAS INMOBILIARIAS, then look at categories such as REQUISITOS & CÁLCULO. It's all there if you can be bothered. Or you can just believe me and everybody else who's posted on the subject for years - this is all fairly common knowledge. Up to you!

Hello Roberto and thank you.

No mention I can find on  https://www.blevinsfranks.com/download/tax-guides/87

‘’You said "I am told Residents in Spain have to pay imputed tax on all properties, apart from their main residence in Spain", so perhaps you could ask whoever told you this as well.’’ 

That came from ex Dixon of Dock Green who often makes statements as you know, then ignores requests to justify them.

I am beginning to think residents do not pay ‘’imputed income tax’’ on second homes and it’s all a myth.

How sad no one on here can either say ‘’no they don’t’’ or ‘’yes they do and here’s the evidence’’.

Ah Duncan, theres the rub!!!

I am beginning to think residents do not pay ‘’imputed income tax’’ on second homes 

I think you have identified a choice to make there, the long term residents say it's a valid tax, and on the other hand you want to avoid it because it is too complicated to get your head round and its not something thats causing you immediate hassle.

So its your choice, either pay it ot dont pay it, if you dont have a demand for it, do you still have to pay it?  If you cant calculate it, can you pay it anyway?

Is an accountant any good for you, or is it a gestor you need (that thread is still a dissapeared), does Mr Dixon have the answer?

The more I have read of this post the deeper it gets without any resolution, I wonder if there is an answer at all Duncan?

Now even I'm getting confused.

Duncan: "I am beginning to think residents do not pay ‘’imputed income tax’’ on second homes and it’s all a myth. How sad no one on here can either say ‘’no they don’t’’ or ‘’yes they do and here’s the evidence’’.

Did you even read my post immediately before yours? I'm not going to translate the proof for you as well, you can use Google Translate. If a Spanish government website (the tax office, to be precise) is not sufficient "proof" then I really don't know what it is you're looking for. Are you just determined to disbelieve it?

Brian: "So its your choice, either pay it ot dont pay it, if you dont have a demand for it, do you still have to pay it?  If you cant calculate it, can you pay it anyway?"

Since when was paying your taxes a choice? The Spanish tax office does not issue a "demand", anymore than HMRC do - it's a self-assessment system. If you can't do it yourself, then yes, you must employ a gestor.

And are we still talking about non-resident taxes? It seems to me that the argument has turned to residents' tax. Duncan - are you a fiscal resident in Spain or not? Do you own a property (or more than one) or not?

Roberto:   There is always a choice.

Pay tax correctly or don't, take goods without paying or don't, etc etc.

The 'getting caught' bit is the one to look out for, perhaps Duncan doesnt want to pay, so its up to him to look for reasons not to do so.

Personally, I employ an accountant and pay all the taxes I am due to pay, and I don't trust my own judgement about what my liability may be if its at all complicated.  I advocate thats what Duncan does, but its his choice.

There have been discussions here about the abilities and standing of Gestors, maybe that still needs some discussion for people wanting to know exactly what their liabilities are.

Or are you saying its really easy and straightforward to work out?

No, I'm not saying that at all - taxation is rarely simple & straightforward, which is why I said  If you can't do it yourself, then you must employ a gestor. But having said that, there are plenty of non-resident property owners who complete and file their own modelo 210 without difficulty, and there are members on this forum (some of whom are routinely criticised for trying to share their experience), who can help those who haven't done so and want to know how to. (I've only ever filed resident IRPFs, for which I've always used a gestor because frankly, I can't be bothered to do it myself)

Ultimately as you say, it's up to individuals whether they "choose" to pay the taxes they owe or not, but I took the time to trawl through AEAT's website for the "evidence" requested, so find it a little disappointing that my efforts were completely ignored and disregarded. So much for trying to help!

I didn't pay the non residents tax for a few years, as no-one told me I had to do so.  When I realised I had to pay the back years, which were increased by a penalty element. 

I found the system full of gobbledegook and having (I think) grasped the basics I made myself a file note:
<<
In 2011 discovered there are 2 taxes !!!

1. “Declaracion de la Renta” (Modelo (form) 210) This is the Income Tax payable in Spain and is calculated by several factors.  First off find the Cadastral value of the property.  This is shown on the IBI (aka Suma) which is the equivalent of our Council Tax. 
   
   The Cadastral value is a notional value and similar to the UK “ratable value”.  The assumed earnings element will be first decided on either 1.1% or 2% of the Cadastral value dependent on when the cadastral value was last assessed.  The lower figure of 1.1% applies on properties valued since 1994.
   
   This Agencia Tributaria set the annual percentage of this figure which is actually payable.  In 2011 it was 24%.  So the abbreviated calculation is RV x (either 1.1% or 2%) x 0.24
   
   This tax is paid regardless of whether or not you have any rental income from the property.  The Spanish just call it “deemed rental income” – so everyone is obliged to cough up.
   
   For the calculation see - http://www.agenciatributaria.es/static_files/AEAT/Contenidos_Comunes/La_Agencia_Tributaria/Modelos_y_formularios/Declaraciones/Modelos_200_al_299/210/Instrucciones/OrdenIRNR2010instrucciones210_en_gb.pdf
    
2. IBI (aka Suma) which is the equivalent of our Council Tax.
   >>
   
   A bit irritating and unfair, but in reality the amounts are relatively modest.