Non res tax- ouch!!

Roberto. I have no problem with your comment about getting over ..the 90 /180 day rule in Spain what I have a problem with is that a Spanish citizen can come on holiday to the UK for a continuous 180 days  or 180 days spread over a 365 day period I don't understand why the Spanish as a Sovereign country have not reciprocated with the UK government .. when it's plane to see that the British are no longer buying property in Spain  due to the 90/180 day EU rules.

Hello Roberto

You say ‘’imputed income tax’’ are you able to explain in terms that the man in the street can understand what this actually is and how it applies in this case?

Imputed income is an income that is not actually received but rather deemed as having been received.  This can be based on differente situations.  A very simple example, an employee has exclusive use of a company car.  The employee is deemed to have received income equivalent to the price of such use. The law tells how to calculate this price. There is imputed income tax on benefits in kind. 

What happens with properties is that it is deemed that the owner using a property has received an income equivalent to the price of such use.  The tax laws tells how to calculate this price.

Roberto is right that this law has nothing to do with Brexit or being a UK national.  All taxpayers are subject to this imputed income regardless of their nationality or residence.  The difference is how the tax is calculated.  For residents, Spanish or non-Spanish nationals, the tax base is added to the rest of their income to determine the tax rate.  For non-residents the tax rate is 24%, except for nationals of other EU countries whem the tax rate is 19%.  Since the UK nationals are no longer nationals of an EU country, their tax rate has increased from 19% to 24%.  This has been like that for many years.    However due to Brexit, the tax rate for UK nationals has increased from 19% to 24%.

This has also nothing to do with the EU Schengen rules on how long can a UK national who is not a resident of Spain stay in this country.  This is an entirely different matter that now affects UK nationals due to Brexit.  These are EU rules not Spanish Government rules.  I am not sure that a Schengen country like Spain can deviate from them.

I hope I have helped to clarify the matter.

Windtalker: I guess you'd have to at least consider the possibilty that you may have overestimated the importance of British holiday home buyers to the Spanish economy? Also, I'm not certain, but I think Spain, as part of the Schengen agreement, may have to follow Schengen rules?

Kavanagh, I say imputed income because that's what it always seems to be referred to as in this context, but to be honest, I have never used the word "imputed" in any other context and don't know why we use that word! Google suggests this though: 

"(of a value) assigned to something by inference from the value of the products or processes to which it contributes; estimated."

I'm not even sure the Spanish use the same word (imputado), although the verb imputar could be translated as attribute, or ascribe. 

I think earlier in this thread you likened this tax to a "benefit in kind" tax, akin to company car tax, which I believe is probably correct; in that case, an arbitrary value has to be attributed to the benefit - or imputed. On the other hand, I think it is commonly believed that there is an implicit assumption that second home owners do in fact sometimes rent their properties out, but do not bother declaring the actual income, so this tax is a way to ensure that at least some revenue is collected. 

I hope this helps explain what it is? 

Posted before seeing Lobin's post!

In case it has got lost as the thread digressed a bit....

Mike: 
If you pay tax on actual rental income you need you submit an imputed tax return pro-rata to the number of days that the property was not rented out.

Roberto .I think you will find that the one million British holiday home owners are extremely important to the Spanish businesses throughout the Costas ..the one million British citizens adds up to more than all the other Spanish holiday home owners ...especially on the Costas  no other country in the so called EU spend money like the Brit's..believe me the British have got a habit of voting with their feet if it's not right for them.. remember the BREXIT when the EU wouldn't listen to British concerns...we will just have to wait and see what happens .

Yep, let's see what happens 

How interesting ‘’DEEMED’’ to let it out for income. ‘’MIGHT’’ let it out for income. So the taxman will tax and punish financially every second property owner with no evidence whatsoever. As I have stated before residents get around this tax easily but non-residents cannot. Why does this tax not apply to having 2 private cars or a caravan/motor home or even a Jet Ski? 

Kavanah, this imputed tax on property used by the taxpayer (both residents and non-residents)  applies as well to primary residences.  It is not applied only on second or holiday residences.  If you own your primary residence, the imputed or deemed income is subject to tax.  The method you mention to avoid this tax does not work.

Hello lobin

I am now totally confused, but I suppose you learn something every day. So all residents pay imputed tax on their main residence, is that correct? Is this also a deemed letting tax like you ‘’might’’ have a lodger? How and when is this paid? Do second property owners get charged ‘’lodger tax’’ and ‘’deemed’’ letting tax, a bit like double taxation?

Kavanagh, I believe you are confusing tax on rental income and imputed tax. These are two entirely different things.

Rental income is an income that has been received by the owner of the property and as such, it is not an imputed or notional tax.  The imputed tax on self used property is a tax on income that has not really been received but it should not be considered a deemed letting or deemed rental.

The imputed tax levies the economic benefit that the taxpayer receives from his own property.  I can see why you are confusing the two but when a property is let out, the owner is not using it, but rather deriving real income that is subject to tax.  When the owner uses it he is obtaining a benefit (similar in a a way to a benefit in kind) from an investment and it is this benefit that the imputed tax considers as income.

Resident tax payers just add this imputed income calculated in the manner the law dictates to their  general tax base of income from all sources.  The tax rate varies depending on the total tax base.  

For second properties, if they are let out, the rental income is subject to tax and added to the general tax base.  If the second property is used by the owner, then he must add the imputed income to the general tax base.  In the case of mix situation the imputed tax is calculated in proportion to the amount of time that the property has been available for use by the owners, that is, not rented out.

I hope this helps in clarifying things.

Hello lobin

I really, really do appreciate your patience and efforts in trying to explain what’s, what. Unfortunately, perhaps it’s beyond my intelligence.

I do understand that if you let out and actually receive money (in your handy pandy) for any property (main residence or second home) it is a taxable income and rightly so. It’s an earner.

The bit I cannot get my head around is where you have purchased a property (main residence or second home) with your own hard-earned TAX PAID money, you do not let it out and receive SOD ALL income from it, but you are taxed for living in your own tax paid property.

How can any property be classed as a benefit in kind when you own the asset and have paid for it with your own tax-paid money.

The company car example is totally misleading, which is a benefit in kind and taxable because it is not your asset, you do not own it, you are receiving the use of an asset that has a value that you have not paid for.

Is the whole thing a property (main residence or second home) an owner's wealth tax?

Does a resident that is renting pay less taxes than a person who owns their main residence?

Iobin.

Thank you for your explanation which sticks to the facts and doesn't get clouded by complainers.

Simply if it's not your main residence, and you let it out, you have to pay a tax based on the rental income.  I

f it's not let out you have to pay Non Resident Tax which actually means 'not occupied' and this also applies to Spanish nationals who have holiday homes.

Mike.

Hello Mike

If you own a property in Spain , you must pay a local property tax or Impuesto sobre Bienes Inmuebles (IBI). The amount is the rental value multiplied by a tax rate set by the local authorities. This applies to non-residents and residents. Non-resident property owners also need to pay an additional imputed income tax at flat rates on potential rental income on Spanish property even if they never receive any rental income. There is also basura, a rubbish collection tax you must pay even if the property is unoccupied.

Most Spanish residents avoid additional imputed income tax by declaring second properties as a main residence in a family name and therefore only pay Impuesto sobre Bienes Inmuebles (IBI).

Thanks lobin, I think the penny has eventually dropped with me, what a scam!

I do know what IBI is, Local Council tax. This must be paid.

The discussion is about Non Resident Tax and Rental Income Tax..

Yes Mike you are correct.

Do you think it is fair to be charged a non-resident tax over and above IBI when you never rent your property out or receive a penny in income?

Is this a fair tax or a discrimination tax?

Kavanagh: "I think the penny has eventually dropped with me". No, I really don't think it has!

Mike, "Non Resident Tax....actually means 'not occupied' " - I may be splitting hairs here, but that's not actually correct. It is true that a tax is levied on all owners of second (sometimes unoccupied) homes, whether they are Spanish residents or not, but it is not called non resident tax, it's just income tax. We refer to "non-resident" tax for those who are not fiscal residents in Spain simply because there is a different form to use for non residents. If you look at your form 210 you'll see it is actually titled Non Residents Income Tax.

You pay income tax on any rental income obtained, and for the days when the property is not rented out (either occupied by you or left empty) you pay imputed income tax pro-rata. 

You may be correct Roberto. Nobody really seems to know the true title/name of this tax and furthermore, nobody seems to know what gain/income/benefit in monetary terms is actually being taxed.

There was a debate in the US some time ago about imputed tax on property.

‘’Legal application in the United States

In dicta in 1934, the Supreme Court touched on the issue of the constitutionality of taxing imputed income: The rental value of the building used by the owner does not constitute income within the meaning of the Sixteenth Amendment.’’

Of course, that is the US and this is Spain. I still believe this mythical tax aimed at milking non-residents.

The "name" of the tax is income tax. It's clearly stated on the relevant form (210) which is used for all forms of taxable income, actual or imputed (imagined, if you like) and not just tax on second property ownership.

It's not a mythical tax. It actually exists!

It's not aimed at milking non-residents, as residents also pay it.

Owning a second property in other countries comes with additional tax burdens too. For example, in the UK there is no relief on stamp duty if you buy a second home - whether you are resident or not in the UK, and whether or not you plan to rent it out, or just use it for your own holidays.

Death & taxes, as they say. Believe what you like. (But perhaps you could turn off your bold typeface? It makes you seem like you're shouting. Perhaps you are? )

So now we know its real name ‘’imagined income tax’’.

No Spanish resident pays this imagined income tax as Señor Rodriguez lives in one house and Señora Rodriguez lives in the other, or at least on paper.