I received this from a company via my solicitors today, it looks as if we have to pay 1/2% of the value of the property we bought. Is this correct and if so is it at the purchase price or today's depressed market price?
Dear Sirs,
We are pleased to inform you that your Solicitors, have retained us as tax consultants for any of their clients wishing to avail of this service.
As property owners in Spain, it is important that you ensure that you are in compliance with current tax regulations in this country. We can provide a full range of specialist tax advice, including planning, compliance and investigations, to allow you to keep your taxation affairs in order.
Should you wish to avail of this comprehensive tax advisory service we would handle all matters on your behalf with the Spanish Inland Revenue, including settlement of your annual taxes.
We shall also keep you informed of your tax liability now and in the future, based on the details held in our files concerning the property or properties you currently own in Spain.
We feel it is important that you are made aware of the following facts:
Any non-resident person owning a property in Spain is liable to both Wealth Tax and Deemed or Presumed Income Tax.
- These taxes must be paid annually. If you purchased your property in 2006, you must start paying taxes in 2007. If you purchased before 2006, we can bring your taxation affairs up to date should you wish to do so.
- Should you fail to pay your Wealth and Deemed Income Tax annually to the Spanish Inland Revenue, you will be unable to recover the 3% capital gains tax (CGT) retention on the sales price when and if you sell your property in Spain. We are referring to the 3% on the sales price of the property which must be withheld and lodged with the Inland Revenue to cover capital gains tax, if any, on the transaction. Even if you were to make no profit whatsoever on the sale, the Inland Revenue would still retain the 3% and use this to settle your unpaid wealth tax and income tax for the preceding five years. You would also be liable to pay interest on the unpaid taxes over that five-year period, in addition to a fine.
4. The Wealth Tax rates for the fiscal year 2006 (payable in 2007) are as follows:
- 0,20% for assets under EUR 167.129,45
- 0,30% for assets between EUR 167.129,45 and EUR 334.246,88
- 0,50% for assets between EUR 334.246,88 and EUR 668.499,76
- 0,90% for assets between EUR 668.499,76 and EUR 1.336.999,51
- 1,30% for assets between EUR 1.336.999,51 and EUR 2.673.999,02
- 1,70% for assets between EUR 2.673.999,02 and EUR 5.347.998,03
- 2,10% for assets between EUR 5.347.998,03 and EUR 10.695.996,06
- 2,50% for assets over EUR 10.695.996,
In assessing your property for Wealth Tax liability, the Inland Revenue will apply the highest of the following three values:
- The rateable value of the property (as assessed by the local authority).
- The purchase value as stated in the Deed of Conveyance.
- The value assessed by the authorities.
- Any non-resident person owning a property in his/her name is liable to Income Tax of 2% (or 1,1% if the rateable value has been revised) on the value of the property. This tax currently stands at 25%. In simple terms, the Inland Revenue considers that the owner of the property is receiving an annual taxable income equal to 2% of the value of the property and consequently charges a 25% tax on this income.
The assessed value for Income Tax purposes is the value indicated on the rates bills (rateable value).
Yours faithfully,