This is a taxing subject

OK, so it's not the most exciting subject but it is really important and many people aren't always aware of the different taxes that apply to them in Spain.

Us this forum to post any questions or useful information relating to Spanish taxes.  Post them here or start a new thread. 

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We have heard that non residents are supposed to pay a wealth tax based on the value of their spanish property inc furniture etc every year.  Is tis correct and if so, how do you go about doing this and when?

Is it to the Spanish equivalent to UK Inland Revenue or is this another payment that is paid to the local TownHall?

Karen from NM - costa de Sol

 

 

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I believe the wealth tax is paid annually and is calculated at 0.2 % of the property value

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Wealth tax has to be paid by all non resident property owners, 0.2 % of the declared value of your property, this is not the same as suma ( council tax ) which is also paid annually. Firstly for suma you need to register with the suma office, this is sometimes done through the local town hall and usually paid a year in arrears, wealth tax is paid annually it would probably be a good idea to get yourself a fiscal rep who can make the declaration for you, I beleive that if you do not make any of these payments they could become payable in total when you sell the property.

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Concerning property taxes there are two to pay Wealth and Renta Tax they are both on the 214 tax form and are paid as one amount one year in arrears(such as pay now for tax year 2005) they are paid to the tax office not the Council, we owned a property for 8 years and never had a letter from the tax office asking for any money but we always paid it every year about this time just incase as our Solicitor told us we would need it if we sold BUT at the time of selling we produced it to our buyers Solicitor he was not interested to see it  we also took it to the Notary on signing but not interested we know people who have never paid this tax in 25 years and do not worry about it, we used a fiscal rep. for the first thinking he was the best person to help us with this form 214 but all he managed was to pay our taxes for the wrong year charge us about £100 and it took us 6 months to get a refund, our advice is to get the 214 form if you need help filling it out ask around it only takes 10 min.and copy all the details for the next years form, I have heard some people just copy all the details each year and pay the same amount each year,my advice is to stay clear of Fiscal Reps And Solicitors if you can with this form, but of course if you feel you need to pay this tax and can get no help or not much in Spain you have no option,as a new member this is my first letter so we hope its of use to the new owners in Spain . Regards to all Rosi N

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In yesterday's property pages of a reputable Irish newspaper there was an article entitled "Cop-on to the risks of buying abroad". The writer referred specifically to Spain, where he stated that you pay tax on an assumed rental income whether your property is rented or not. Is this correct? If so, how is this "assumed" income calculated? Has anyone experienced receiving a tax bill for rental income that did not exist?

Any information regarding this matter would be appreciated. We have recently purchased off-plan, and being taxed on phantom income certainly was not referred to by the selling agent or the developer.

 

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By default the Spanish assume that non residents will rent out their property and not declare the income. Consequently there is an annual tax on the property for perceived rental income. It is not a significant amount - galling maybe if you are not renting it but insignificant nonetheless. It relates to the fiscal value of the property so the best person to advise you will be your lawyer or fiscal representative.

Rgds Smiley

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Having now read the thread from Rosi I have made the glaring assumption that you have a reliable fiscal/legal representative in Spain which is not always the case so for that I aplogise. I trust mine implicitly and I know he is reliable so that was why I suggested that course of action. It should be noted that while the Spanish have historically been quite lazy over tax collection - God knows it is complicated enough - they are gradually tightening up. Hence the clampdown on under-declaration of sale price on resale properties. There are now more controls on this and if one enters into an agreement now involving significant sums of b money there is a very real risk it will come back to haunt you at a later date. Thus mortgage lenders have become very edgy about lending sums in excess of declared price. If the tax office suspect avoidance of CGT on the part of the seller they can impose a fine on the property (thus the new owner) equivalent to what they believe has been avoided plus a 20% penalty for the avoidance. If charged on the property this takes priority over the mortgage and hence the mortgage becomes the second charge. The lenders clearly wouldnt want that to happen so they have started to control it a little more.

Rgds Smiley

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Smiley-thanks for the information re tax on perceived rental income. Regards.

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You're welcome MCK

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Regarding the 'true' rental income....

If you have 'true' rental income ( which you must declare for the 25% tax offtake in Spain) I believe you can, if you are resident in UK still, offset that against your UK Income Taxation Income Declaration (and not have to pay twice).

 

 

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The tax obligation for your rental income obtained in Spain for renting your property situated in Spain is, obviously, in Spain. If you remit the rental income profits to the UK you might be liable for taxes on that on a personal obligation basis, but you can use the fact that you have already paid tax in Spain as a property related obligation to avoid double taxation. 

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If you are UK resident and domiciled whether or not you remit Spanish rental income to the UK is irrelevant. You are liable to UK income tax on your worldwide income, even if it never gets nearer these shores than Jersey. But you will generally be able to set your Spanish tax against your UK liability (but there's no UK refund if the UK tax is less than the Spanish).

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To mikesmith4: Yes, you can.

Regarding rental income tax having to be paid in the UK, mate, you have the most imperialistic system in the world together with the States.

Rental income has to be taxed in the country where the rent is generated because the asset is there. If your tax system attracts tax for that as well, then just use the tax treaty to state you have paid on that already. Obviously, if you have paid a higher tax already, ther is no refund, but it is logic.

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To Spanish Inquisition, in the case where the owner of a spanish property is non-resident, can you offset your outstanding mortgage or is the tax based on the total value of the property?

As a non-resident is there any tax advantages to have a spanish mortgage?

Does wealth tax have to be paid in the first year of ownership?

Thanks for you help

Hollybrook.

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Hollybrook,

Yes, any outstanding mortgage is deducted before you take the % for tax payable.

And yes, once you have signed for your property, taxes are due from that date. Tax is always paid in arrears, i.e.you pay in 2006  for the year 2005 and unlike Spanish residents, non residents do not have a time line to pay by.

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Well, on the 214 form that Non Residents pay their taxes with, it actually has the formula to deduct any outstanding mortgage, so I imagine the Spanish Tax man knows what he is doing!

I would bet my casa on it that I am right!

If you send me your e-mail address, I will send you my personal document on paying taxes in Spain. Then you can access the 214 Form via the Spanish Income Tax site and see for yourself.

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In theory non residents do not have a time line however if it is deferred for too long they will slap a charge on the property that will take first rights over any other mortgage or lien on the property. If it is not addressed almost immediately they will start repossession proceedings and if your representative in Spain or you yourself does not deal with it then they can and do take the property out from under your feet and sell it at auction simply to recover the debt - that sounds a bit drastic and it is over simplified but I am trying to get across the point that one ignores Hacienda at one's peril. It could also mean you become credit blacklisted (only for Spain).

Reason I know is that I had a client 2 years ago trying to arrange a remortgage to secure more favourable terms - his lawyer had not done anything about dealing with mail or tax notices etc. They had already issued a 15 day notice to possess and the bailiffs were knocking at the door. Managed to get it sorted but it was close. Seem to recall no tax paid for 2 years. The tax office has special powers here for non payment of taxes and can do things others cannot such as mortgage lenders.

Rgds

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Thanks for that info Smiley.

I knew that non residents could pay their taxes at any time in the financial year, but residents have a certain date which they have to pay by. But, it was interesting to read that your property can be taken if you avoid paying taxes at all!

Crikey, I am glad I am paying mine myself and NOT through a representative!

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