Reducing Spanish Income Tax

As non residents in Spain are taxed at the rate of 24% on the gross rental income without an option to deduct mortgage interest payments or other expenses. one of the tax tip given to me was to agree with the tenant to pay for IBI and community charges in return on paying lower rent.  It is important to create a clear rental agreement stating that.

Could someone comment (EOS residental lawyer especially) on the above tip (validity in taxman eyes, experiences, pros and cons).

Does anyone have a sample of tenant agreement incorporating above that will stand in law in case something goes wrong (tenant defaulting on paying IBI or comunity charges or terminating the contract prematurely)?

Many thanks

Tanja

Hi Purpurei

Correct re the mortgage payments - in fact non resident landlords aren't entitled to claim any expenses at all. Your idea is good....and providing you've got an agreement with the tenant to pay the IBI and community charges there should be no problem, since you can't be taxed on income you're not receiving.

Just a thought, have you considered the tax implications in your home country of receiving a rental income in Spain? For example, the UK/Spain double tax agreement provides that rental income from say a UK situated property is always taxed in the UK, but this doesn't mean that the rental isn't also assessed for tax in Spain.

Normally what happen is that the income tax that would be payable if the property was situated in the Spain is calculated, and an allowance is given for income tax already paid in the UK. If less tax is paid in the UK than would be due in Spain (rare) then the difference is payable in Spain.

Spanish residents can claim expenses against rental received, and they are also entitled to a 50% deduction on the rental income itself, plus they can amortize the property value.