It’s one of the biggest mistakes: not being aware of non resident tax Spain.
You obtain your NIE number.
You buy Spanish property.
Maybe to spend your holidays here.
Maybe to rent out.
You pay the corresponding tax.
The lawyer fees.
The estate agent fees.
You may apply for Spanish residency one day.
Something goes wrong.
One year after, you receive a letter from the Spanish tax office.
They want to see you in person.
Did you forget to pay something?
That seems likely.
What can you do?
Prevention, that’s the key.
Prevent expensive fines from the Spanish tax office.
Prevent all the worries, the anxiety, the chest pain; to get peace of mind instead.
How do you do it?
The answer: hire a fiscal adviser to take care of your non resident tax Spain.
(Spanish tax office: Agencia Tributaria)
It sometimes comes as a surprise to foreign Spanish property owners that they have to pay taxes in Spain.
Non resident tax Spain explained
Taxes are a fact of life and we expect to pay them in the country where we live.
However, what about when you have a property in another country but don’t live there?
Most people recognise that there is likely to be some form of property tax that contributes to the cost of the services that the property depends on.
In Spain this is called the IBI (Impuesto Sobre Bienes Inmuebles) and is a form of council tax, similar to that levied in other countries.
IBI council tax
The IBI is collected once a year, although the timing varies according to which town the property is located in.
The amount you have to pay usually compares well with that of council tax in other countries.
It is certainly not exorbitant and is used for the maintenance of many facilities that those spending time in Spain, depend on.
This tax is paid directly to the town hall or the SUMA offices and is based upon the rateable value of your property or valor catastral.
What often takes non-resident Spanish property owners by surprise is the existence of another property ‘income’ tax.
Imputed income tax is an additional tax that non-resident home-owners are required to pay if they do not rent out their property.
Imputed income tax
If you are a non-resident with a property in Spain then it is considered to be your second home.
As such you may rent it out, as many do, or simply use it as a holiday home when you choose.
If you decide to rent it out, then you must pay rental tax on the income you make. However, if you don’t rent it out then you still have an additional tax to pay; imputed income tax. After all, you could rent it out if you wished.
The obligation to pay imputed income tax has sometimes been missed by non-resident owners. Unused to the practice in their own country, people are often surprised to hear that they must pay an income tax in the country they visit rather than reside in.
However, as with most Spanish taxes, if you do not keep up with the payments you may well find that these are logged against your property and cause problems when you wish to sell or it is passed on to your inheritors.
If you rent out your property for only part of the year then you will pay rental tax at these times and a proportion of the imputed income tax for the months when the property is not rented out.
In order to make sure that you are tax compliant you must make a non-resident tax declaration at the end of each year, before December 31st.
If you rent out your property than you must pay rental income. This is calculated on a quarterly basis:
- First quarter, 20th April (January, February, March)
- Second quarter, 20th July (April, May, June)
- Third quarter, 20th October (July, August, September)
- Fourth quarter, 20th January (October, November, December)
There are allowances for some expenses such as:
- House insurance
- The community fee
- Property repairs
- Property management fees
You can also claim for water and electricity charges where the owner rather than the tenant, pays for them. You should note, however, that you can only claim expenses against rental income if you are a resident of the EU, Norway or Iceland.
We are often asked if you must also declare this income in your home country.
If you are British, for example, you must declare the income in Britain, but the double taxation agreement means that you don’t have to pay twice.
Instead the tax you have paid in Spain is deducted from the amount you would have to pay in Britain.
Keep your taxes in order
Buying a property in Spain comes with tax implications. Some of these, such as imputed income tax, can be difficult to understand and are different to what many people are used to in their home country.
To avoid complications with non resident tax in Spain or when selling or bequeathing your property, we recommend that you engage an independent tax adviser. After all, you bought your property in Spain to enjoy not to add to your to-do list.
Ábaco Advisers is a well-respected and independent firm of lawyers and legal advisers based in Torrevieja and Alicante. They specialise in Spanish property law and have been helping people to purchase property safely and easily in Spain since 1999.
Please click on the following link to know how Abaco Advisers can help you:
Spain 101 is a free ebook full of unique tips that will save you thousands of Euros when moving to / living in Spain.
Would you like to get your copy now?
Please click / tap on the image below:
If you would like to read about other important points for living / moving to Spain, here are other useful articles we wrote: