Warning: The information set out below is a general guideline provided by DOMENECH ABOGADOS.
Specific advice should be sought before any action in reliance on it is taken, as explained more
fully in this website's
legal notice.
1.
What taxes am I liable to as a non-resident owner of real estate in Spain
?
You will need to pay yearly:
-
a local tax known as IBI; and
-
Non-Resident Income Tax and Non-Resident Wealth Tax, both payable to the Spanish
central tax authorities.
2.
When and how do these taxes have to be paid
?
The easiest way to pay IBI is to have it automatically debited each year from
your Spanish bank
account. Non-resident Wealth Tax must be paid each year during May and June in
relation to the previous calendar year. Non-resident Income Tax is payable as income accrues. However,
if you own only one property in Spain for your private use, you’re entitled to
file a simplified return (using tax form nº 214) comprising both taxes: and this can be submitted
at any time in the calendar year following the year it relates to.
3.
Hang on a minute, does that mean I get taxed on income even if I don’t rent
out my property
?
Yes, unless what you own is a property which qualifies as “rural” land.
But, generally speaking, most second homes – be it an apartment or a villa by the sea or in the
country - will qualify as “urban” land and, as such, will be subject to Non-Resident Income Tax
(even if you never rent them out).
4.
Do I have to appoint a Spanish tax representative (representante fiscal)
?
It isn’t compulsory if you only own one property for your private use (but it’s
advisable).
5.
Who can I choose to take on that role
?
DOMENECH ABOGADOS can act as your Spanish tax representative. As such, we will
be sent any communications from the Spanish tax authorities about your property. Which means that
important tax demands aren’t left mouldering in your Spanish post-box while you’re at home
blissfully unaware they’ve arrived. Doménech Abogados can then action the right response straight
away.
6.
When I come to sell my Spanish property, will there be tax to pay in
Spain
?
Yes, on the basis you make a gain from the difference between your original
acquisition value and the sale price. And the Spanish tax authorities will tax this capital
gain by means of two taxes:
-
a local Capital Gains Tax (which is levied by the Town Hall where the property
is located and depends on local values); and
-
a general Capital Gains Tax (the applicable rate now being 18%).
7.
How long do I have to pay that general Capital Gains Tax after sale
?
For a start, 3% of your property’s sale price must be
retained by the buyer and paid to the Spanish tax authorities as a contribution to
Non-resident Income Tax liability regarding capital gains.
8.
But with Spanish property prices going soft, I think 3% of the sale price will
actually exceed my Spanish Capital Gains Tax liability - what then
?
The 3% retention still has to be made. But DOMENECH Abogados can apply for
a partial or total refund from the tax authorities on your behalf.
9.
And Inheritance Tax – does the Spanish tax man get that off me too?
Not exactly. He gets it off your heirs. In Spain, inheritance tax is
paid by the heirs to an estate (rather than the estate itself).
10.
What tax breaks are there to reduce liability to Spanish Inheritance Tax
?
Not many for non-Spanish residents (note that there is no spouse exemption, so
if a non-Spanish resident couple’s Spanish property passes from one to the other on death, Spanish
Inheritance Tax is still payable).
One way to reduce potential liability potential
liability, both for Inheritance Tax and Wealth Tax purposes, can be
to consider taking a mortgage over the property from a Spanish bank when buying
it.