Taxes & Annual Expenses in Spain

– ¿What is the “cadastral value”?

The cadastral value is an official value set by the Councils to each property subject to a number of criteria such as location, quality standards, year of construction, etc. This value, annually updated by the Administration, is used as a reference for the calculation of some taxes and it does not necessarily matches the market value.

 – I am not resident in Spain and my property is not rented out nor generates any income. Do I have to pay income tax on an annual basis?

Yes. Non-residents in Spain are subject to pay tax on the income actually received where their properties are rented out and for the hypothetical income that generates the own use. In this latter case, the tax is calculated according to the property cadastral value.

 – Do all property co-owners must pay income tax or it is enough if just one of them presents the tax return in the name of all?

For tax purposes, each owner is considered a separate taxpayer, so it is compulsory to present as many individual tax returns as owners the property has. each owner will be taxed according to their percentage of ownership.

 – When is the Non-Resident Income Tax due?

Between 1st January and 31st December of the year following the fiscal year for which the return is submitted and according to the number of days the tax payer was the owner of the property. For example, Income Tax 2012 is due between January and December 2013.

 – Is it possible to deduct any expenses, such as mortgage repayments, in the Non-Residents Income Tax returns?

No. It is not possible to deduct any expense.

 – Do I have to pay this tax if the property is in the name of a company registered in my country?

Only in the event that the foreign company is resident in a country considered to be a tax haven it would be obliged to pay tax for owning properties in Spain, but in this case a different tax form shall be used. The tax rate is 3% of the cadastral value of the property.

 – What is the difference between Local Council Rates (IBI) and Tax on Non-resident Income?

Actually, their only similarity is that both are annual taxes.

Local Rates (IBI) is a municipal tax levied on real estate, charged by the Town Hall and for which the property remains affected in the event of default. Calculation of this tax is based on the cadastral value of the property and its receipt can be paid by direct debit.

The Income Tax for Non-Residents is a State tax with personal character. In the case of income derived from the use of the property itself, each owner must pay according to their percentage of ownership. It is a self declared tax and does not support payment by direct debit.