REAL ESTATE PURCHASE & SALE WILLS AND INHERITANCE TAXATION CORPORATE LAW
Annual taxes for property owners in Spain
Vicente & Otaolaurruchi Abogados has a tax advice department specialising in non-resident taxation, with many years of experience behind us. Any client who wishes to do so can use our global service of tax calculation, settlement and payment, as well as tax representation in Spain.
Non-resident Income Tax
Non-resident natural persons in Spain who own urban properties in Spain are subject to annual payment of Non-resident Income Tax. The return obtained from the property, whether real (rent) or estimated (own use) is subject to tax.
For tax year 2014 (Tax return to be presented in 2015) the tax rate that applies to income obtained from urban property rental is 24.75%.
From tax year 2015 the general rate for non-residents shall be reduced from 24.75% to 24%. Furthermore, for those tax payers residing in a member state of the European Union the rate will drop to 20% in 2015 and to 19% in 2016.
In those cases where there is a double taxation agreement with Spain, the property owners may deduct the amounts paid for this item in the tax return that they submit in their country of residence for tax purposes.
A statement on the income derived from the rent must be submitted at the end of each quarter.
b) Own use
If the property is for one’s own use or is empty, the applicable rate will remain at 24.75% for fiscal year 2014 and will be reduced to 24% from 2015. In the case of tax payers residing in a member state of the European Union the rate will also drop to 20% in 2015 and to 19% in 2016. The taxable base will be 1.1% of the property’s cadastral value, if that value has been revised or modified after 1 January 1994, and 2% of the cadastral value in all other cases. Likewise, a proportional calculation will be made according to the number of days of the year in which the person has been the owner of the property in question.
The deadline for submitting and paying the income tax in the case of properties for own use is between 1 January and 31 December of the year following the year it accrued.
The Non-resident Income Tax must be paid by self-assessment, i.e., the tax payers (or their appointed representative) are under obligation to personally make the calculation, fill in and validate the corresponding form online, and arrange payment. The Spanish Tax Authorities do not send non-residents any communication, advice of payment or settlement regarding this tax.
Lastly, it is important to mention that, as a result of recent measures introduced by the Spanish Government to prevent tax fraud, the Tax Authorities have started a campaign to notify property owners who have not submitted any statements or returns on this issue of the need to rectify their tax situation so as to avoid any significant economic penalties.
Personal Income Tax (residents)
According to current legislation, a person is considered to have their usual residence in Spain when any of the following cases are met:
- Where they spend more than 183 days of the year in Spain.
- Where the main core or basis of their business activities or economic interests are in Spain.
- Where their spouse and underage children live in Spain.
If any of the above circumstances are met, the person will automatically be obliged to submit their income statement in Spain as a tax resident, regardless of whether they have or have not officially applied for residence before the relevant body of the Ministerio del Interior (Spanish Home Office).
This statement must include all of the person’s income and expenditure (income from work, from equity, from economic activities, annuities, etc.), whether they have been produced or paid in Spain or any other country. The pensions of some civil servants and officials are exempt, as these must always be declared at source.
The aforementioned does not imply that the tax payers must pay twice for income that has been generated abroad. In these cases, an exemption from the tax at source would be requested or the amounts paid there for this item would be claimed back in the country where the income was generated.
Non-resident natural persons who, at 31 December of each year, are the owners of assets and rights in Spain are subject to payment of Wealth Tax.
In the case of immovable property, the taxable base is determined by the difference between the value of the property in the deed and the debts on the estate (mortgage), in the case that any exist. Likewise, non-resident taxable subjects are given a reduction of 700,000 Euros on the taxable base, by way of an exempt minimum. So, for example, a married couple who have 50% each of properties valued at under 1,400,000 Euros will be exempt from submitting the Wealth Tax statement. Nevertheless, all taxable subjects whose assets come to over 2,000,000 Euros will be under obligation to submit a statement, even when the amount to be paid, once the deductions and the exempt minimum are applied, is zero.
The tax rate will vary according to the tax base and will range between 0.2% and 2.5%. The Wealth Tax statement must be submitted online.
Local Council Rates (IBI)
The Council Rates, or IBI, is a municipal tax on the value of properties and the person who is listed as the owner on 1 January every year is responsible for its payment. The settlement and collection of the IBI is the exclusive competence of each Council, which can set the tax rate, as well as any exemptions and discounts that it deems appropriate. Nevertheless, the tax rate set by the Council cannot be below 0.4% or above 1.1% of the property’s cadastral value.
In general, the income generated by this tax is invested in the same municipality in which it is collected (street lighting, roads, pavements, cleaning and other such services).
The IBI bill is issued on an annual basis and can be paid by direct debit.
Rubbish Collection Fee
This is a municipal fee for the service of rubbish collection and disposal. Each Council sets their own payment deadline and method (annual, six-monthly, etc.).
Special property tax for non-resident bodies
This tax statement is compulsory for all companies that are not resident in Spain but which have property in Spain, and whose residence for tax purposes is in a country considered to be a tax haven.
The tax rate is 3% of the property’s cadastral value. The tax is annual and the deadline for submission ends on 31 January following the tax year in question.
Furthermore, those non-resident bodies that own property in Spain, but which are exempt from the special tax because they have their residence in countries that have signed agreements with Spain to avoid double taxation, are legally bound to provide the Tax Authorities with a valid e-mail address to which the Authorities can send all communications and notifications.
Information statement on assets and rights abroad
All natural and legal persons that are resident in Spain and owners of assets and rights in another country are legally bound to submit an information statement before the Tax Authorities on those assets, divided into sections:
- Accounts in financial institutions
- Securities, annuities, life or disability insurance policies, stocks and shares in the capital stock of certain institutions, and trust funds
- Property and property rights
There is no obligation to submit this statement when the total of the assets and rights of each of the three sections does not exceed 50,000 Euros (i.e., you may be exempt from submitting the statement in one section but under obligation to do so in another).
The statement on assets and rights abroad must be submitted online.
Failure to submit this statement, or submission after the deadline or with incomplete or false information, will constitute a serious tax infringement and entail significant economic penalties.
Do you still have queries on this subject? Have a look in the FAQs about taxes in Spain.