Taxation
Taxation

Ten questions on Non-Resident Spanish  
Property Owners' Tax

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.

Also, depending on the value of your Spanish assets, you might be subject to Wealth Tax.
This tax, which had been abolished as from tax year 2008, has been reintroduced for year 2011 and subsequent years.

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 income tax derived from rentals is payable as income accrues. If you have a property in Spain for your  private use, you will also have to file a tax form concerning deemed income. And Wealth Tax is back from year 2011 if the value for tax purposes of you Spanish assets exceed the exemption limits (currently Euros 700,000)
 

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). And you will definitely have to appoint one if you are liable to Wealth Tax. 

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 for 2011 is 19% and it has been increased to 21% as from 2012)

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).


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