When becoming the owner of an apartment, villa, land or commercial real estate in Spain, not everyone knows that, in addition to the prestigious property, the obligation to pay taxes is also on their shoulders. Regardless of the value, purpose, method of receiving (donation, inheritance) of real estate, even a non-resident is obliged to file annually a tax return to Spain.
All taxes can be divided into three types: national, regional and municipal.
Property tax of non-residents (Impuesto sobre la Renta de No residentes) The main tax return for foreigners who do not have a residence permit in Spain is the Declaration of a non-resident- El Impuesto sobre la Renta de No residentes
Property tax for a non-resident, if the owner does not rent the property, but uses it for his own use, it is 24% of the 2% of the cadastral value of the object, adjusted by a factor. There are maximum and minimum ratios. The ratio of 1.1% is used in cases where the cadastral value of the property (valor cadastral) has been revised or modified after 2005. In other cases, the ratio is 2%. With their help, the tax base is calculated. The cadastral value changes annually, so it is very important to clarify it before filing a declaration.
The same model of property tax for a non-resident is entered into information and the income from the rental of real estate is paid with the only amendment that no coefficients and deductions are applied to it – but only 24% of the profits are retained.
In the event that an apartment or house is rented only for a few months in a year, sums for a “profitable” period are entered separately in the declaration. For example, half a year is a tax for personal use, and the second half of the year is a tax on rental income – 24%.
Wealth Tax (Impuesto sobre el Patrimonio) applies to the net amount of the state of an individual (this tax did not affect legal entities) of a non-resident located in Spain: immovable and movable property relating to luxury items (cars, yachts, airplanes, etc.), cash and others “benefits of an economic nature that are located in Spain and are registered in the name of a non-resident (and for residents of Spain information is requested for all countries) .In accordance with Art. 37 of the Law on Wealth Tax, the obligation to file a declaration arises when, after all deductions from the gross amount of the taxpayer’s state, the tax arises at a wage rate, or when the total amount of the property does not arise, exceeds 2,000,000 euros.
Considering that the competence in determining the applicable tariffs is given to the regions of Spain, then both the amount of the non-taxable minimum and the tariff rates vary from region to region. For example, in Andalusia it amounts to 700,000 euros, and in Catalonia 500,000 euros. In Valencia, literally this year, it was decided to lower the bar from 700,000 euros of taxable minimum to 600,000, thereby increasing the number of taxpayers by 1,832 people. But Madrid decided to abolish the payment of the luxury tax altogether, leaving only the obligation to file an information declaration in the event that the amount of the total real estate exceeds 2 million euros.
The obligation to pay arises on December 31 of each year. The model itself is served from May to July. The basis is the highest value of real estate (either purchased or cadastral, or established by the tax service (valor revisado)), real estate encumbrances are deducted, and then the regional scale rate is applied. According to Spanish law, the tax varies from 0.2% to 2.5%. Nevertheless, regions can change the rate up or down. So, for example, in Andalusia, the rate comes to 3.03%, in the case that in Spain the non-resident in the aggregate of cash and property assets has more than 10.695.996.06 euros.
For example, if in Marbella you have a house worth 1.5 million euros, and 500,000 euros of them are mortgaged, the following amount will arise for payment of 1,500,000 – 500,000 (costs) – 700,000 (non-taxable minimum) = 300,000 euros. That is, a non-resident becomes obliged to file this model.
Municipal taxes The obligation to pay municipal taxes falls on the property owner, who officially became its owner on January 1 of the reporting year. So if you purchased a property on February 1, and the seller tries to charge you the amount that was withdrawn from him for the whole year ahead, do not give in. The obligation of the new owner to pay these taxes begins only from January 1 of the following year.
Real Estate Tax (Impuesto sobre bienes inmuebles – IBI) All municipal real estate is registered in the register, where each object is assigned an estimated value (cadastral valuation). The tax is calculated based on the size of the property, its classification and the quality of the infrastructure. Municipal authorities, based on these data, assign taxable value in their jurisdiction. Therefore, it is necessary to know the rate at the place of registration. As a rule, this amount is automatically withdrawn from the owner’s account, thus facilitating the payment of tax on time.
Waste collection tax (Tasa de basura) In addition to IBI, in some municipalities it may be mandatory to pay two more fees – Tasa de basura (Garbage collection) – for example, in Catalonia. Its value is also set depending on the cadastral value.
Tax on parking (Tasa por aparcamiento) This tax is not common in all municipalities. For example, in Catalonia, for your information, there are 185 taxes more than in other provinces of Spain. Among them
– tasa por aparcamiento (parking fee). This fee will have to be paid even if the owner of the property does not have a vehicle.
Taxes on the sale of real estate When selling real estate, in addition to IRNR, a non-resident must pay the municipal capital gains tax, that is, an increase in the price of the property – Plusvalia – 1.5% of the difference between the purchase and sale prices after deducting all expenses. This fee will be deducted from the deduction amount of 3%, which the seller is obliged to pay temporarily to the municipality within one month from the date of the transaction.
Plusvalia is calculated as the difference between the cost of sale and the cost of purchase (real purchase price). The selling price is the real price minus the expenses and taxes that the seller incurred during the transaction. Such a complex system was developed in order to guarantee the payment of the required amount by a non-resident seller, who could leave Spain the next day after signing the documents. What to do if there was no capital gain? Literally, on February 16, 2017, the Constitutional Court (Tribunal Constitucional) of Spain recognized that the Plusvalia tax payment requirements are considered illegal when the property is sold for a lower amount than was purchased.Of course, not all municipalities take into account the new standard, and still require the seller to pay this tax.
Difficulties of tax declaration in Spain for nonresidents It would seem that special difficulties in the calculations should not arise. However, the first thing non-residents face in Spain is the difficulty of accessing information. For example, the cadastral value, which changes annually. In free access it is not. Any inaccuracies can lead to serious consequences, since the Spanish tax authorities can review the declarations and send a letter to the taxpayer stating that the data has been rechecked and discrepancies are found and need to respond to the tax claims submitted within 10 days. The limitation period is 4 years, and, as a rule, letters are sent at the end of this term. For all the past time, fines, penalties (25%), etc.will be counted.
Consequences of non-filing What can happen if the declarations on mandatory taxes are not provided? The most innocuous of the consequences is the possible difficulties in applying for obtaining or extending a residence permit. In principle, the failure to submit any declarations that are obligatory for all foreigners is fraught, first of all, with difficulties or with the refusal to obtain or extend the Spanish residence. The fact is that when filing a package of documents, for example, a residence permit (no matter what type of residence permit we are talking about – the residence permit of the investor or the residence permit without the right to work, etc.) or for its extension,
It takes about 5 working days for registration, settlement and filing of the declaration, but the information itself in the tax office does not appear immediately, but after 2-3 weeks. This means that the applicant risks not only staying with fines for not paying taxes, but also without a cherished residence in Spain due to the untimely documents provided. And to the question of who is to blame, you need to look for an answer from realtors and lawyers, because they are the buyer who must inform the buyer about the filing of all necessary declarations in the course of the purchase and sale transaction.
Advantages of working with Pro Spain Consulting The clients of Pro Spain Consulting receive not only full consultation on taxation issues in all provinces of Spain, but they can be sure that the company specialists will help to significantly reduce costs and expenses, avoid double taxation and fines , and return taxes (including Plusvalia in the absence of capital gain) etc.
Therefore, if you are already or are only going to become the owner of real estate in Spain, do not forget that even without being a resident of the country, it is necessary to file annually tax returns.
Our tax consultants are responsible for the entire tax declaration process – starting with registration with the tax inspectorate and calculations, especially if there are several real estate objects, receiving up-to-date information about changes in cadastral value and before filing a declaration on behalf of a client throughout Spain. And then, as it was said in an advertisement that was once known to everyone, “you can sleep peacefully” in your own Spanish home.
Contact us today for more information.