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ANSWERING QUESTIONS ON NON RESIDENT TAX

We have taken this opportunity to write an extended article to help many non residents better understand the issue.

You will find below answers to most of the questions you have very likely asked yourselves.

Mr. and Mrs. Smith are fiscal residents in the UK and they bought a property in Spain this year, they aren’t receiving rental income. Do they have to complete a non resident tax declaration this year?

No. The non resident tax is deemed income tax paid in arrears. Taxpayers buying property this year will have to complete and submit a declaration before the 31 of December of the year following the purchase and thereafter on a yearly basis.

Therefore, they will have to complete a non resident tax declaration before the 31st December 2014.

Mr. and Mrs. Smith purchased their property on 1st January 2012. How much will they have to pay for Non Resident Tax?

Each individual will have to complete and submit an individual Non Resident Tax Declaration before the end of this year.

Non resident tax is calculated using the tax value (catastral value) of your property that can be found on your Council Tax (IBI).Catastral value on Mr & Mrs. Smiths IBI tax is 50,000.

  • If this value was reviewed by the Town Hall after 1st January 1994, Mr. Smith will have to pay 68.06 and the same amount will be payable by Mrs.Smith, payable before the 31st December.
  • If this value wasn’t reviewed before that date, then Mr. Smith will have to pay 123.75 and the same amount will be payable by Mrs. Smith before the 31st December.

If they had purchased a property on the 1st August 2012, would they have to pay the same tax?

No. They would have to complete and submit a non resident tax declaration before the 31st December, but this would be calculated in line with the number of days they had owned their property in the year 2012.

I am fiscal resident in the UK and have rental property in Spain. Do I have to pay taxes on my rental income from property in Spain?

Non-resident landlords have to complete a non resident declaration at the end of every quarter. Deadlines are 20th April, 20th July, 20th October and 20th January.

However, only fiscal residents in other EU country are allowed to deduct expenses in relation to the property from rental incomes, such as council tax, trash collection fees paid to the Town Hall, Estate Agent fees, insurance, solicitor fees, mortgage interest, maintenance, furniture or property improvements, depreciation.

Mr. and Mrs. Smith have obtained in the third quarter of the year rental incomes of 1,500 and have had 2,000 in rental expenses, as they did in the first and second quarter of the year. Will they have to complete a Non Resident Tax declaration before the 20th of October?

No. They will have to complete and submit a nil declaration between the 1st and 20th January 2014, providing a Fiscal Resident Certificate issued by the Tax Office where he/she is a fiscal resident.

Mr. and Mrs. Smith have obtained rental incomes of 2,000 in the third quarter of the year and calculated 1,500 of rental expenses. Will they have to complete a Non Resident Tax declaration before the 20th October?

Yes, they will have to complete and submit a non resident tax declaration before the 20th October. Tax due: 61,87 to be paid by Mr. Smith and same amount to be paid by Mrs. Smith.

Mr. and Mrs. Smith only rented the property in the second quarter of the year with profits on rental incomes. What should they do?

They will have to complete and submit a non resident tax return for the second quarter before the 20th July, as well as a further non resident tax declaration before the 31st December calculating the tax on the number of days the property was not rented.

Many non resident owners ignore this obligation and believe Council Tax is the only tax payable on property.

The Spanish Tax Office is currently being very strict on this issue and have sent letters requesting non resident owners to complete a non resident tax form which has to be submitted for the year 2009 until present.

We advise you to contact a professional who can asses you regards your tax obligations and liabilities thus avoiding unnecessary fines and penalties/embargoes being applied to your assets.

Take always professional advice and for your peace of mind, you should consider appointing a fiscal representative who will assume the responsibility of receiving any formal communication and acting upon them with the Tax Office on your behalf within the given timescales.

Prevention is always better than cure.

CORRAL&ALCARAZ LAW FIRM

LAWYERS, BARRISTERS & ACCOUNTANTS

corralalcarazANSWERING QUESTIONS ON NON RESIDENT TAX