The new tax law which is effective from 2015 was published in the Official Spanish Gazette (BOE) on 28th November, Law 28/2014. This law contains the latest changes affecting non residents taxation.

Non Residents who own property in Spain need to complete and submit a Non Resident Tax income form.

For owners not obtaining a rental income, the tax rate has been reduced from 24.75% to 20% for people living in the EU zone, Iceland and Norway. (24% for non EU members). This tax rate will be further reduced to 19% in 2016.

Deadline: 31st December 2015

This tax applies to “deemed income” calculated by applying a coefficient of 1.1% or 2% to the catastral value. Non resident owners will see further reductions in their tax bills as this catastral value was reduced last year by most of the Councils, such as Mazarron. This council has reduced the values again for 2015.

The same new tax rates will apply to Non Residents renting out property in Spain. In the year 2014 owners living in the EU zone were allowed to deduct all costs directly connected to the property from their rental incomes (i.e. maintenance, home insurance, rental insurance, council tax, community fees, loan interest or other allowable property expenses). This will now also apply to non resident owners from Norway and Iceland.

Deadline:20th April, 20th July, 20th October and 20th January 2015. (If the property has been rented out and you are making losses: deadline is between 1st and 20th January 2015.)

Non resident owners selling property will no longer benefit from the coefficients that used to apply to the purchasing cost to increase its historical value and consequently reduce the capital gains tax payable.

The capital gain or loss on the property sale will be now calculated by the difference between your selling price,  reduced by all costs related to your sale, such as estate agent fees, ‘plusvalia’ tax and solicitor fees, and your purchasing cost, as stated on your purchase deed, increased by adding up all the costs related to the purchase, such as solicitor fees, notary fees, land registry fees, alterations made to the property and taxes paid on purchase.

The tax rate for non resident capital gains tax when selling property has been reduced from 21% to 20%. This tax rate will be 19% in 2016. We remind all non resident vendors that they are also subject to a 3% retention made by the purchasers on the sale price when selling property. The 3% retention is fully refundable when the vendor declares they have not made a gain on the sale.

There is an important exemption which has been introduced for Non Residents when selling their main home in Spain, as they will be exempt from capital gains tax when reinvesting the gain in a new home in Spain.

It is also important to remember that there is a 50% tax exemption on capital gains tax on properties purchased between 12th May 2012 and 31st December 2012.  You will only be liable to pay taxes on 50% of your capital gain.

We advise you to contact a professional who can provide you with an assessment of your tax obligations and liabilities thus avoiding unnecessary fines and penalties/embargoe being applied to your assets.

Always take professional advice and for your peace of mind consider appointing a fiscal representative who will take responsibility for receiving and dealing with any formal communication from the Tax Office on your behalf within the given timescales.