Non resident Income Tax must be completed by all non residents as a consequence of owning property in Spain.
For a tax purpose you are considered Spanish Resident if you stay in our country more than 183 days within a year period.
If your property is left empty, regardless if you are or not receiving a rental income, Spanish Inland Revenue assumes you have what is called a Deemed Income Tax which is subject to non-resident Income Tax.
Many people who live abroad and own a Spanish property ignore the responsibility of paying taxes, but you may find below some few reasons for avoiders:
1. The Spanish Tax Office sends notification of any outstanding taxes to your home address in Spain. If you do not act upon this notification then you will be officially notified as your notification will be officially published into the BOE (Boletn Oficial del Estado). Â This a public paper from the Government. And then the Tax Office is free to proceed with embargoes which might be applied over your bank account or even your property.
2. A bigger problem comes when you wish to sell your property and you have been avoiding paying your taxes in the past. As the buyer has the obligation to withhold and pay to the Tax Office 3% of the sale price to the Non-resident seller. If there is in fact no capital gain on the property then you will recover this amount but the Tax Office will check first that Tax Forms 210 has been paid up to date. The taxes plus fines will then need to be paid before the property can be legally transferred.
The same situation it may happen if you pass on your property as part of an inheritance process.
Penalty basis for late payments:
- Within 3 months of due date 5% of tax due.
- Within 3-6 months 10%.
- Within 6-12 months 15%.
- Over one year late 20%.
3. The Tax Authority knows that many Non Residents property owners are not completing their annual tax returns. But it is now easier to have more information as they have close links with Property Registry and Electricity Companies obligated to provide with client details to search tax avoiders. Furthermore due to actual economic recession Spanish Government needs to gather more incomes via taxes.
You probably know someone who has owned property for years and has never completed a tax return. However, if they are caught by the Tax Authorities they will be liable to pay the last four year’s tax and probably a significant fine.
How much do I have to pay?
If the property has not been rented out during the year, then income tax works out to be applying a tax rate over a percentage of the rateable value (valor catastral) of the property. In this situation, tax returns are normally submitted on a yearly basis with deadline at 31 of December.
If the property has been rented out, then tax is payable applying a tax rate over the rental income received, deducting all the costs in direct connection with the property (i.e. repairs, insurances, loan interest or other allowable property expenses). In this situation, tax returns are normally submitted on a quarterly basis.
Due to most people still ignore this responsibility anti fiscal fraud plans are started by the Spanish Inland Revenue, and this situations has been extremely monitored lately. A neglectful behavior on this matter could have serious consequence.
What information do I need to supply for you to submit my tax returns ?
- The full address of your property in Spain.
- Your address in your country of residence.
- The date of purchase of the property.
- Your property rateable value (valor catastral) or copy of your IBI bill.
- NIE number, Passport number, full name, date and place of birth of each owner of the property. (Individual tax returns must be filed for every non resident regardless of marital status)
- An IBAN bank account number to include on the form so that you can pay from your bank.
How do submit your tax returns?
If you have a Spanish bank account, we will order payment of the tax by direct debit to your account.
We are members of the Association of Economists (Colegio de Economistas); we therefore have the Spanish Tax Office’s electronic certificate which allows us to submit your returns online and order payment of the tax returns through direct debit.
All non-residents with property in Spain are also liable to pay a Wealth Tax (Impuesto de Patrimonio) which is calculated on the value of their assets in Spain (i.e. property, savings, etc.) But there is a tax exemption of 700.000 Euros , what it means that those persons with total net assets below 700,000 will not have to pay this tax.