There are two different types of property taxes you are liable to pay on the tax year as a Non Resident Owner which runs from January till December:
Non-Resident Income Tax (210 Tax Form)
Local Tax (IBI)
Many people who live abroad and own a Spanish property ignore the responsibility of paying taxes, regardless if they are or are not receiving rental income. You must remember that among other taxes you also have to pay taxes for Capital gains obtained as a result of selling a property.
Important facts that you must know about Non Resident Tax:
Individual tax returns must be filed for every non resident owner regardless of marital status.
The non resident tax is deemed income tax paid in arrears. This means that if you have property this year, you won’t be liable to complete and submit till a year after.
The tax is calculated in line with the number of days the property has been owned.
A quarterly form must be submitted if you are obtaining rental incomes on the property. Deadlines are 20th April, 20th July, 20th October and 20th January.
Fiscal residents in other EU countries, Norway and Island are allowed to offset expenses related to the rental. These expenses include charges for things such as council tax, trash collection fees paid to the Town Hall, Estate Agent management fees, insurance, solicitor fees, interests paid on a mortgage, maintenance, furniture or property improvements.
Tenants are liable for non resident tax and therefore they could be liable to pay this tax if the non resident landlord is not completing his/her obligations.
At Corral&Alcaraz Law Firm, we are experts in tax matters and strongly advise you to make us a consultation, to be assessed on the best way and therefore reduce your tax liability as much as possible.
TAXATION ON SELLING YOUR PROPERTY BY NON RESIDENTS. CAPITAL GAINS TAX
You will face two property taxes when selling your property:
This tax is calculated and taxed by your Local Council on the increase in the value of the URBAN land. This is taxed only on the land and not on the value of the building.
Rates are set by every Council and can vary dramatically between neighbouring areas. The tax value of the land, so called valor del suelo, can be found on the bill for your IBI
Capital Gains Tax
This is calculated on the taxable income as the difference between the purchasing price and the selling price.
We are allowed to offset a number of costs either on purchase and selling price, such as costs and taxes paid in origin, Estate Agent and solicitor fees.
At Corral&Alcaraz Law Firm, we are experts and may help you to reduce your tax liability. You would be amazed of all what we can do for you to save you money and not to pay the tax you initially you thought you had to pay. We can make us a free consultation and we will provide you with a calculation on your tax liability before selling your property.
3% Retention when selling property
You also need to be aware when selling your property as Non Resident Owner, that your purchaser has the obligation to withhold 3% of the selling price to be paid to the Spanish Inland Revenue into account of your Capital Gains Tax. Copy of the form filed for this matter will be handed to the seller who could later obtain a possible refund depending on the profit or loss declared. The buyer has 1 month to deposit the Withholding Tax, and the vendor will have the right to claim the tax back by completing a Capital Gains Tax form a month after completion within the next following 3 months.
At Corral&Alcaraz Law Firm, we are experts in tax recovery, and may help you to get a tax rebate on the 3% held on the sale, and have that back to your pocket.
It is also important to know that Spain has special tax agreements with different countries, and that there are Double Taxation Agreement applicable with your country of residence, to avoid paying tax twice over same income received. Any tax paid in Spain will offset of the final tax bill in the country where you are resident, when declaring your sale on your income tax.