Dear clients and readers,
We would like- if we may- to take this opportunity to kindly inform you about the Annual tax return for non-residents with properties in Spain, as we have detected that this issue is still creating some confusion among many people.
First of all, if you own a property in Spain, it is automatically considered as a type of income and consequently, all owners named on the Title Deed must submit an annual declaration of the property owned, despite the fact that you might be non-Tax resident, or you might not have any regular income in Spain.
In the second place, bear in mind that you will be liable to pay two totally different kind of taxes: The IBI (“Impuesto Sobre Bienes Inmuebles” in Spanish) or local rate tax, and the Non-resident tax or rental tax (in some cases a combination of the two). So, what is the different between the two?
The IBI is a council tax that must be paid by every home owner, usually by standing order-direct debit around September-October each year. Subsequently, the IBI is collected annually and paid directly to the town hall or the SUMA offices, depending on the case. It is based upon the cadastral value of your property.
On the other hand, the Non-Resident Income Tax is paid to the Tax Revenue Office, and the deadline is December 31st.
A) Is it necessary to pay income tax in Spain even if the owner doesn’t live at the property?
Yes. Non-Resident income tax is payable by non-resident property owners who do not rent out their property (and subsequently do not pay rental income tax), irrespective of whether you use the dwelling sporadically as a second residence or holiday house. The non-resident tax declaration covers the previous year, so in 2018, you will have to pay for the previous tax fiscal year, that is 2017.
B) What happens if the tax is not paid before the deadline of 31st December? How will the Tax office find out?
First, if you are considering for example to sell your property, you might not be able to claim the refund of the 3% retention back from the tax Revenue office.
Second, you might be caught out through one of the Tax Authority’s anti-tax fraud campaigns, and as a result, you might have to pay late payment interest as well as sanctions between 5% to 20% of the tax involved. In fact, we have detected that the Spanish Tax Revenue is increasingly cross-referencing information, reviewing those cases where non-tax Residents are avoiding paying the taxes. This includes, monitoring electricity consumption, bank’s accounts and comparing your details as logged on the Land Registry with utility usage. As a result, as a worst scenario, a disciplinary letter could be sent to your Spanish address. Failing to respond to the notification might imply that your bank account might be ultimately embargoed.
C) What paperwork would be required in order to prepare the tax form? What will be the cost?
- Photocopy in color of your NIE and passport
- Your address in Spain and abroad
- Copy of your latest IBI receipt
- Copy of the title deed (at least the first 4-6 pages)
These documents are required in order to calculate the current cadastral value of your property and consequently how much tax you should be paying, making sure that your Spanish property taxes are up-to-date
Regarding our fees, – as a special offer for new clients who might hire our services during 2018,- we are glad to inform you that our competitive fees would be only 45 Euros per tax form declaration or 90 Euros per two.
In conclusion, we strongly recommend that if you are non-resident, you should hire a fiscal representative as soon as possible in order to represent you to the Spanish Tax authority. A reliable and cost-effective fiscal representative, – like our Law Firm, – will make sure your non-resident taxes are paid on time, and also, we will be delighted to answer any queries you might have throughout the year as well. Remember that it is your responsibility to ensure your tax is paid preventing any future unpleasant surprise from the Spanish tax authorities. Do not wait for the taxman to knock on your door with a penalty proceeding against you!
We hope this information is useful and in case you might have any additional doubt or enquiry, please do not hesitate to contact us by e-mail to firstname.lastname@example.org, ( our websites are www.ricorabogados.com or www.englishsolicitorinspain.com), and we would be delighted to give you further specific information and advice.
Mr Oscar Ricor. “NON-PRACTISING ENGLISH SOLICITOR IN ENGLAND AND WALES”, under the “Solicitors Regulation Authority” (SRA) number 519196 and practicing Spanish Solicitor nº 1247.
Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional individual legal advice.