Annual Taxes for Non-Residents
Many people assume that if they own a holiday home in Spain they are not liable for Spanish taxes. WRONG!!! Non-Resident property owners ARE liable for 3 annual taxes.
We advise you to ensure that you are paying all the relevant taxes to avoid problems in the future (ie when you come to sell your property). In addition, Non-Residents are liable for a 25% Income Tax for the year 2006 and lowering to 24% as of the 1st January 2007 on any income earned in Spain. This applies as well when renting out a property. Please note that there is also a property owners' imputed Income Tax that is applied for the mere fact of being an owner of a Spanish Property.
Please make an appointment with our specialist Tax Consultants, who will be pleased to advise you on ALL your tax liabilities and any allowable deductions for your specific circumstances.
For a nominal annual fee we will be pleased to act as your fiscal representative and handle all your tax matters for you - so you don't have to - contact us now! Click here to complete an application form for this service Fiscal Representation.
We have listed the property taxes below, with a brief description under each one:
- Wealth Tax
Commonly known as the Patrimonio (full name Impuesto Extraordinario sobre el Patrimonio), this is a low-rate tax which, for Non-Residents, is payable on the capital assets held solely in Spain at 31 December each year. The value of the property is deemed to be the greater of the value as declared in the Title Deeds, the Rateable Value, or the real market value as determined by the authorities. The rate is applied on an increasing scale - the first bracket being a valuation from 0 euros to 167,129.45 euros, with a tax rate only of 0.2% (ie two-tenths of 1%). Therefore on a property worth 100,000 euros you would be liable to pay 200 euros in tax. Each property owner is taxed separately on their share of the property. There are no exemptions - everybody pays! However, deductions are made for mortgages from Spanish banks.
- Property Owners' Imputed Income Tax
For Non-Residents, the property is not considered their principal residence but, rather, one they could let for income - whether they do or do not is immaterial; this is therefore a 'notional' tax. (This tax is replaced by Income Tax in the case of actual declared income from letting.)
2% of the official unrevised rateable value (valor catastral), or 1.1% of the revised rateable value (as applicable) of the property is attributed as "income" and this figure is taxed at 25%, as of the 1st January 2007 this will be 24%. Note that if the rateable value has never yet been assessed (eg in the case of a new property) the rateable value is deemed to be 50% of the value as declared on the Title Deeds and 1.1% of this is attributed as "income" and taxed at 25%, as of the 1st January 2007 this will be 24%.
All those named on the Title Deeds (usually husbands and wives) are taxed separately on their share of the property.
- Local Rates
Called the IBI (Impuesto sobre Bienes Inmuebles), this is a municipal tax paid annually to the Town Hall (or, in the Alicante province, to the SUMA office - an agency who collect the tax on behalf of the Town Halls). You may sometimes see this referred to as Real Estate Tax.
It is based on the valor catastral (the rateable value as set by the Town Hall) of the property and is applicable to Residents and Non-Residents alike. There are no exemptions. This tax is for municipal roads, street lighting, schools, hospitals etc. When you sell your property you are required to present the latest, paid, IBI receipt.
The valor catastral is adjusted periodically in line with inflation.
PLEASE NOTE THAT NEW TAX LEGISLATION CAME INTO EFFECT AS OF THE 1st JANUARY 2007, HOWEVER MOST OF THE TAX DECLARATIONS TO BE PRESENTED THIS YEAR WILL STILL BE UNDER THE PREVIOUS LEGISLATION.
Annual Taxes for Residents
For a nominal annual fee, we will be pleased to act as your fiscal representative and handle all your tax matters for you - so you don't have to - so contact us now! Click here to complete an application form for this service Fiscal Representation.
We have listed the taxes below, with a brief description under each one:
- Personal Income Tax for Residents
All Residents, whether retired or not, are liable for Income Tax on all income, including pensions (with the exception of some Civil Service pensions). This is separate from and in addition to the annual Wealth Tax.
The tax rate for Residents ranges from 15% to 45% for the Tax year 2006. However, Spain has Double Taxation agreements with many countries - which ensure that you do not pay tax on the same income in both Spain and your home country. (If your tax liability in your home country is lower than it would be if paid in Spain, you pay the Spanish tax authorities the difference. However, if you are paying a higher tax than you would pay in Spain you will not receive a rebate from the Spanish authorities!)
- Employed in Spain
If you are employed in Spain, a 'withholding tax' is deducted from your salary throughout the year (ie you are taxed at source). Tax declarations, and any adjustments, are made in May and June of the following year. The Tax Authority (Hacienda) calculate the 'withholding tax' deductions as near as possible to the employee's actual tax liability, depending on the known factors (such as number of family dependants), and issue any refunds due.
- Self-employed in Spain
If you are self-employed or operating a business, you have to make a tax declaration regardless of how low any income might be.
- Residents with Incomes from Outside Spain
If you have an income from outside Spain, an annual tax declaration has to be made. However, you do not pay tax on the same income in both Spain and your home country.
- Exemptions
Anyone with a total worldwide income from one source of less than 8,000 euros is exempt from Income Tax and does not have to file a tax return (subject to certain conditions). For a husband and wife this is 8,000 euros joint income.
- Employed in Spain
- Wealth Tax
For Residents, this is a low-rate tax on your world-wide assets, not just those held in Spain. However, Spain has Double-Taxation agreements with many other countries, which means you will not be taxed twice (ie in two countries) on the same asset.
Residents have an exemption on the first 150,253.00 euros of the valuation of their main residence property in Spain. Husbands and wives are taxed separately and the exemption is per person, so a husband and wife with both names on the Title Deeds are jointly exempt from the tax up to a total property valuation of 300,506.00 euros.
- Property Owners' Imputed Income Tax
Residents do not pay this tax on their principal residence. For second or more homes, 2% of the official rateable value (valor catastral) of the property is attributed as 'income', added to their annual income tax returns and taxed at their normal income tax rate. Note that if the rateable value has not yet been assessed (eg in the case of a new property), the property value is deemed to be 50% of the value as declared on the Title Deeds. Those named on the Title Deeds (usually husbands and wives) are taxed separately on their share of the property.
- Local Rates
Called the IBI (Impuesto sobre Bienes Inmuebles), this is a municipal tax paid annually to the Town Hall (or, in the Alicante province, to the SUMA office – an agency who collect the tax on behalf of the Town Halls).
It is based on the valor catastral (rateable value as set by the Town Hall) of the property and is applicable to Residents and Non-Residents. There are no exemptions. This tax is for municipal roads, street lighting, schools, hospitals etc. When you sell your property you are required to present the latest, paid, IBI receipt.
The valor catastral is adjusted periodically in line with inflation.
PLEASE NOTE THAT NEW TAX LEGISLATION CAME INTO EFFECT AS OF THE 1st JANUARY 2007, HOWEVER MOST OF THE TAX DECLARATIONS TO BE PRESENTED THIS YEAR WILL STILL BE UNDER THE PREVIOUS LEGISLATION.
