Non Resident and your Property Taxes
2 March, 2020
Are you a Non-Resident?
If you live here for less than 183 days then you are classed as a non-resident and must pay at least two non-resident taxes. That often confuses non-residents in that there is more than one tax to pay. Most people understand that there will be some form of council tax that will need to be paid annually. In addition to this, however, non-residents must also pay either:
• Rental income tax if they rent out their property
• Imputed income tax if they don’t
It is imputed income tax that causes the confusion. As a non-resident your Spanish property is automatically considered as a type of income, even if it is not rented out and you do not receive any income as such.
For more detail about these taxes:
1. Council tax
Council tax must be paid by every home owner whether they are resident or non-resident. It is a local tax and goes by the name of IBI (Impuesto Sobre Bienes Inmuebles). It is payable directly to the town hall or via a tax collection office, for example SUMA, in some regions.
IBI is the tax that goes towards paying for local services such as the maintenance of facilities, parks and leisure areas and all kinds of infrastructure provided by the Town Hall. It is collected annually and the period during which it is collected depends on where your house is located.
How much you pay is based upon the Cadastral value or Valor Cadastral ( Rateable Value ) of your property determined by the Municipal Government…normally much lower than the market value.
What taxes do I have to pay?
Rubbish collection is charged for separately either as part of your water bill or as a separate service charge issued by the Town Hall or tax collection agency such as SUMA.
2. Rental Tax
If you choose to rent out your property for some or all of the year then you will need to pay rental tax in Spain. This is collected quarterly on the 20th April, 20th July, 20th October and 20th January. At this moment in time some expenses can be deducted from your rental income only if you are a Resident of the EU, Norway or Iceland.
You only pay rental tax for the periods when you rent out your property. For the rest of the time you will pay imputed income tax.
3. Imputed income tax
Imputed income tax is an additional government tax that is payable by non-residents if they do not rent out their property. The idea is that even though it is not rented out at present, it could be.
In a way you are paying a tax for the privilege of keeping a second home for your own use. Although it might sound a little formidable, people used to paying council tax in their own countries should not to be too dismayed at the prospect of two taxes. In most cases the total bill will be much less than you would expect to pay in your own country.
For example the council tax on an average 100,000€ property would be around 290€ and the imputed income tax 112€. A total that is usually still below what you would pay in one tax elsewhere.
You should also be reassured that if you only rent out your property for short periods of time an adjustment will be made to the total imputed income tax you pay across the year.
Imputed income tax can be calculated either using the purchase price of your property or the rateable value. It is important to be aware that the rateable value (Cadastral value) is usually much lower than the purchase price.
Therefore, if you do have the rateable value it is this that should be used to calculate your imputed income tax. The rateable value of your property can be found on your Spanish council tax bill ( see above IBI )
Using the purchase price for the calculation leads to more tax to pay, as you can see from the examples below.
How is imputed income tax calculated?
Purchase price of the property 100,000€ Inputed Tax 107.265
Rateable value of the property (Valor catastral) 31,226.91€ Imputed Tax67.20€
Purchase price of the property 146,000€ Imputed Tax 156.58€
Rateable value of the property (Valor catastral) 46,086.55€ Imputed tax 98.85€
How do I pay them?
The system here is different from what happens in most other countries. The Spanish Tax Authority (Agencia Tributaria) will not necessarily remind you that a tax hasn’t been paid. Instead you are expected to make your own enquiries and arrangements. This doesn’t mean that they have forgotten that you haven’t paid the tax
There is an annual tax declaration in Spain (deadline December 31st) that non-residents must submit on form Modelo 210. This is the means by which you pay your imputed income tax. There are different ways of presenting this payment. You can either: • Submit the modelo 210 online or use a fiscal/tax representative
Submitting online is the cheaper option. If you do choose to use a fiscal representative they can give you advice about what you should and should not present. They are up to-date with the latest tax law and will represent you at the Tax Authority if there should be any problems.
What happens if I don´t pay them?
What can happen is that any tax that remains unpaid is held against the property until it is either sold or bequeathed. At that point the records will reveal that you owe money and this amount must be settled before names are changed on the Title Deed to the house. This can sometimes lead to large amounts of tax debt accruing and there can be late payment interest and fines to settle as well as the tax itself.
If you are in the process of selling your house it can lead to delays whilst debts are cleared. Not something that most people want to happen when they have a buyer.
Although the Spanish Tax Authority is not in the habit of regularly reminding people, they do increasingly run campaigns during which outstanding tax is rooted out.
A campaign two years ago saw thousands of letters sent to non-resident Spanish property owners who were not up-to-date with their tax. The letters warned them that if they didn’t provide some explanation of why the correct Spanish taxes weren’t paid an investigation would follow.
It is beneficial to have, as a nonresident, a contact in Spain who will act as your representative in your absence.
It is true that some people choose to complete their Spanish tax declaration on line and trust the good will of a friend to collect any registered post. However, this sometimes leads to problems.
These arrangements can work if you know what you are doing, are confident in online form-filling and if everything goes smoothly. However, if there is a problem then it is unlikely that a friend or relative will be in a position to deal with it for you and you may be unable to fly over to Spain at short notice.On the other hand, a fiscal representative will be in a position to keep you up-to-date with changes to the tax law, will be on hand if there are difficulties and will have good communication channels with the Tax Authority.
It makes sense to have someone here representing your interests in an official capacity.
My advice is to use a Specialized Fiscal/Tax Representative
For more information about this subject and you are in Spain, why not call into our Office
Andalucian Properties Real Estate Agent,
Marques del Duero, San Pedro de Alcantara, Marbella
Located on the main pedestrian street of San Pedro
tel. +34 952927833 or email firstname.lastname@example.org
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