Aside from Capital Gains, Wealth and Inheritance Taxes, non-residents must pay tax on any income they receive that arises in Spain. Income tax for non-residents is charged at a fixed rate of 19% if you are a resident in an EU or EEA country For non-residents from the rest of the world, the rate is 24%.
Non-Residents Property Tax on No Income
If you own a property in Spain and earn rental income from it, then this has to be declared. What some non-resident owners of property in Spain are not aware of, is that they are also required to pay tax, regardless of whether the property is let out or not!
This tax is often referred to as an imputed income tax. Spanish tax legislation for some reason assumes that a non-resident owner derives some sort of benefit from owning property and provides a system to tax it.
How Is 'Imputed' Non-Resident Property Tax Calculated?
The tax is calculated using the ‘cadastral‘ value of the property. The tax base is either 2% or 1.1% if the ‘cadastral’ value has been revised since 1st January 1994.
Cadastral value of property (pre 1994) = €300,000
Base = €6,000
Tax (EU/EEA resident = 19% x €6,000 = €1,140
For tax purposes, couples or joint / multiple owners will be treated as separate taxpayers, and required to file separate tax returns. Property tax can therefore be split amongst co-owners.
How And When Do I Declare Property Income And Pay Tax
If you are non-resident in Spain, but own a holiday home or a property that you don’t rent out, you have until the last working day of the month of December to file your tax return – or Modelo 210, as it’s known. The tax payable will cover the full fiscal year from 1st January to 31st December, unless you acquired the property part way through the year, in which case the tax will be prorated.
If you receive rent from the property, then you are required to complete the Modelo 210 quarterly to declare the income.
Resident or Non-Resident for Tax in Spain?
You are considered to be tax resident in Spain if any of the following apply:
- You have spent more than 183 days in Spain within a single calendar year
- Your main economic activity is in Spain, e.g. you are employed or self employed, run a business or company in Spain
- Your spouse or dependent children live in Spain
It is important to understand whether you are classed as resident for tax purposes in Spain. Spanish tax residents are required to pay income tax on their worldwide income. Non-residents on the other hand are only required to pay tax on income arising in Spain, e.g. rental income from a Spanish holiday home.
What happens if I haven’t paid Non-Residents Property Tax?
Many non-resident owners of property in Spain, are unaware of this tax.
If you miss paying your non-resident tax, then the debt is held against your property until it is either sold or otherwise transferred to a new owner. When this happens, it means that you:
- cannot change the names on the Title Deed until the debt is settled
- may have to pay late payment interest as well as sanctions
- might be caught out through one of the Spanish Tax Authority’s anti-tax fraud campaigns
- could could have your bank account embargoed
How will the Authorities know if I haven’t paid Non-Resident property Tax?
Authorities are increasingly cross-referencing information to identify where there are irregularities. For example checking the ‘padron’ ( town hall register of inhabitants), and sending a notice to properties where the owner is not registered. The assumption being, if the owner is not on the padron, then they are non-resident, therefore liable for the tax. They will also check on-line rental sites for advertised properties.
Will I get a bill or reminder
A letter may be sent to your Spanish address. It is usually sent recorded delivery,‘certificado’, therefore if you are not there to receive it, then the letter will be returned and a notification will be placed on the BOE (Boletín Official del Estado). You are then considered to have been informed. Failing to respond to the notification is what leads to steps being taken to recover the debt which often result in embargoes on bank accounts and the property.
If you are unsure about your situation regarding Non-Resident Property Tax in Spain, get in touch. We’ll be more than happy to answer your questions and offer you some free guidance. You can call us on (+34) 951 77 55 44 / (+44) 033 0001 0777.