The Spanish tax authorities (Hacienda) are keen to ensure that UK residents, who own a property in Spain pay their taxes. It is incredibly important for Spanish property owners to ensure they pay their taxes on an annual basis. Even more so now that the Spanish authorities are sending out demands to British citizens, giving an estimated or provisional figure for the amount of tax payable. In conjunction with this they are now also adding interest and further fines, which can even be charged for the last 4 years of non-payment! The Spanish tax authorities have a great deal of power to embargo bank accounts and property for the non-payment of this type of tax.
So, what do you need to know about paying your Spanish Taxes?
- Taxes in Spain are personal, so if you jointly own a property in Spain each owner will need to present their own tax declaration which can be done separately or jointly.
- If you rent out your property, apart from perhaps needing a tourist rental licence (which we can also help you with), income from lettings/rentals is taxed at 19% on the net rent received. A number of expenses can be offset against your income from rentals. These include Community fees; Town Hall rates (IBI) Insurance, utilities, marketing and some maintenance costs.
- Even if you do not rent out your property, there is a deemed income on any property you own which is for your own use. This applies to second homes, holiday homes and property you own in Spain as a non-resident. This is taxable at 19% of the taxable “income”. The deemed income is assessed as 2% or 1.1% of the rateable (catastral) value depending on the date the catastral value was last updated for that property. This applies during the whole period that you own the home. For example, if you purchase in July it is payable from July to December 31st of that year. It is paid annually but can change if the catastral value of the property changes. The rate applicable to property owners resident outside of Spain but in the EU is 19%, we do not know yet what the rate will be once the United Kingdom exits the EU.
It is not possible to set up a direct debit or standing order for this as each year the taxpayer has an obligation to complete the forms and present them to the bank for payment before the 31st December. The tax authorities are able to claim unpaid non-resident tax for the previous 4 years of ownership if you fail to declare.
Please bear in mind this is a tax which is charged for property-owning non-residents of any nationality. The rate for British nationals may vary after Brexit is finalised. The best way to avoid any problems is to appoint a Fiscal representative who will advise you of the tax payable and ensure your returns are up to date. We work closely with an independent tax consultant who is dedicated to assisting you. If you would like more information do contact us on 01924 675 039 or email us at [email protected]