The Deadline is December 31st
Non-resident Spanish property owners have taxes to pay on their property. They must pay IBI or council tax and either property income tax or tax on their rental income. In some cases they may also need to pay Wealth tax. The deadline for making a non-resident Spanish tax declaration for 2010 is December 31st 2011.
Taxes in Spain can be confusing. They are very different from what we are used to in the UK and the means of informing us about them and collecting them are different too. To add to the complications, there are variations according to whether you are a resident or a non-resident. If you are a resident you can ignore this article – slightly different rules apply to you. If you are a non-resident Spanish property owner and do not have a fiscal representative or complete a Spanish tax declaration then it is important that you take note.
What non-resident property taxes are there?
There are three types of Spanish property tax for non-residents:
• The IBI or council tax
• Property income tax
• Wealth tax
IBI stands for Impuesto sobre Bienes Inmeubles and is the equivalent of local rates or council tax. It is based upon the valor catastral (official rated value) given to your property. It is collected by SUMA or your local town hall depending upon where you live and is used to pay for local services and maintenance. The payment date depends upon where you live and you should receive notification of when it’s due through the post. You can pay either by direct debit or by visiting your local town hall/ SUMA office.
Property income tax
There are two types of property income tax:
• Tax on rental income
• Tax on ‘imputed’ income
If you rent out your property then you have tax on the income from that rental to pay. If you don’t, then the Spanish government still levies a tax in its place, on the basis that this is your second home and, as such, could generate an additional income for you. It is this tax that so many British and Irish residents find confusing.
The Spanish property income tax is due for everyone by the 31st December. This is the date when you must have presented your non-resident tax declaration. ‘Income’ only refers to money you might have earned if you had rented out your house. You are not expected to declare any other income as such wherever it derives from.
The amount of ‘income’ you need to declare on this form is worked out through taking either half the purchase price or the full rateable value, multiplying it by the corresponding coefficient and then applying the 24% tax rate.
The wealth tax or patrimonio was suspended in 2008 but has now been brought out of retirement. It is a low-rate tax that is applied to assets over 700,000€. held in Spain. If you have property here worth more than this amount then you will need to pay this tax according to a sliding scale. The more assets you have the higher the percentage you have to pay. Although central government have announced its reintroduction, at present it is still only a temporary measure for the next two years. After that? Who knows.
What happens if you don’t pay them?
Having established what you should be paying, what happens if you don’t? Arrangements for paying taxes and the repercussions from non-payment are rather different from the UK. In many cases debts are held against property rather than people. That’s why it is so important that you make sure that any new property you buy is clear of outstanding debts.
You tend not to be ‘reminded’ in Spain about what you should be paying to the same extent as we have come to expect in the UK. You could go years without receiving a tax demand only to find when you come to sell or inherit property that the debts have piled up, with interest! The onus is on you to keep tax payments in hand.
In some cases you might receive a notification that tax hasn’t been paid. This will come to your property in Spain. If it isn’t acted upon and the tax owed isn’t cleared you could find that your bank account is frozen, and ultimately your house can be embargoed too. It is important that you make sure that you are paying what you should.
Reading the forums it is evident just how much confusion there is out there in relation to property taxes. Don’t panic. Follow our three key pointers to keeping calm about property tax:
1. However complicated and confusing, in most cases the property taxes in Spain are less than we would expect to pay in the UK
2. As a non-resident you should be paying just the two taxes IBI and income, unless you own property over 700,000€
3. A reputable solicitor or accountant will handle your taxes for you so that you don’t need to worry
Perhaps we should add, don’t listen to the gossip at your local or on the forum. It’s often misleading, usually confusing and sometimes just plain wrong.
Susan Partridge Helme
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