Foreign Owners Target of Renewed Non Resident Tax Campaign
With the advent of the crisis and the coffers of the Spanish Inland Revenue drying up fast, foreign property owners now seem to be the target of a renewed tax levy campaign, judging by the content of tax office letters received by a few clients. Because whereas before property owners that did had never paid Non-Residents Property Income Tax, an annual tax based on the ratable value (valor catastral), were deemed to be under the radar of the taxman, they are now being specifically pinpointed.
The letters sent by the Hacienda are not openly threatening, if that is possible at all, but a reminder that taxes have to be paid by virtue of owning a Spanish property. The written request states: “based on the information we hold, it appears that you have owned a property in Spain during the years 2008, 2009, […], and, according to our records, you have failed to submit a tax return for Non-Residents Income or Wealth Tax“.
The letter then says that this is neither a tax request nor the commencement of an investigation. However, they seem to have all the information owners were hoping would not be picked up by the taxman, not until the property was sold (time when it would have had to be disclosed, and taxes paid up, if one wants to claim the 3% Capital Gains Tax retention back successfully).
This obviously does not affect tax-abiding property owners, who file they annual returns prior to the 31st of December of the following year (2010 tax is to be paid by the end of 2011), and are expected to pay an average of between €200 to €800, depending on size of property and the municipality; with larger villas paying substantially more. Resident property owners, on the other hand, are exempt from this tax.
Wealth Tax to be reintroduced in 2012
With effect as from 2011 and during the next year, property owners will be taxed again on Property Wealth Tax, having to submit the tax returns in 2012 and 2013, respectively. Residents for tax purposes will have tax breaks on their habitual home, up to a certain value, and an allowance of €700,000, which means that most Spanish residents will effectively be exempt from it.
Finally, nonpayment of due taxes will attract penalties, surcharges and interest and ultimately, a charge on the property so, to avoid unpleasant surprises, we suggest you act promptly by talking to a qualified professional.
If you have questions, you can read this FAQ about non residents tax in Spain.
Documents
- Non resident tax letter being sent by the taxman (PDF – 238Kb)
Hi Antonio
A few weeks ago we arrived at our Benalmadena property and found a similar letter on our stuffed mailbox. The truth is that we haven’t paid any taxes on our Spanish property since we bought it 3 years ago. what is our couerse of action? is our home at risk? Please advise if you can assist in settling this matter. Thanks
Hello Andrew,
It is important to pay your taxes, both property (Council) and personal (Non-Residents Property Income Tax) because, as a result of the crisis, the Tax Office is targeting taxpayers that traditionally were not actively pursued. Your property is at risk, although not inmediately. You should however prevent any further action by the authorities by complying with the tax demand which, incidentally, is generally a modest sum.
If you need help, you can contact Juan Carretero, from our tax department, via email (juan.carretero@lawbird.com) or by telephone (+34 952861890). Also, you can familiarize with our fiscal representation service by clicking on the following link http://www.lawbird.com/services/view/11/Fiscal-Representation
Hi Antonio. I hope you are well. We received an email from your office with our tax breakdown. I was under the impression we didn’t have to pay this tax, as we don’t generate any income on our Spanish property, and pay our taxes in the UK. Our property is vacant all year round (we haven’t been there for a while) and we already pay IBI and basura. Must we pay this? Thanks. Wendy
Hello Wendy, I hope all is well with and your family. The answer to your question is yes, you need to pay this tax as, although the name is misleading, it is not linked to rental income but an imaginary, or imputed, income.
You can get more information by clicking on http://www.lawbird.com/services/fiscal_representation_faq
Let me know if you have further queries.
Thanks
Hi Antonio. My name is Robert, i am interested in buying a property in Spain. I am of Albanian nationality therefore i am only able to visit and spend no more than 6 months a year in Spain. Buying a property there do i have to sort out my immigration matter first?
Hi Antonio
I bought apartment in Benalmadena and my agent has disappreared without even handing over the keys to the property. I was not informed about any legal requirements and I am learning as I go along. Mainly from Eye On Spain news letter. I have not paid tax since I bought the apartment in Benalmadena in 2008. Any advice?
Vijaya
Dr. Joshi,
Thanks for your comments. If you bought your apartment in 2008, you would need to file taxes for that year, 2009 and 2010. 2011 is to be paid before the end of the 2012. I trust you have title to your name and that the deeds are registered. If you have any queries about these matters you can always email again.
Robert, as explained in my email to you, you are able to buy a property in Spain with no other requirement than having a passport and an NIE number (which we can help you with), as there are no impediments for any person in the world to buy property in Spain, nor any specific clearance. You can also qualify for a mortgage if you wish, and in fact some banks are offering 110% of the value of properties they own (which have been generally repossessed from property developers or individual owners).
Generally, you would get visas without much hassle but immigration (residency permit) would require a different type of procedure, depending on whether you wish to apply for a self-employed or non-lucrative residency permit.
Your recent article in Olive Press suggests that the Inheritance Tax Schemes being offered involving the use of a UK Company are illegal.
As I have such a Scheme under consideration please advise why you consider such Schemes to be illegal.
I presently have a property in Puerto Marina Benalmadena which is held in joint names with my wife, which is left to the survivor on first death, then in equal parts to our 5 children which I believe could prove to be very expensive in respect of Inheritance Tax in Spain
Derek, we consider the scheme to be clearly against Spanish tax laws, as it artificially negates the Tax Office knowledge of the transfer of the underlying property. You may wish to have a look at the post I wrote a while ago, addressing this matter: http://belegal.com/blog-by-antonio-flores/spanish-inheritance-tax-don%e2%80%99ts-2-seeking-exemption-by-incorporation-of-uk-companies/
Hi,
I am trying to buy the 50% share an ex partner has in our apartment. He is desperate to sell. I have contacted a large estate agent who have given me a valuation. I have offered him half of this, bearing in mind he wont have to pay the 5% + iva. He will not reply to me. He has paid no bills for 3 years and I have paid his income/wealth tax. This year I dont want to pay it for him. He has sold his property in England and I cant get in touch with him. What will happen if I dont pay his tax?
Hello Sandie,
Personal taxes don’t affect the property automatically, as property taxes do (Council tax for example). If he does not pay his own tax, the Tax office will go against him and in the last instance, they may go against his share of the property (and register a a charge against his 50% share).