Spanish Property Income Tax in 2009
Contrary to what has been divulged by some, Property Income Tax (PIT) for 2008 will not have to be paid in June but prior to the 31st of December, as has been the case in previous years. Property Wealth Tax (PWT) has now been abolished and will not have to be paid alongside PIT.
PIT will also be calculated in the same manner as before, that is, by applying 2% to ratable value (or 1.1% if it this value has been revised after 1994) and applying a 24% on the resulting amount. Form 214 is no longer used, and instead Property Income Tax will have to be filed using Modelo 210.
If the property is being let (and the income declared to the authorities!), Property Income Tax is not applicable and if it is only let for part of the year, the tax is only applicable for the part of the year that the property is vacant from tenants. In this case the income is taxed at a flat rate of 24%, without possible deductions.
The elimination of PWT by the Spanish Government was a consequence of the economical crisis and seen as a measure to boost foreign investment. The reality is that very few investors get to know that this tax ever exist prior to deciding to purchase a property and even if they had known it was still applicable it is doubtful that it would have had any influence on the decision to purchase property. In any event the elimination of PWT has been welcomed by owners.
Property owners who have bought a property through a foreign company will need to provide a certificate from the Tax Office in the country of domicile proving fiscal residency of the company and shareholders in a country with a Double Taxation Agreement (all UE countries are), in order to avoid the Special Tax on Foreign Companies, currently at 3% of the ratable value. We will provide assistance in this matter. Property owners who have bought through a Spanish company are exempt from payment of taxes for owning property.
As in previous years, from Lawyers of Spain we will be offering the Fiscal Representation Service to all our clients as from September. The service includes not only the calculation of the taxes and filing of the forms and payment of tax due but also acting a fiscal representative for the duration of the fiscal year (calendar year), notification of any communication from the Spanish Tax Office in relation to the tax and free consultations in respect of any tax matter.