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)