The purpose of this guide is to provide an introduction to the basic and most common Spanish taxes that a non-resident (read this article to find out when it is considered a non-resident person in Spain) may face.
This guide is in no way a substitute for professional advice, as a thorough investigation of the various personal circumstances is required to give the best and most profitable tax advice.
Please do not hesitate to get in contact with us and we will be glad to provide you with the best solution for your situation.
The Spanish authority responsible for tax collection is the “Agencia Estatal Tributaria” (AEAT-Hacienda). It is organised on a provincial basis. There is a main tax office in each province.
In many provinces there are also one or more sub-provincial offices.
In Spain, it is your responsibility to get a tax form, fill it in and calculate the amount of tax you owe to the state. It is then your responsibility to submit the form to the hacienda along with the appropriate tax payment.
This is a tax payable when you purchase either agricultural land or a house/apartment/building plot from a private owner.
It is generally 7% (it depends on regions) of the declared value of the property as expressed in the Escritura de Compraventa (Deed of Conveyance).
This has led people to be tempted to under-declare the value of the property. Though this practice was and is widespread, it is a mistake. Penalties are payable in respect of abusive under declarations which, in addition, can lead to Capital Gains Tax headaches at a later date, as the declared value on your purchase is the base line used by Authorities when assessing the Capital Gain you make on the disposal of the property.
This is the Spanish equivalent of VAT.
It is paid instead of I. T.P. when you buy from a Promoter rather than the private individual.
At present, the tax is charged at the rate of 21% on building plots and on additions carried out subsequent to the construction of properties.
It is charged at the rate of 10% on the construction of a house and any associated buildings, excluding commercial premises.
It is also charged at the rate of 10% on both the plot and the house if you purchase both at the same time.
In addition to IVA you will also have to pay a document tax or stamp duty (IAJD) at 1% (this depends on regions) of the purchase price on your purchase from a developer.
These vary according to the locality, type and value of the property. They are not strictly taxes but rather administrative fees but, for the sake of completeness, are referred to in this document.
This is the main local property tax affecting property owners in Spain.
The amount of tax is calculated by reference to the ‘valor catastral’ (official property value) registered for all properties in Spain.
The percentage of this cadastral value that is levied as tax varies from area to area.
The official values were very low until recently. They are now rising rapidly, in line with a Spanish government policy to bring official values closer to the real value of the property.
Some municipalities levy additional taxes depending on the services they provide to residents. These include rubbish collection, street and beach cleaning, etc.
Municipalities are also entitled to charge a fee for the use of a vehicle in their area.
The amounts of these fees and charges are usually not high.
A non-resident for tax purposes in Spain must file an annual income tax return.
The Spanish authorities are only concerned with the income you earn from activities in Spain, not your worldwide income.
Typical examples are your income from renting out your flat or house (see also “Tax on the notional rental value of your property” below).
As this income is part of your worldwide income, it must be declared to the UK tax authorities, but deduction to avoid double taxation is possible due to the agreement between the two countries.
The Spanish do not have a separate system of capital gains tax assessment. For individuals who are resident in Spain for tax purposes, capital gains are treated as part of their taxable income for the year in which the gain occurs.
For individuals who are not resident in Spain for tax purposes, capital gains tax is generally payable at a flat rate of 19% on the difference between the price at which the asset was sold and the price paid for it.
In the typical example of the sale of a property, the prices used to calculate the tax liability are those stated in the title deed.
In addition to the ordinary income tax return that you must file in appropriate cases, you must always file a tax return in respect of the notional rental value or own use of your property.
This return must be filed whether or not you have actually used the property.
If you have actually rented out the property and received money for it, then the money received will be included in your normal income tax return.
The declaration of the notional income or own use from your property is done on a form called 210, which you can get from the website of the tax office.
The amount of tax is calculated on the basis of the cadastral value of your property.
As in most countries, in Spain the State likes to keep a part of your estate when you die. How much they will receive depends largely on how well you plan your affairs.
The whole system of death taxation is very different from those in other countries, so it poses a real danger to non-residents and foreigners, who unconsciously assume that similar provisions will apply and organise their affairs accordingly. Some differences are: In Spain there is no automatic inheritance by a spouse or other co-owner of the deceased co-owner’s share in any property. If left by will or intestate succession to the other co-owner, the gift will be subject to tax.
The amount of tax payable is not determined by the size of the entire estate – as in England, for example – but by the size of the individual inheritance. The tax is progressive: the more you inherit, the higher the tax rate you pay.
Close relatives pay a lower rate of tax than more distant relatives, who in turn pay less tax than strangers.
Close relatives are also entitled to receive a tax-free amount. More distant relatives and strangers are not.
Those who are already wealthy when they inherit pay more tax than beneficiaries who are poor, although, as in the case of foreigners the only assets taken into account are Spanish assets, this rarely causes difficulties in practice.
Penalties are imposed if the tax due is not paid within 6 months of the date of death.
In many cases where the payment of substantial taxes will be a problem, it is possible to dispose of the assets during the owner’s lifetime much more cheaply than on death.
In many regions, substantial tax relief is available when both the deceased and the beneficiaries are resident in the region. When the beneficiaries are close relatives, there may even be no inheritance tax payable.
