Non-residents are taxed in Spain on income arising from Spanish sources only. You are considered tax resident in Spain if you spend at least 183 days there per year or if your main resident home is located in Spain. Tax on purchase: Transfer Taxes (Impuesto de Transferencia de Propiedad) Transfer taxes at a rate of 6% or 7% apply on the acquisition or transfer of residential property depending on the various municipalities. This rate includes 0.5% (or 1% in some regions) stamp duty. VAT (IVA) VAT is levied on new properties at the lower rate of 7% (4.5% in the Canaries). From 1 July 2010 the lower rate increases to 8%. In certain cases eg for Spanish leaseback properties, a VAT refund may be claimed on the purchase price but this will give rise to a VAT charge on rents. Contact us for more details at info@dgitax.com Ongoing property taxes: Spanish Personal Income Tax (PIT) Actual Rental Income: Non-resident property owners must pay income tax at a flat rate of 24% (since 1 January 2007) on any income arising from letting a property. No allowance is made for expenses incurred against the rental income. If you only own one Spanish property, then the rental income may be declared together with your wealth tax and paid annually in respect of each calendar year at any time on or before 31 December of the following year. Otherwise, this income is declared separately from Wealth Tax and must be filed before 30 June of the following year. Deemed Rental Income: Impuesto de la renta de no residents declaración ordinaria (IRNR) Where real estate is held for personal use and is not used as the habitual residence of the owner, Spanish tax law deems income to arise on the property that is subject to IRNR or Deemed Income Tax. This tax is calculated on the deemed annual rental income currently calculated at 1.1% of the property value (or 2% if the property’s cadastral value (found on the IBI receipt) has not been revised since 1 January 1994) at a rate of 24% (since 1 January 2007). No deductions are available against deemed income in arriving at taxable income. Spanish Net Worth Tax (NWT) or Impuesto Sobre el Patrimonio Up to 2007 (eliminated in 2008), non-resident individuals are subject to NWT on their assets located in Spain. NWT will be payable annually at rates between 0.2% and 2.5% of the value of the property which is calculated as being the higher of: It should be noted that a Spanish mortgage charged on the property can be deducted from the cadastral value for the purposes of calculating this tax. Note: The mortgage must be registered with the Spanish Property Register. Local Property Tax or IBI (Impuesto de Bienes Inmuebles): This is a rate tax which varies depending on the municipality and the level of urbanisation and services relating to your property. The filing period is normally between September and November of each year and the tax is usually between 0.4% and 1.1% of the cadastral value of the property. It is important to check with the local town hall that you are registered for this tax and to ensure that you receive any notifications. It should be noted that reminders are not always sent out and if you do not pay on time the Spanish Authorities may incur interest and penalties. Transfer taxes: Spanish CGT applies to a gain arising on the sale of the Spanish property which must be declared within three months of transfer. No indexation is available. The current rate of Spanish CGT is 18% since 1 January 2007. It should be noted that any Spanish CGT paid by an Irish resident individual should be creditable against any Irish CGT arising on the same disposal under the Ireland/Spanish double tax treaty. Withholding Tax on Sale of Property: According to Spanish fiscal law, if you are non-resident and sell your property in Spain, the purchaser is obliged to withhold 3% (since 1 Jan 2007, previously 5%) from the sale price. This reflects a payment on account of the capital gains tax which is payable to the Spanish Treasury (Tesoro Publico). The purchaser then provides the non-resident seller with a copy of this form so that they may deduct this withholding from the capital gains tax payable. If the 3% is greater than the actual calculated capital gains tax you are entitled to reclaim the difference. Note: The withholding tax will not be applied to the sale of properties which were acquired before 1986, provided they have not suffered improvements. Spanish CGT was levied at a rate of 35% for Non-residents prior to 2007. This is being challenged as contravening EC Treaty Discrimination rules which if won in the courts may mean a CGT tax refund can be claimed by non-resident individuals who sold Spanish property in a maximum 4 year period ending 31 December 2006. Contact us at info@dgitax.com or at ++ 353 56 7780852 for more details. The CGT rate for Residents and Non-residents is currently 18%. Spanish Inheritance Tax and gift tax : The tax due would depend on the owners relationship with the donee, the heir’s pre-existing wealth and the value of the property. The marginal rate is 34%.
You will also be obliged to file a tax return detailing your worldwide income in your home (tax resident) country.
Where a double taxation agreement exists between Spain and your home country, which provides for double taxation relief, then a deduction for tax paid in the foreign country can be offset against tax on the same income in your home country. A double taxation agreement exists between Spain and Ireland / UK.
> The purchase price
> The assessed value for tax purposes (Value assessed by Spanish Tax Authorities for transfer tax
purposes).
> The cadastral value (or Valor Catastral), as reflected in the property tax receipt (IBI) for the year to
which the return refers.
Spanish Capital Gains Tax (CGT)