Annual Tax Return
The Spanish Tax Year is the same as the calendar year. The tax system is based on self-assessment. This can be challenging and so it is important for non-residents to have a financial adviser in Spain. All property owners in Spain must submit a tax return regardless as to whether the property is rented out or not.
GB Abogados represent your interests and we will ensure that your tax obligations are always met in a timely manner, with the bestvalue for money service. We also provide you with up to date information of any changes in the regulations, planning your tax obligations so that you have the security and peace of mind that everything is in order, including checking the previous 4 years tax declarations for which you are liable.
Non-residents are often unaware of their tax obligations to the Spanish State. Taxes should be met regularly, as any breach can lead to many problems in the future (in particular economic sanctions).
Other Taxes
The Law 26/2014 and Decreto Legislativo 5/2004 contain everything to do with the rules governing income tax for non-residents (IRNR). In addition, some taxpayers may be subject to other taxes depending on the cause of the taxable event, such as:
- Property Transfer and Stamp Duty Tax
- Value Added Tax
- Property Tax (I.B.I)
- Inheritance and Gift Tax
It is most important to know the taxes which can affect the vast majority of non-residents (whether individuals or commercial entities) and know what the consequences of failure to comply with those obligations to the Tax Authority (AEAT) would be.
Income Tax Law
The tax authority in the Income Tax Law 35/2006 section 9 states the definition of resident in the national territory, as opposed to those who are non-residents:
- You are considered a tax resident if you remain within the national territory for more than 183 days in a calendar year, with some clarifications.
- That the nucleus or base of activities, or economic interests is in Spanish territory. Presumed to be atax resident if residing in national territory with spouse, and/or minor dependent(s) child(ren).
Therefore, those who do not meet the above requirements will be considered non-residents. The most common forms of income that the Non-Resident must declare to the Spanish authority are:
a) Property Tax: it is a local recurring tax payable each year and levied on the value of urban property, rural property or goods with special characteristics. The party obliged to pay is the owner of the property on 1st January regardless of when the tax invoice is issued each year. Obligation: must pay the tax debt in the period determined by the location of your property and the local authorities. For example, if the house is located in Torrevieja you must pay tax before October 2 of each year; whereas if the property is located in Alicante, the tax must be paid on or before the 3rd June, etc.
b) Income allocations for those with a property in Spain the tax authority considers that there are earnings made by the mere fact a second home/property is owned in Spain. The assumption is that a second home has the capacity to generate return by increasing in value over time, or due to the possibility of obtaining income from rental, this is irrespective of whether the property is actually let or not. Liabilities: Non-residents are required to file an annual declaration and payment of tax due before December 31 of each year. Otherwise, the tax debt remains outstanding with the respective interest and surcharges accumulating until further transmission by sale or inheritance.
c) Returns on Real Estate for those who obtain income from the lease of real estate property where the tenants are not retainers (as individuals who are not engaged in economic activity). Duties: must be declared quarterly by the 20th of the months of April, July, October and January.
d) Capital gains calculated accosding to by the transfer of immovable generated by the positive difference between the acquisition value and transfer value. There are partial exemptions in certain cases of 50% (the discount applies if the property sold was acquired between May 12, 2012 and December 31, 2012) and a reduction is established if the property was sold before 31 December 2014 depending on the year the property was purchased.
Transitional regime: If you purchased the property before 31st December 1994 the Capital Gains will be reduced thanks to the application of some specific rules. There is also an exemption for reinvestment of property in the EU, Iceland or Norway.
Obligations: this transmission must be declared within 3 months following the end of the month in which the property is conveyed. If you have questions regarding your tax liabilities in Spain, or any other Tax related issue, please don ́t hesitate to contact us.
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