Non-resident Tax on Unmovable Property

Thursday, July 3, 2014
By Maria Teresa Velasco

MLVelascoNon Residents in Spain owning a property in Spain are like in most countries subject to taxes. In most cases the taxes related to a property that a non-resident will have to pay are less than what a resident would pay. Here is brief outline of what non-residents are expected to pay.

IBI – Council tax – Impuesto sobre bienes inmuebles

The IBI is a tax both residents and non-residents will have to pay. It’s paid to the town hall and is based on the cadastral value of the property. Depending on the town hall, it will be paid once a year or in instalments several times a year. The time of payment differ according to the municipality. After the purchase of a property the new owner might receive the IBI payment notifications in the name of the previous owner. These will have to be paid by the new owner regardless and it might take up to a year for the town hall to change the owner name.

Imputed income tax (non-resident tax)

This tax (in Spanish: Renta de no residentes imputada de bienes inmuebles), is paid by the non-residents owners when the property is for personal use and is not rented. In practice the Spanish Hacienda is going to tax the property on the loss of opportunity of placing the property on the rental market.

It is a tax that is paid in arrears during the following year. For example the imputed income tax related to year 2013 will have to be paid during year 2014 with a payment deadline on the 31 December 2014.

The tax base is calculated as a percentage of the cadastral value of the property and is:

–       1.1% of the cadastral value, if the cadastral value was revised after 1st January 1994

–       2% for all other cases

On this amount the tax to pay will be the 24.75%. In cases of shared ownership the different owners of the property will have to file and pay the tax individually proportionally to their ownership share. Additionally if the ownership was partial during the year (in case of purchase or sale), the tax will be paid proportionally to the amount of days the property was owned during the year.

Income tax on property rental for non-residents

If the non-resident owner rents out the property during the year, he will have to pay taxes on the rental income. This will be 24.75% of the income. Unlike imputed income tax, the declarations and payment will have to be done either once a month or once a quarter. In this last case the deadlines are 20th April for Q1, 20th July for Q2, 20th October for Q3 and 20th January for Q4.

If the owner is a tax resident in a European Union country, he can deduce all the expenses directly related from the property rental. This can be for example, property insurances, IBI, renovation expenses, amortisation of the property and so on.

Partial rental over the year

In case the non-resident rents the property only partially during the year, he will have to pay Imputed income tax proportionally on the days the property is not rented. Expenses related to the property rental will have to be deducted proportionally. For example a house insurance paid annually will be deducted proportionally on the days the property is rented.

Non-residents wealth tax

Wealth tax as of 2014 is paid on the total amount of assets owned by the non-resident in Spain. There is an individual deduction of 700.000€ per person. For example if a couple co-own a property, their total tax deduction will be 1.400.000€. In case of properties the higher of any of these 3 values will have to be considered:

–       Cadastral value

–       Assessed value by Tax Authorities on filing other taxes

–       Price set in the purchase deeds

This tax is also regulated by autonomous communities and will have to be analysed on a case by case basis.

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