The Spanish tax system is already complicated in itself.
To this we must add on many occasions the difficulty of the language, both in the documents and in the administrations themselves, or the difficulties involved when you are not resident in Spain.
Furthermore, tax obligations are not the same for foreign residents with property in Spain as they are for non-residents, even though they may fear property in our country.
We explain the differences below.
When is a foreigner considered a tax resident in Spain and what are the implications?
For a foreigner to be considered a tax resident in Spain, one of the following circumstances must apply:
- Staying in Spain for a period of more than 183 days during the calendar year.
- Their spouse or minor children are in Spain.
- Their main base of operations or economic activities is located in Spain.
Foreigners resident in Spain must, in turn, be aware that they must declare and pay their personal income tax (IRPF) in Spain, whether on income obtained in Spain or abroad.
The same applies to the tax on their wealth from a certain point onwards.
On the other hand, it is also worth noting that they can benefit from the deductions and exemptions offered by the Spanish tax system, such as deductions for habitual residence, for donations or for investments in start-up companies.
What taxes affect non-residents in Spain who own property in our country?
Foreigners who are not resident in Spain but who own property in our country should be aware that they are not exempt from tax obligations towards our country.
In this case, moreover, these obligations are maintained independently of whether the property is occupied, rented or remains without tenants.
Therefore, the first tax to be paid is the I.R.P.F. (Personal Income Tax), although the amount may vary depending on whether the property is rented, that is to say, whether it obtains an economic income from the property, or not.
In the event that the property is not rented to a third party, the Non-Resident Income Tax (IRNR) is maintained, for which a rent is calculated taking into account the appraised value of the property itself.
What happens to the properties we own and rent out?
As we have seen above, the taxation of property is governed, in part, by whether it is rented or not. Where this is the case, the rental profit is calculated on the basis of the gross rent paid by the tenant. It is true that there are some expenses that the landlord can deduct that will affect his annual tax return, such as mortgage interest, community charges and even some local taxes.
In cases where the property has only been rented for part of the year, a pro-rata calculation will have to be made to determine what part corresponds to the rent and what part is proportional to the use that the owner has made of the property.
Finally, do not forget the local taxes in force in each community on the value of the property. This is an annual tax that each local council applies to the cadastral value of each property and which varies according to annual inflation.
The payment of this tax is always the responsibility of the owner, even if the property is currently rented.
Why is it necessary to hire a tax representative in Spain to manage my taxes?
As you may have noticed, the Spanish tax system is not easy to understand, so it is relatively easy not to be up to date with the obligations due to lack of knowledge or understanding of them.
This is one of the reasons why having an advisor or lawyer can be essential in order to keep up to date with the tax obligations payable in Spain.
If, in this regard, you need any help or advice, please do not hesitate to contact MAM Solicitors and our specialists will help you with whatever you need.
