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Understanding the Spanish tax system is a complicated task, even more so if a person is not permanently resident in Spain but owns property in our country.

Depending on these circumstances, tax obligations can vary considerably, so appointing an expert lawyer to manage all these processes is a wise decision.

First of all, it is important to answer a question that allows a better understanding of the tax obligations that foreign owners have in Spain: are the obligations and taxes the same for residents and non-residents?

This is where a first difference appears, as the obligations are not the same depending on this.

It´s important to know that MAM Solicitor’s team of tax representation lawyers can help you whether you do not live permanently in Spain but own a property in our country, here on Spanish soil or you are a resident expatriate.

In both cases, you should always bear in mind that there are a number of tax obligations that are unavoidable.

Let us see, below, what the tax obligations are in both cases.

What taxes affect non-residents?

In this case, non-residents who own property in Spain, especially when we are talking about dwellings, have a series of tax obligations in Spain, whether the property is occupied, rented or remains empty.

Thus, the taxes on property in the case of non-residents comienzan con el pago del I.R.P.F (Personal Income Tax).

Regardless of whether the property is rented to a third party or not, non-resident income tax must be paid. However, the tax treatment is different depending on whether the property is rented or not.

With reference to these properties when they are not rented out, they are still subject to non-resident income tax. In these cases, a rent is calculated for which the assessed value of the building itself is taken into account.

The payment always corresponds to a calendar year from 1 January and is always due for the year in which the tax is due. Furthermore, it is paid directly to the tax office. It is not possible to pay this tax by direct debit. It is the obligation of the owner, through his lawyer, to fill in the tax declaration and submit it to the Spanish tax office.

What happens then with the properties that we own and rent?

As we have seen above, taxation of property is governed, in part, by whether it is rented or not. When this is the case, the profit from the rental is calculated on the basis of the gross income paid by the tenant. It is true that there are some expenses that the landlord can deduct and 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 must be made to determine which part corresponds to the rent and which part is proportional to the owner’s use of the property.

Finally, we must 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.

What differences do residents in Spain obtain in terms of taxation?

A common misconception is that if the pensions correspond to the country of origin, they should not be declared in Spain.

Unfortunately, as we have said, this is a mistake. The first thing a resident in Spain should know is that income tax must always be paid in the country of residence, except, as stipulated in the Double Taxation agreements between countries, pensions paid by the local or central administration, such as the armed forces, the police or teachers, which can only be taxed in the country of origin.

To do this, expatriates must submit a series of documents or apply for a refund in their home country.

As you will have seen, the Spanish remuneration system is not easy to understand, so it is relatively easy not to be up to date with the obligations due to a lack of knowledge or understanding of them.

This is one of the reasons why having an advisor or solicitor can be essential in order to keep up to date with the tax obligations payable in Spain.

If, in this regard, you need any kind of help or advice, do not hesitate to contact MAM Solicitors and our specialists will help you in any way you need.