| Many non-resident owners of property in Spain | | | | 1994 = yesx |
| are under the misconception that they can forget | | | | 1.1 % = 1650x 24% = 396 euros tax payable |
| about submitting their annual tax forms! | | | | If your property is left empty, even though you |
| It would be nice but it is not the case. However | | | | do not let out your holiday home for gain, Spanish |
| the good news is, from 2009 the taxes payable | | | | law assumes you have what is called a "Deemed |
| will be less than people paid in previous years. | | | | Rental Income" which is subject to non-resident |
| Up until the end of 2007 non-residents with | | | | Income Tax. |
| property in Spain were also liable to pay a "wealth | | | | The "Deemed Rental Income", which used to be |
| tax" (Patrimonio) which was calculated on the | | | | included on the old Modelo 214 form, is now |
| value of their assets in Spain (i.e. property, | | | | declared on a Modelo 210 form. |
| savings, etc.) | | | | The amount you pay is calculated using the "Valor |
| It is interesting to note that when Prime Minister | | | | Catastral" (Rateable Value) of your property in |
| Zapatero fulfilled his election promise regarding | | | | Spain. This can be easily ascertained by looking at |
| Patrimonio or "Wealth Tax", with the introduction | | | | the receipt for your "Impuestos Sobre Bienes |
| of Spanish Law 4/2008 passed on the 23 | | | | Inmuebles" or IBI, (often referred to by English |
| December 2008, the tax was finally amended by | | | | speakers as "Rates") - which is paid to your |
| reducing the taxable base to zero. | | | | "Ayuntamiento" annually. The format can vary |
| Is this technically a formal abolition of the Tax? | | | | between Ayuntamientos, or whether you get the |
| The answer is no. Certainly the effect is that no | | | | receipt from your bank rather than paying in cash. |
| wealth tax will be paid by either residents, | | | | But all the information you need will be on there. |
| (obligacion personal) or non-residents, (obligacion | | | | This receipt will also tell you whether the rateable |
| real). | | | | value of your property has been revised since 1st |
| The law, which ironically was published in the | | | | January 1994. This is critical because the |
| Spanish Government Official Gazette (BOE) on | | | | percentage used to calculate "Deemed Rental |
| Christmas Day 2008, applies to tax years starting | | | | Income" is higher if your rateable value has not |
| 1st January 2008 onwards which, under the | | | | been revised since that date. Tax payable on the |
| previous scheme would have been payable in | | | | "Deemed Rental Income" is 24 per cent. The |
| arrears in 2009. | | | | deadline for the submission of form Modelo 210 is |
| The mechanics of the new law mean that the | | | | the June 30th 2009 for income deemed or |
| obligation to submit a wealth tax return (Modelo | | | | actually derived in 2008. |
| 214) is terminated by applying a 100 per cent | | | | All of the above applies to Non-residents with no |
| deduction to the taxable base. | | | | permanent establishment but who own a holiday |
| By reducing the tax to zero but not abolishing it, | | | | home in Spain |
| is the Spanish Government retaining the option to | | | | Anyone treating apartment letting as a business |
| re-introduce the tax in the future? That may well | | | | If someone owns property in Spain, but is not |
| be the case! | | | | resident in Spain for tax purposes and has at |
| So to reiterate, the Patrimony "wealth tax" has to | | | | least one office or premises used for managing |
| all intents and purposes been done away with. But | | | | the letting business and employs one or more |
| that does not mean that there are no annual | | | | people on a full time contract, then the owner is |
| property taxes for Non-Residents to pay. You | | | | considered to have income through a permanent |
| may remember noticing on previous year's | | | | establishment in Spain and is subject to different |
| Modelo 214 forms that there were 2 separate | | | | regulations. |
| calculations: The Patrimony amount and the | | | | I wrote this article with the aim of making |
| "Declaracion de la Renta" amount. | | | | non-resident homeowners aware of their legal |
| The "Declaracion de la Renta" or "Non Resident's | | | | obligation to submit an annual income tax |
| annual tax return" must still be made and paid! | | | | declaration in Spain; it is not intended to be a |
| Taxation, and particularly dual taxation issues are | | | | crash course on Spanish tax law. As I said that's a |
| an extremely complicated subject and I would | | | | complicated subject and peoples's circumstances |
| always advise readers who make financial gain | | | | differ. But what holds true for all, is that no |
| from their property in Spain to get a qualified | | | | non-resident home owner, whatever their |
| assessment of their own personal circumstances, | | | | circumstances, is exempt from making a |
| either directly from the Spanish "Hacienda", Spain's | | | | non-residents Income Tax return. |
| Inland Revenue, or from a tax professional. | | | | Do you know someone who has owned property |
| However, in general terms the earnings from | | | | in Spain for years and never made a declaration? |
| rented property or sub-let property are calculated | | | | Probably. However, if they are caught, and |
| on 24 per cent of the gross income received | | | | computerised records are making that ever more |
| from the tenant, excluding IGIC. | | | | likely, they are liable to pay the last four year's |
| If the property is only rented out for part of the | | | | tax and probably a hefty fine. |
| year, the earnings are calculated as above for the | | | | But in any case, when that property is eventually |
| rented period. For the part of the year that it lies | | | | sold or passed on as part of an inheritance, the |
| empty, the calculation is made as for "Deemed | | | | Spanish Tax Agency can and will check their |
| Rental Income": see below. | | | | records, which will show the property is owned |
| See if your Catastral Value has been updated | | | | by a non-resident and that no tax declarations |
| since 1994 if the answer is yes the coefficient to | | | | have been received. The taxes will then need to |
| use is 1.1 if the answer is no then use 2. | | | | be paid, including any fines imposed, before the |
| Multiply the Catastral Value by 1.1 or 2 (as above) | | | | property can be legally transferred. |
| per cent | | | | I believe that at the very least it makes sense to |
| Take this value and multiply by 24 per cent - | | | | clarify what your tax liability is and if at all possible |
| thats how much deemed rental income tax you | | | | keep things up to date, rather than looking over |
| pay. | | | | you shoulder and waiting for a fine to drop on the |
| Example: Catastral Value 150,000 revised since | | | | mat! |