In this article, we are going to speak about liabilities and implications arising for foreigners when they decide to buy a property in Spain.
When you are a non-resident person in Spain, and own a property, you must pay non-resident income tax to the Spanish Tax Authority. If these taxes are not paid, the Tax Authority can send claims to property owners requesting the last four years of unpaid non-resident income taxes plus the applicable interest for late submissions and fines.
Non-resident Income taxes
In Spain people who own property but are non-resident in the country for tax purposes, have an obligation to file non-resident taxes returns every year to the Spanish Tax Office.
This Tax must be filed prior the 31st of December by completing a tax form called Mod 210 at the Tax Office. If the property is owned by two people or more, then all owners must fill in a tax return. The income tax declaration is filed in arrears, meaning that if you buy a property in Spain in 2023, you will have to declare this annual income tax from 2023 in year 2024 prior the 31st December, otherwise the tax will have a penalty for late submissions of the tax.
The tax rate is 24% for all residents in third countries, that is, those countries not part of the European Union, and the tax rate is 19% for residents in countries belonging to the European Union including Norway and Iceland.
The calculation of this tax is based on 1.1% of the total cadastra (rateable)- value of the property. This value can be found on the IBI bill of the property.
Non-resident Income taxes when renting a property out:
If you usually rent out your property in Spain, as a non-resident you are obligated to file tax declarations on a quarterly basis. Also, for the period that the property is not rented out, you will have to file a non-resident tax that is calculated like the annual income tax explained above, using the cadastral value of the property prorating for the numbers of days that the property was not rented out.
Quarterly Income Tax Returns are to be filed in January, April, and October before the 20th of the month.
Residents in countries belonging to the European Union have a fixed tax rate of 19% and they could offset expenses of the rental. For third countries the fixed tax rate is 24% and expenses are not deductible.
In regards to taxation, unfortunately, after Brexit, this is one of the consequences for UK residents; now they are a third country and have to pay 24% of tax instead of 19%, and also, they cannot deduct any expense from the rental.
At Nockolds Lawyers Spain, we can deal with, and help you, to file your Income taxes with the Tax Office every year, so you do not have to worry about it, and you will always have your income taxes up to date with the Tax Authority.
For further information please contact us on (+34) 951 552 254 or complete an online enquiry form, and a member of the team will be in touch.