Spanish Taxes Guide: What Spanish taxes should you be paying?
Spanish Taxes Guide: What Spanish taxes should you be paying
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In some communities it has been almost acceptable. However, things are changing. As everyone feels the pinch the tolerance of those who pay towards those who don't is diminishing. In addition, the means to check on who should be paying what are increasing. For example, Iberdrola and the other electricity companies have to complete an annual declaration that indicates the rate of usage of their customers. This information is linked to bank accounts and clearly shows the residential status of home owners. Where usage is high but the owner is a non-resident thenSpanish income tax must be paid on that property, either through tax on rental income or through the annual tax declaration. If anomalies are spotted then bank accounts can be frozen and assets embargoed.
Property income tax
Not everyone realises that if they are a non-resident and own a home in Spain they must pay tax on it in addition to their SUMA' or Council Tax. Thisproperty income tax is tax on the income you might have received if you had been renting it out. A similar tax is payable for those residents who own a second home in Spain. baco can help you complete your annual tax declaration and make sure you have no Spanish taxes outstanding. If it is not paid it can cause problems when it comes to selling your property and/ or you could be fined.
Fiscal residency
But it's not all bad news. There are benefits to making your annual tax declaration if you are a resident.
It is particularly important that if you are living in Spain that you have fiscal residency. This is not to be confused with civil residency. Civil residency involves a trip to the police station, the submission of various form of ID and eventually the collection of your green residencia certificate. Although you need this certificate it is not accepted on its own as proof of residency in several different contexts.
For example, when you come to sell your property if you are a non-resident you will be liable to pay 19% in capital gains tax. However, if you are a resident there are substantial reductions to this figure. The catch is that you have to be able to demonstrate that you have used your home as your main residence for at least three years. To do this you need three sequential tax declaration forms.
Similarly, there is a reduced inheritance tax for those who can prove residency.
Spanish Income tax
You will either be self-employed (autonomo) or your employer will pay your Spanish income tax. The tax year is the natural calendar year and if you are self-employed you pay tax between May 1st and June 30th for the previous year's earnings. If you are an employee then your employer will deduct from your gross salary to pay your tax. If you are self-employed you will need to complete an annual tax declaration and will be taxed according to your earnings after deductions.
The amount of tax you will pay varies from 24% to 43%. This rate varies as it combines the provincial tax rate (dependent upon the region) and national tax rate. Personal allowances reduce the amount of earnings you have to pay tax on.
Tax when selling your property
The amount of tax you have to pay varies depending upon whether you are a resident or a non-resident. As a resident you do not have to pay any capital gains tax in Spain if you are re-investing everything in another property which will act as your main residence. However, if you are a non-resident you will need to pay 19% on the sale of your property. An important reason for being able to demonstrate that you are a fiscal resident through having completed your tax declaration forms.
The following information provides an overview of some of the main taxes you might have to pay. Rules and regulations change frequently this is a guide to Spanish taxes at the time of publication.
Council tax/IBI
Residency status: Resident and Non-Resident
Payable on: Property that you own in Spain
Other points to note: Paid annually directly to the town hall or via the office of SUMA. It is calculated on the value of the property or valor catastral.
Property income tax
Residency status: Resident and Non-Resident
Payable on: It is not always enforced. It is the responsibility of the vendor and is a one-off municipal tax.
Other points to note:
Resident: Paid to the Agencia Tributaria (Tax Office) this tax is for non-residents only and represents the income you might have received had the property been rented out.
Non Resident: You should fill in an annual tax declaration to declare your income
Rental income tax
Residency status: Resident and Non-Resident.
Payable on: Property you rent out and a second home if you are a resident.
Other points to note:
Non-resident: For non-residents a form 215 should be completed every quarter declaring the rent received.
Resident: Income should be declared on the annual tax declaration form.
Spanish income tax:
Residency status: Resident
Payable on: World-wide income
Other points to note: This is paid annually and t he actual percentage depends upon how much you earn. The tax year is from January to December.
Plus valia tax:
Residency status: Resident and Non-Resident.
Payable on: Transfer of property title deeds.
Other points to note: It is not always enforced. It is the responsibility of the vendor and is a one-off municipal tax.
Capital gains tax in Spain
Residency status: Resident and Non-Resident.
Payable on: Sale of property.
Other points to note:
Non-resident: Reduced rate for residents but you need to be able to prove residency through having three consecutive annual tax declaration forms.
Resident: Currently 19% for non-residents.
You can find this article and others written by our team of experts in the News & Articles section of our web page: www.abacoconnect.com
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