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There’s Non-Resident Income Tax On My Spanish Holiday Home?
You’ve bought your Spanish holiday dream home, paid your fees, registered it with the appropriate authorities and now, besides council taxes every year, you’re done paying fees and taxes, right?
Not so fast, folks. You know what they say about death and taxes? That definitely applies to Spain as well.Although, since the government of Andalucia basically axed the inheritance tax in 2019, maybe we can at least say that there’s no taxes on death any longer.(https://www.terrameridiana.com/9567-news-alert-inheritance-tax-in-andalucia-slashed-to-zero-in-2019.html)
However, back in the land of the living, non-resident homeowners in Spain must pay income tax on their holiday home property.
The first thing you need to know is IF you are a Spanish fiscal resident. The main way to determine this is follows: do you spend more than 183 days per year away from Spain and have a residence in another country? If so, you’re not a fiscal resident.
There can be other criteria as well, such as if you have professional activity or work inside of Spain or if you have dependents who are residents of Spain, such as a spouse and dependent children. If in doubt, speak to a gestor or lawyer who specializes in this in order to avoid any nasty surprises.
But, for the moment, let’s assume that you’re a non-resident property owner
Of course, if you rent out your vacation property, whether short or long term, you will have to pay taxes on that rental income. For non-EU residents, which includes UK owners post Brexit, you must pay 24% on your gross rental income; no deductions for maintenance costs, etc are permitted.
Spanish and EU-residents pay 19% on net rental income, as they are permitted to deduct various related expenses.
Those rental incomes must be declared and paid on a quarterly basis, by the 20th day of the month following the end of the quarter.
Imputed Income or assumed income from renting your property
However, even if you don’t rent out your vacation property, the Spanish government assumes that you do for tax purposes and you still must pay a form of income tax on presumed income, known as imputación de rentas inmobiliarias.
In other words, it is imputed that your non-resident home has a rental income value, and you must pay tax on that. This tax is calculated as a percentage of the valor catastral – the assessed value of your vacation home.
If your home has been assessed by the local council within the last 10 years, the tax is calculated based on 1.1% of the assessed value. If it has been more than 10 years, tax is assessed based on 2% of the assessed value. If you have a house valued at €200,000, the taxable “income”, at 1.1%, would be €2200. You would then pay 24% tax on this amount or €2200 x 24% = €528. If you are an EU citizen you would pay 19%, or €418.
As I noted at the beginning, this is separate and distinct from your council or property taxes. This tax applies to all second homes in Spain, including those of Spanish residents.
What you need to do to ensure your taxes are up to date
In the case of both a house with rental income and that with only a notional or imputed income, you must fill out a form 210 as part of your tax submission. If your situation is simple and you don’t have rental income to declare, or have stable, long-term income, there are even online services that will help you fill out the form and submit your taxes for a very low fee.
If your situation is more complex, for instance, you rent out through a platform such as Airbnb or VRBO, and so have constantly changing rental income throughout the year, based on season, occupancy rates, etc. it might be best to use a reputable accountant or gestor. Better to do it right than to get dinged later for unintentional tax fraud.
Speaking of tax fraud, in case you didn’t think you needed to declare Spanish rental income in Spain or just thought you’d slip under the radar, you should know that Spanish tax inspectors are pro-active. They can and do search property rental websites and cross-reference with tax records. They can also solicit information from utility companies, such as water and electricity, to determine year-round usage.
This is an important point worth highlighting. It is surprisingly common for owners to be surprised by their lawyer at the point of sale informing them that they have never paid income tax. Our advice to owners is, whether you intend to sell or not, ask your lawyer now and stay up to date with this important tax.
If you’re reading this and thinking – “oh boy, I haven’t paid that in 10 years, I’m going to be broke!” – don’t panic. Liability for this income tax only goes back 4 years. But definitely get it sorted so that it doesn’t come back to bite you in the end.
By Adam Neale | Consult an expert | June 10th, 2022