If you are a non-resident and own a property in Spain you will have to pay taxes in Spain beyond the initial ones resulting from the purchase of your property. These are 5 things you need to take into account:
- Dual taxation
Let’s say you are a citizen of the United Kingdom but have revenue from renting a property in another country. This situation might lead you to have to pay taxes on the rental income in both the UK and the other country. Thankfully, throughout the years Spain has signed many treaties in order to help locals and foreigners not to have to pay taxes twice. For example, in 2006 Spain signed a double tax treaty with the UK which makes British citizens exempt of double taxation. For an up-to-date list of treaties, see the Agencia Tributaria.
- Registering for taxation in Spain
Agencia Tributaria is the name of the tax authority in Spain. You will need to register with this agency in order to pay your taxes. To do so you will be asked for your Identification Number for Foreigners, or Número de Identidad de Extranjero (NIE). The NIE is your all-purpose identification and tax number in Spain.
Where can you get your NIE? The first thing to realize is that dealing with Spanish bureaucracy can be quite frustrating. Different regions do things differently and the process for getting your NIE might differ widely depending on where you are. For example, in Catalonia if you are a citizen of the EU you will need to book an appointment online in advance, and then when showing up for your appointment you might still have to spend hours waiting in line. In contrast, in other regions you can just show up and get it done in half an hour.
There is also the possibility of applying for your NIE through a solicitor —at AvaLaw we can help you with that—, or if you are in your country of citizenship you can also do it through Spanish embassies or consular offices.
Aside from your NIE you will need to fill in the document Modelo 30 to register your obligation to pay taxes for the first time.
- Income tax for non-residents
If you have a property investment in Spain that brings you revenue such as rent you will have to pay income taxes. For citizens of the European Union, Iceland and Norway the flat tax rate is 19%. For citizens of other countries the flat tax rate is 24%. These percentages are for 2016 and can change on a year-on-year basis.
You must also know that for EU citizens all rental expenditure (including mortgage interest) is tax deductible. For non-EU citizens, the entire rental income is taxable —no allowable tax deductions available.
To apply to pay income tax as a non-resident of Spain, use Modelo 149. You can then make your income tax declaration on Modelo 210. At AvaLaw we are experts in this area; if you need support in filling these forms don’t hesitate to contact us.
- Capital gains tax and plusvalia
The capital gains tax is the tax paid on profits from selling a property. Since 2016 capital gains generated by non-residents are taxed at a flat rate of 19%. For properties acquired between the period 31 December 1986 and 31 December 1994 inflation relief might be applicable.
Moreover, if you own a property and sell it, the local authority will charge you a tax on the increase in its value. This tax is called plusvalia.
Also know that because you are not a resident of Spain the buyer will be asked to withhold 3% of the purchase price and pay it to the tax authority. Why is that? The reason behind this approach lies on the fact that many times it is not easy to locate a non-resident; thus the Government charges the buyer in order to avoid not being paid.
- Wealth tax
After having been previously abolished in Spain, the Wealth Tax was re-introduced in 2015, in theory as a temporary measure, which would last until 2017. However, knowing Spain’s reputation when it comes to taxes we would not expect an abolishment next year. If your wealth is over 700,000 € you will have to pay a wealth tax of 0.2–2.5% on net assets.
The information found in this article is only a guide and before making any decisions or submitting any tax returns in Spain, you should seek independent advice, which you can do by contacting us at +34 932 553 107 or firstname.lastname@example.org.