It is important to establish your tax residence in Spain if you have an investment or property in the country as whether you are classed as resident or non-resident will determine the amounts of tax you are liable to pay. If you don’t correctly establish your resident or non-resident tax status in Spain, miscalculate the tax you have to pay or miss a deadline for filing a tax return, you could be liable for significant fines.
There are a number of free online Spanish Non-Resident Tax Calculators but please be wary about relying on them to calculate the tax you think you need to pay. As there are so many complex variables regarding your tax residency status, the type of income you receive, the type of property you own etc the results from these calculators can often be inaccurate. The fact you used an online calculator will not help you if the Spanish tax officials issue a fine for an inaccurate tax declaration.
For both your peace of mind and to avoid any nasty surprises in future, it is always worth getting professional advice on your Spanish Non-Resident Tax. Tax and legal professionals may also be able to suggest tax mitigation steps you can take that can actually help you legitimately reduce your tax bill.
The Spanish taxation system is complicated and you will probably need professional tax advice on how to pay non-resident tax in Spain in order to avoid potential fines from incorrectly declaring what taxes you think you owe.
The Spanish Government also regularly changes its tax rules, making it hard to keep on top of all the nuances of the system. Unfortunately, those that often get it wrong are expats holding assets abroad.
If you are classed as a non-resident for tax in Spain there are a number of taxes that you may be liable to pay including:
If you are thinking of buying property in Spain there are a number of ways to mitigate Non-Resident Property Tax liabilities, but obviously, this has other tax and legal implications that need to be considered. The most suitable solution will depend on your particular circumstances. Your tax residency in Spain and elsewhere, how you own the property, what type of property it is and how long you stay in Spain each year will all have a factor.
If you are a non-resident and own a property or investment, for example, a holiday home or rental, you are liable to pay taxes to the Spanish tax authorities on property you own and other assets and investments. If you do not pay the appropriate tax to the Spanish authorities your property may build up a debt against it on which interest is also due, which often leads to difficulties in selling it and your bank account could be embargoed. If you own a property in Spain but don’t rent it out, an annual tax levy of Renta Imputada de Inmuebles Urbanos will be made. This is calculated in relation to the rateable value of your property.
In general, non-resident taxpayers are taxed at a flat rate on income obtained in Spanish territory or which arises from Spanish sources, at the general rate of 24% for work income and at the rate of 19% on capital gains and financial investment income arising from Spanish sources. Specific rates apply to certain other types of income.
Spanish income tax and non-residence rules must be considered carefully when buying property or investing in Spain. Essentially there are three categories of foreign resident in Spain:
If you are buying real estate in Spain but not planning to live there, you still need to be aware of Spanish property taxes for non-residents. If you are a Spanish non-resident and sell property in Spain you will likely be liable for capital gains tax at a fixed rate of 19% for non-residents from EU/EEA countries or 24% for non-residents from other countries, including the UK.
Deductions and allowances are available but they are quite complicated and vary by region so you should consult with a Spanish tax specialist for more information.
Spanish Wills and Inheritance Tax are both important considerations for non-residents if you have Spanish property, assets and/ or investments. It is normally recommended that Spanish Non-residents draft a Spanish Will to cover assets located in Spain and a foreign Will to cover any assets in other countries.
It is important that there are no legal or tax conflicts between the application of the Spanish Will and the international Will. Spanish laws governing inheritance tax are complex, for example, in Spain there is no legal concept of a person’s ‘estate’ and all beneficiaries are liable to inheritance tax in some form or other.
It is important to note that inheritance tax is not included in the double tax treaty between the UK and Spain. Therefore, when drafting a Will, the Spanish Inheritance and Gift Tax (ISD) must be considered together with the UK’s Inheritance Tax Rules.
Del Canto Chambers provides dual-qualified, multi-lingual tax lawyers, who have worked on over 500 cases throughout Europe, the Middle East, Latin America and Asia, making us the counsel of choice for London-based and international clients, corporations, solicitors and tax advisers.
Del Canto Chambers specialists are constantly up to date with new legislative changes and aware of any Spanish tax and legal implications. Contact our Spanish legal and tax specialists to find out the best tax planning and corporate structures in your circumstances.
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