It’s just a matter of time that UK expatriates in Spain receive a notification from the Spanish Inland Revenue (Hacienda); claiming unpaid taxes for the last four tax years (tax statute of limitation).
By now, after having acquired your Spanish property, we are sure you’ll agree that the Spanish Tax Legislation is rather complex adding to this complexity the different laws and regulations of the different towns and regions. Regardless of your tax residency and position, you must understand a simple statement, owning property in Spain is taxing!
In addition to the taxes you paid when buying your property such as VAT or Transfer Tax, Stamp Duty and Council Taxes, you will be hit again by the Capital and the Municipal Capital Gains Taxes when selling your property. But meanwhile your life in Spain is not tax free. Please keep reading and contact us if you prefer to talk directly to us.
Because you own property in Spain, every single year you must file a Spanish Non Resident Income Tax (NRT)
There are over 500,000 Britons owning a holiday house in Spain, and many of them are not aware that every year there is a Non Resident Tax (NRT) Return to be filed. There are not exceptions to it. The Spanish Tax Inspection is happily realising the great income potential of this niche of non compliant people. They are starting to raise tax bills plus penalties for the last four years.
OK, you are not living in your property. Are you renting it out?
If renting your property you must account for additional tax compliance as you must register your rental activity under certain circumstances. Firstable, you will be taxed on the rental income and a separate quarterly return must be filed in this respect. Please take into account also any regional regulations coming in force after the holiday lettings reviews to combat the Airbnb rental business proliferation. Please contact us to discuss it if you are not clear with your position
If you are owning property with a Company, please continue reading…
Many people made arrangements to buy property using Spanish or offshore companies or even double structures, to own property in Spain. The Spanish Tax Agency is challenging those structure on the basis that they are using an empty shell to avoid tax. They are taking readings of the utilities on those properties and making a determination on the occupation of the said properties. That determination is followed by a tax bill for the last four years (statute of limitation) including the undeclared rent or the Benefit In Kind value for the owners, which is determined according to comparable market price rentals in the area.
Your will and the Inheritance Tax —only if you are planning to die!
Any assets located in Spain are subject to the Inheritance Tax and the Gift Tax. The tax is payable in accordance with a valid will executable in Spain, six months after death. Please note that there is no provision for this tax in the Double Taxations Agreements between The United Kingdom and Spain. In addition to the short time to pay this tax, only six months, you should note that according to Spanish Law it is the estate inheritors of the receiver who are liable to the tax and not the deceased, as it is the case in England. It is fundamental to have proper arrangements in place and a Spanish executable will. In many cases you may be able to use your UK will, although this will need to be translated officially and legalised according to The Hague Apostille Protocolo to be executable in Spain. Please let us know if you want us to review your inheritance tax arrangements.
Del Canto Chambers complimentary property tax and legal review
Del Canto Chambers, the Anglo Spanish tax and legal expert for UK residents, offers a complimentary review of your legal and tax affairs in Spain. Just contact us here.
Del Canto Chambers