If you are a non-resident property owner in Spain, you are required to file four different quarterly tax returns throughout the year.
And with the next tax return deadline (20 October) just a couple of weeks away, now is the perfect opportunity for a recap of Spanish tax requirements and obligations.
In this guide, you will find everything a non-resident needs to know about Spanish property income taxes and the tax filing deadlines.
What makes you either a resident or non-resident in Spain?
You are a non-resident in Spain if you live in the country for less than 183 days in a single year. If you are present for more than this, you are considered a resident.
Who has to file a tax return?
If you are a non-resident and your property is rented out in Spain, you are required to make a tax declaration for each quarter in which you have rental income. If the property is not rented out, non-residents must submit a deemed tax return.
What are the tax rates?
“Impuesto Sobre la Renta de no Residentes” is a tax on rental income for non-residents in Spain. If a property is rented, then an income tax return should be submitted and income tax paid.
For the tax year 2020, the tax rate is 19% for residents of the EU, Norway and Iceland and the rental expenses (including mortgage interest) are allowed to be deducted from the gross rental income.
For residents of other countries, the tax rate is 24% with the rental income received being fully taxable with no deductions.
Can any deductions be made to reduce tax liability?
If you own a rental house, apartment or office space, you might be able to save taxes. EU citizens are entitled to deduct expenses from their net income in order to reduce their tax liability. A Residency Certificate will be required in order to deduct expenses.
Examples of allowable expenses:
Note: The expenses are pro-rated as per the number of days the property is rented, except bank charges, management & letting agent fees.
- Mortgage Interest (excluding capital element which is not allowable)
- Bank charges
- Local rates
- Management fees
- Letting agent fees
- Running costs
- Maintenance and improvement costs
- Building and Furniture depreciation /Capital allowances/
If there is no residency certificate enclosed along with the tax return, no expense deductions can be made in favour of the landlord.
What are the tax return submission deadlines?
Non-resident property owners must file four rental income tax returns each year. Each deadline falls on the 20th after the end of the previous quarter. In other words, the deadlines are:
- Quarter 1 – 20 April
- Quarter 2 – 20 July
- Quarter 3 – 20 October
- Quarter 4 – 20 January
It is also possible for EU residents to submit a ‘total year’ tax return if you have made a loss or have not generated any income during the quarter.
Note: If the property is rented for 200 days, for example, a deemed tax return must be filed for the rest 165 days in addition to the quarterly rental income tax returns.
Can I file all at once, rather than 4 separate tax returns?
No, if any rental income is received during the quarter, a quarterly income tax return has to be filed and payment of the tax due has to be paid before the deadline.
If there is no income tax due, there is no need to file a quarterly tax return for the relevant quarter. If the property is not rented during the year, only one annual deemed tax return has to be submitted.
What happens if you miss a previous tax filing deadline?
Paying tax on rental property in Spain is mandatory. If you miss a filing and payment deadline you may incur fines or penalties, as below.
|Up to 3 months||5%|
|Up to 6 months||10%|
|Up to 12 month||15%|
Should you be registered for Spanish tax in order to submit returns?
When you purchased your property it is likely that you were assigned a foreigners’ ID number (NIE).
In other words, in most cases, property owners will already be registered for tax.
What is deemed tax? How is deemed tax calculated?
If you do not rent out your property in Spain, you are obliged to pay deemed income tax and file a deemed tax return.
The deadline for a deemed tax return is 31st December following the end of each tax year.
This is income tax on the “imaginary” rental income that you have on the property and is calculated in reference to the cadastral value (valor catastral) of the property.
The taxable amount is, in general, from 1.1% to 2% of the cadastral value of your property, depending on the year of the last update.
So, for instance, if your property cadastral value is €50,000 then the annual tax payable for the tax year 2020 is €105.
If the property is rented only part of the tax year – deemed tax will be calculated only for the period in which property is not let.
I am a joint owner of a property. Do both owners need to submit more than one return?
Yes, each joint owner of the property is required to submit a separate return.
How much is Capital Gains Tax in Spain?
When you sell a Spanish real estate, you owe Capital Gains Tax. CGT in Spain is 19% for non-residents from EU and EEA countries and 24% for non-residents from other countries.
What are the Spanish local property taxes?
Impuesto Sobre Bienes Inmuebles is the main local property tax in Spain and it is calculated by reference to the cadastral value of the property. The percentage varies from 0.5% to 1%.
Is local property tax different for each region in Spain?
Yes, the tax rates of the local property taxes vary from region to region due to the local governments.
What is the Plusvalia tax?
The Plusvalia tax in Spain is a local tax charged by the Town Hall on properties, at the moment they are sold. It is calculated on the rateable value of the property and depends on the number of years that have passed since the property last changed the owners.
Which countries have double taxation agreements with Spain?
Spain signed double taxation agreements with the following countries:
Albania, Algeria, Andorra, Argentina, Armenia, Barbados, Australia, Austria, Cyprus, Belgium, Bolivia, Bosnia, Brazil, Bulgaria, Canada, Chile, China, Columbia, Costa Rica, Croatia, Cuba, Cyprus, Czech Republic, Dominican Republic, East Timor, Germany, Denmark, Kyrgyzstan, Ecuador, Egypt, El Salvador, Estonia, Finland, Romania, France, Georgia, Greece, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Kazakhstan, Korea, Latvia, Lithuania and Luxembourg.
Spain also signed treaties for the avoidance of double taxation with:
Macedonia, Malaysia, Malta, New Zealand, Mexico, Moldova, Morocco, the Netherlands, Norway, Pakistan, Panama, Philippines, Poland, Portugal, Russia, Saudi Arabia, Serbia, Slovakia, Slovenia, South Africa, Sweden, Switzerland, Tajikistan, Thailand, Trinidad & Tobago, Tunisia, Turkey, Turkmenistan, United Arab Emirates, United Kingdom, USA, Uruguay, Uzbekistan, Venezuela and Vietnam.
How much can I earn in Spain before paying tax on income from rent?
If you are considered a non-resident in Spain (If you live in Spain for less than 183 days), taxes will apply to your income at flat rates with no deductions.
If you own a property and if you are considered a non-resident, whether or not you rent it, you are obliged to submit a tax return and pay Spanish property taxes as well as local property taxes for non-residents.
Who can help me prepare my tax return?
We know that the Spanish tax system can be very complicated, especially for non-residents! But help is at hand!
Property Tax International will assist you with the entire process of preparation of tax forms in respect of rental income.
We have specialised in international property tax returns services and we are ensuring our clients are compliant in each of the relevant tax jurisdictions! See more about PTI.
PTI will keep you updated throughout the process and communicate directly with the Spanish tax office on your behalf.
What information do I need to supply for you to prepare my tax returns?
In order to prepare your Spanish tax return we will need:
- NIE of each owner of your property
- The full address of the property
- The date and cost of purchase
- The cadastral value (valor catastral). This will be on your latest rates (IBI) bill; for recently purchased properties, the lawyer/ agency who dealt with the sale may also be able to provide you with this information
- Name, nationality, date and place of birth, and current home address of each owner of the property
- If you have rental income in any quarter, please provide a schedule of the income and expenditure for the quarter. Expenditure is deductible for tax purposes for residents of the EU. (Bank charges, Management charges; Advertising costs; Mortgage interest; Local taxes; Community charges; Insurance; Running costs (electricity, gas, water, internet, etc.); Maintenance; Repairs and Other property-related expenses)
- The IBAN of your Spanish bank account, for the purposes of direct debit payment of the tax due.
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