Last updated on May 31st, 2023 at 03:25 pm.
For many non-residents in Spain, the deadline for tax returns will be here by the end of the year. Non-resident tax in Spain amounts to a complicated time for many, so we at Ábaco Advisers try to answer some of your questions.
However, we would like to remind you that taxes in Spain can be complicated and you could be subject to fines or penalties if you miss a deadline or don’t do your taxes properly. Advisably, you should seek fiscal advice from an expert to avoid possible complications.
What makes a resident and a non-resident in Spain?
If you live in Spain less than 183 days in a single year, then you are not a resident of the country. Any more and you are a resident. Non-residents must pay non-resident tax in Spain. We would like to remind you that taxation in Spain can be complicated and you could be subject to fines or penalties if you miss a deadline or don’t do your taxes properly. Advisably, you should seek fiscal advice from an expert to avoid possible complications.
Which non-resident tax in Spain will I have to pay?
There are two essential taxes in Spain for non-residents (your NIE number will be required):
- IBI (Impuesto Sobre Bienes Inmuebles) or council tax
- Imputed income tax or rental tax (in some cases a combination of the two)
Seems confusing? Here are some more details.
IBI or council tax in Spain
IBI (Impuesto Sobre Bienes Inmuebles) is a council tax that every homeowner must pay. The homeowner pays the IBI directly to the town hall or the SUMA offices, annually and is based upon the rateable value of your property or valor catastral.
IBI is not the same everywhere: different town halls will charge different rates and your local authority will make a difference to how much IBI tax you must pay. The rates can vary a great deal, ranging between 0.4% and 1.30% – and this is a factor to take into consideration when you are buying a home. However, homeowners generally find that IBI in Spain is far cheaper than equivalent taxes in their home country.
If you would like more information about IBI you can visit this post.
Imputed income tax or rental tax in Spain
Rental tax is a compulsory property tax in Spain, for everybody, meaning that there are certain dates that rental tax needs to be paid by. Pay it quarterly, every year in the following pattern:
- 20th April
- 20th July
- 20th October
- 20th January
The Spanish rental income tax remains at 19% for those non-residents who are tax resident in a country within the European Union, Norway and Iceland and 24% for tax residents outside these areas.
It is important to note that the amount of Spanish tax on rental income you pay as a non-resident is dependent on the country in which you are currently fiscal resident and not your nationality. There have been cases, for example, where British nationals have moved to a country outside the EEC. Consequently, their Spanish property is subject to heavier taxes. To ensure you have a clear understanding of the potential changes, contact your solicitor.
You can visit this article for more information.
If you do not live in Spain, why would you need to have to pay these taxes?
There is a particular non-resident tax in Spain for those property owners who do not rent out their homes and therefore do not pay retail tax. This is in place to prevent somebody from beginning to rent out their property on the wrong side of the law. This is called imputed income tax. Within the world of property tax in Spain, imputed income tax:
- is paid on a second home that is not being used for rent
- it is declared in the non-resident annual tax declaration
- and it is paid to the Spanish tax authority.
Many non-residents may have never heard of these taxes before, and that may be because it works slightly differently to in other countries. You will not be reminded about payment of Spanish non-resident tax, nor is it anybody else’s responsibility to ensure it is paid. Furthermore, you need to pay any outstanding tax balances before selling a house or passing it down to family.
What happens if I miss the deadline?
On the 31st of December deadline of each year, you must pay the tax. If not, and you allow debts to accrue, then several things of major consequence may happen:
- The bank secures your debt against your property until they can either sell it or pass it on to somebody else.
- There is a possibility of Spanish Tax Authorities looking for evidence of fraud, and therefore investigating you. This can lead to the freezing of your bank account(s).
What can you do to avoid complications?
We recommend that all non-residents employ the services of a fiscal representative. A good fiscal representative will make sure that you pay your property tax in Spain on time. They will also be your representative, speaking for you when necessary and be on hand to answer any doubts you might have.
Ábaco Advisers can help you navigating the murky world of property tax in Spain. In the meantime, familiarise yourself with some of the ins and outs of the law with this guide to non-resident tax in Spain.