What often confuses non-residents is that there is more than one tax to pay. Most people understand that there will be some form of council tax in Spain that will need to be paid annually. In addition to this, however, non-residents must also pay either:
- Rental income tax if they rent out their property
- Imputed income tax if they don’t
It is imputed income tax that causes the confusion. As a non-resident your Spanish property is automatically considered as a type of income, even if it is not rented out and you do not receive any income as such.
In this article we will go through some relevant information regarding non resident property tax in Spain. 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.
Which non resident property tax in Spain will I have to pay?
Council tax in Spain must be paid by every home owner whether they are resident or non-resident. It is a local tax and goes by the name of IBI (Impuesto Sobre Bienes Inmuebles). It is payable directly to the town hall or via a tax collection office, for example SUMA, in some regions.
IBI is the tax that goes towards paying for local services such as the maintenance of facilities, parks and leisure areas and all kinds of infrastructure provided by the Town Hall. It is collected annually and the period during which it is collected depends on where your house is located.
How much you pay is based upon the rateable value of your property or valor catastral. Rubbish collection is charged for separately either as part of your water bill or as a separate service charge issued by the Town Hall or tax collection agency such as SUMA.
If you choose to rent out your property for some or all of the year then you will need to pay rental tax as a non resident property tax in Spain. This is collected quarterly on the 20th April, 20th July, 20th October and 20th January. The good news is that some expenses can be deducted from your rental income.
You only pay rental tax for the periods when you rent out your property. For the rest of the time you will pay imputed income tax.
Imputed income tax
Imputed income tax is an additional government tax that is payable by non- residents if they do not rent out their property. The idea is that even though it is not rented out at present, it could be. In a way you are paying a tax for the privilege of keeping a second home for your own use. Although it might sound a little formidable, people used to paying council tax in their own countries should not to be too dismayed at the prospect of two taxes. In most cases the total bill will be much less than you would expect to pay in your own country. For example the council tax on an average 100,000€ property would be around 290€ and the imputed income tax 112€. A total that is usually still below what you would pay in one tax elsewhere.
You should also be reassured that if you only rent out your property for short periods of time an adjustment will be made to the total imputed income tax you pay across the year.
How is imputed income tax calculated?
Imputed income tax can be calculated either using the purchase price of your property or the rateable value. It is important to be aware that the rateable value (Catastral value) is usually much lower than the purchase price.
Therefore, if you do have the rateable value it is this that should be used to calculate your imputed income tax. The rateable value of your property can be found on your Spanish council tax bill. Using the purchase price for the calculation leads to more tax to pay, as you can see from the examples below.
|Imputed tax payable|
|Purchase price of the property||100,000€||107.265€|
|Rateable value of the property (Valor catastral)||31,226.91€||67.20€|
|Imputed tax payable|
|Purchase price of the property||146,000€||156.58€|
|Rateable value of the property (Valor catastral)||46,086.55€||98.85€|
How to avoid complications?
Our recommendation is that all non-residents employ the services of a fiscal representative to make sure that you pay your property taxes in Spain on time, to speak for you when necessary and be on hand to answer any doubts you might have. Contact us and we will offer you a free consultation without obligation.