REAL ESTATE – MARBELLA – Annual taxes for foreign homeowners

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Annual taxes for foreign homeowners

Non-Resident Income Tax

Non-resident natural persons in Spain who are owners of urban real estate located in Spanish territory are subject to the annual payment of the Non-Resident Income Tax. The yield obtained from the property, whether it is real yield (rents) or estimated (own use) is subject to tax.

• Rental

The tax rate applicable to the income obtained from the rental of urban real estate is currently 19% for citizens residing in member countries of the European Union, as well as those residing in Iceland and Norway. The tax rate rises to 24% for citizens residing in any other country.

In cases where there is a double taxation agreement with Spain, the owner of the property may deduct the amounts paid for this concept in the income statement that he presents in his country of tax residence.

The declaration of the income derived from the rental must be presented at the end of each quarter.

• Own use

If the house is intended for own use or is empty, the applicable rate is also 19% for citizens residing in member countries of the European Union, as well as those residing in Iceland and Norway. The tax rate rises, in the same way, to 24% for citizens residing in any other country. The tax base will be 1.1% of the property’s cadastral value, if said value has been revised or modified after January 1, 1994, and 2% of the cadastral value in all other cases. Likewise, a proportional calculation will be made based on the number of days of the year in which the property has been owned.

The deadline for filing and entering the income tax in the case of properties intended for own use will be between January 1 and December 31 of the year after accrual.

The Non-Resident Income Tax must be paid through self-assessment, that is, the taxpayer (or the representative designated by him) is obliged to personally carry out the calculation, fill in and validate the corresponding form over the Internet and manage the payment. The Spanish Public Treasury does not send non-resident taxpayers any communication, payment notice or settlement related to this tax.

Finally, it should be mentioned that, as a result of the recent measures introduced by the Spanish Government for the prevention of tax fraud, the Tax Agency has started a campaign to warn property owners who have not submitted a declaration for this concept of the need to regularize your tax situation in order to avoid significant financial penalties.

Personal Income Tax (residents)

In accordance with current legislation, a person is considered to have his or her habitual residence in Spain when any of the following cases occur:

• That they stay more than 183 days a year in Spanish territory.
• That the main nucleus or the base of its business activities or its economic interests resides in Spain.
• That your spouse and minor children reside in Spain.

If any of the above circumstances occurs, the individual will be automatically obliged to present his income statement as a tax resident in Spain, regardless of whether or not he has requested the administrative concession of residence before the competent body of the Ministry of the Interior.

This statement will include all his income and expenses (income from work, capital and economic activities, income, etc.), whether they have been generated or paid in Spanish territory or in another country. Pensions are excepted for some officials and authorities, which are always declared at source.

The foregoing does not imply that taxpayers must pay twice for income generated abroad. In those cases, they will have to request exemption from tax at origin or claim in the country where the income is generated the refund of the amounts paid there for this concept.

Wealth Tax

Non-resident natural persons who as of December 31 of each year are holders of assets and rights in Spain are subject to the payment of Wealth Tax.

In the case of real estate, the taxable base of the tax is determined by the difference between the value of the property on the deed and the debts on the property (mortgage), if any. Likewise, non-resident taxpayers are applied a reduction of 700,000 euros on the tax base, as an exempt minimum. Thus, for example, a couple that owns 50% properties valued at less than 1,400,000 euros, will be exempt from filing the Wealth Tax return. However, all taxpayers whose assets exceed 2,000,000 euros will be required to file a return, even when the fee to enter, once deductions and the exempt minimum have been applied, is zero.

The tax rate varies depending on the taxable base and ranges between 0.2% and 2.5%. The Wealth Tax declaration must be submitted electronically via the Internet.

Real Estate Tax (IBI)

The IBI is a municipal tax that is levied on the value of real estate and the payment of which is responsible for whoever appears as the owner on January 1 of each year. The liquidation and collection of the IBI is the exclusive competence of each city council, which may set the tax, exemptions and bonuses of the quota it deems appropriate. However, the tax rate set by the city council may not be less than 0.4% or more than 1.1% of the property’s cadastral value.

In general, the income generated by this tax is invested in the municipality itself (public lighting, roads, sidewalks, cleaning and other services).

The IBI receipt is issued annually and can be paid by direct debit.

Garbage Rate

It is a municipal tribute for the provision of the garbage collection and disposal service. Each city council will determine the term and the method of payment (annual, semi-annual, etc.).

Special tax on real estate of non-resident entities

Non-resident companies that own real estate in Spanish territory and whose tax domicile is in a country considered tax havens are obliged to present this declaration.

The tax rate is 3% of the property’s cadastral value. The tax is annual and the filing period ends on January 31 following the tax year in question.

On the other hand, those non-resident entities that are owners of real estate in Spanish territory, but that are exempt from the special tax for residing in countries that have signed agreements with Spain to avoid double taxation, will be obliged by law to provide the Tax Agency an enabled email address, where they will receive all the communications and notifications that this body sends them.

Informative declaration on assets and rights abroad

Natural and legal persons residing in Spain who are owners of assets and rights located in another country are required to submit an informative statement on said assets to the Tax Agency, distributed by blocks:

• Accounts in financial entities
• Securities, income, life or disability insurance, shares and participations in the capital stock of certain institutions, trusts and trusts
• Real property and rights to real property

There is no obligation to present a declaration when the set of assets and rights of each of the three blocks does not exceed 50,000 euros (that is, you can be exempt from declaring in one block of assets but obligated in another).

The declaration on assets and rights located abroad must be submitted electronically via the Internet.

Failure to submit this statement, or submitting it after the deadline or with incomplete or false information, constitutes a serious tax offences and carries significant financial penalties.

If you have any questions about real estate taxes or I.B.I. do not hesitate to contact our team of Real Estate Lawyers. When buying or selling a property, our Marbella WOHNEN team in Marbella will be happy to advise you. They go through all the steps and procedures to help you buy or sell.

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