CASE STUDY – What is Non-Resident tax in Spain?
It still amazes us that people come in here sometimes and we ask them about their non-resident tax as they are a home owner in Spain, living abroad, and they look blank.
So what is the situation? For example, Mr Jones has taken the plunge earlier this year and moved out to Spain for some time on his own. He is one of many people coming into our office not having been told by solicitors when he bought his apartment many years ago that he had this obligation legally.
So is he a Resident or a Non-Resident?
Well basically, individuals are deemed as Residents if they meet any of these conditions:-
– they spend more than 183 days per the calendar year in Spain
– their main place of business is indirectly or directly located in Spain
Residents are taxed on worldwide income, and it is not a choice which you want to be. If you live here in Spain or your main place of business is here when you are deemed Resident, and as such, should check whether you need to make an annual Return “Renta”.
Mr Jones has already decided that he is keeping his main home in the UK and that the Summers are too hot for him, and he has a part-time job in the UK that he can put some hours in on a relaxed basis when he feels like it. He is not going to spend more than 183 days per year in Spain. In that case, he should have been already paying all the years he had the property, what is known by the commonly used term as “non-resident tax” on non-resident Spanish property owners. Many people do not realise that regardless of whether or not their property in Spain is rented out, they have to pay tax individually each year by way of a Return.
When a property is owned by a married couple or various different people, each person listed on the Title Deeds is defined as an independent tax payer, which means that an individual tax return must be separately filed by each of the co-owners.
If the property is only used by the owner and not let, the tax is based on an estimated income of the property´s cadastral value. The Return has to be presented and paid by 31st December each year, for the previous calendar year, so a year in arrears. If the property is rented out, this tax is payable, but also a separate tax based on rental income.
Now is the time that many people are coming over to their property in Spain and they should not forget these payments, both SUMA (the local Council tax) to be paid by October and the Non-Resident tax, to be paid by December (for the previous annual year). We can also help people by email and arrange for direct debits to be set up if people wish.
If you have never paid these and need some advice, please contact us and mention this article. You may find that to put things right does not cost as much as you may imagine (as the tax office cannot claim all previous years), and it will save you many a sleepless night when you realise that eventually, non-payment of these legal obligations will cause problems.
Please note that we do need to make payment of your non-resident tax before the end of November owing to the volume of payments.