Spanish Non Resident Tax – Explained

As you may be aware Spanish tax law requires that non-resident owners of property in Spain have to pay Non- Resident tax if they own a property in Spain. Every person who owns a property which is not his habitual residence have to pay a tax on the property. Spanish residents pay this tax on second property in their Income Tax Returns.

This non-resident tax issue can be confusing. Why should owning a holiday home entail paying income tax? There is no equivalent in many countries, and no one from the tax office informs non-residents of their obligation to pay the tax and submit the form.

The government doesn’t request payment of this tax and many non-resident owners don’t know about it and therefore do not fulfil their obligation to declare and pay it. Initially there may appear to be no adverse consequences, but the tax office (the Agencia Tributaria) know the status of all properties from the IBI and other records and know whether they are owned and occupied. It is a simple task for them to identify which property owners are (a) non-resident and (b) not declaring their taxes. In fact they have recently begun chasing non-payers with letters demanding that non-resident taxes (or resident taxes if applicable) are paid.

That said, many people go years without being caught up in tax office investigations. The problem often only rises to the surface when non-residents come to sell their property. In this case the seller is obliged to pay 3% of the sale price to the tax office, which is only recoverable by the non-resident seller when they are up to date on taxes including capital gains tax on the sale and, increasingly, the form 210 tax. This may then require multiple tax returns to be submitted going back several years with fines and penalties.

Your tax liability is calculated on the cadastral value of your property. You can find the cadastral value of your house in the IBI receipt that you pay each year.

You must make your return for a given year by the end of the following year, so for the 2015 tax year you are required to declare and pay by 31/12/2016.

Please, don’t hesitate to contact us if you have any doubt.

Laura Miralles Server
Lextax Consulting SLP