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Fiscal regime for non-residents in Spain: taxes on real estate property

Every year, many people come to Spain from abroad with the intention of buying a second home in popular areas such as Murcia, Costa Blanca or Madrid to enjoy their holidays. But these people do not know what taxes they will have to pay.

This is precisely the task of the real estate lawyer: to explain to these new property buyers in Murcia, Costa Blanca or Madrid the taxes that must be paid at the time of purchase. A subject we talked about in our blog article «Legal and fiscal formalities when buying a property», published on 12 July 2022.

But also to provide information on what taxes they have to pay each year for owning a property in Spain.

In this article we will explain the taxes that non-residents who buy a property in Spain must pay each year.

Taxes payable by non-residents after the purchase

  1. Council Tax or Real Estate Tax

It is also called IBI or SUMA. It is an annual local tax that is paid to the local councils.

It is calculated with the cadastral value of the property. This value is assigned by the State for each property. It constitutes the taxable base for the calculation of taxes and is different from the purchase value and is almost always lower.

The tax rate varies between 0.5 % and 0.7 % of the cadastral value.

This tax is payable by the owner of the property on 1 January of each year. However, if the property is sold, it can be agreed that the new buyer pays the corresponding proportional part.

Each town council sets different deadlines for the payment of this tax. Normally it is paid between the months of August and October. In this case, please contact your real estate lawyer in Spain to confirm when the tax is collected by the Town Hall of the town where the property purchased in Spain is located.

It is a tax calculated automatically by the Town Hall. So your real estate lawyer will direct debit the tax to the client’s bank account at the time of purchase and the tax will be debited from the account without the owner having to worry about anything.

  1. Non-resident tax

This is a state tax payable by non-residents for owning a property in Spain and it has different ways of filing the declaration depending on whether the property is rented to third parties or remains only for the use and enjoyment of its owner. This tax is NOT calculated automatically, so you should contact your real estate lawyer in Spain each year to complete and submit it in order to avoid surcharges and penalties from the Tax Agency.

— House for the exclusive use of its owner (no rental income): An annual tax return is submitted for the number of days of ownership in the previous year. To determine the tax base, the cadastral value is multiplied by 2 % (1,1 % if the cadastral value has been revised within the last 10 years). The taxable base obtained is taxed at a rate of 19% if the non-resident is resident in another EU country, or 24% if resident in a non-EU country. The deadline for filing the tax is 31 December and those owners who want to pay the tax by direct debit will always pay it on that date (Example: The deadline for filing and paying the tax for 2021 is 31 December 2022).

— House for which the owner obtains rental income: In this case, a tax must be filed every quarter that the property is rented and in the same year in which the income is obtained. If the property is not rented on any day in a quarter, it is not necessary to file tax for that quarter. The rental tax is due between 1 and 20 April (first quarter), July (second quarter), October (third quarter) and January (fourth quarter). The tax liability will be 19% of the Net Profit (gross income minus deductible expenses) if the non-resident resides in another EU country; or 24% of the Gross Income, if residing in non-EU countries, as for the latter the expenses are not deductible. The deductible expenses for rent are:

  • Interest on mortgage loans.
  • Utilities (water, electricity, gas, internet).
  • Home insurance.
  • Community of owners.
  • Municipal taxes. (council tax, rubbish tax)
  • Repairs and maintenance.
  • Consultancy fees.
  • Intermediary agency fees (Booking, AirBNB, etc.).
  • Cleaning of the property.
  • Depreciation of the building (calculated by your real estate lawyer).

The following year, the non-resident tax indicated in the previous point must be presented if there are days that the property has not been rented and has been at the disposal of its owner, but paying the proportional part corresponding to the days that the property has not been rented.

As you can see the application of non-resident taxes is not simple. So, to avoid penalties from the Tax Agency, please contact your real estate lawyer at Imont Legal & Taxes in Madrid, Murcia or Costa Blanca every year to comply with your tax obligations.

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