Spain tax form 210 deadline nears

Where did 2011 go? It was just a few weeks ago since I was enjoying a late Autumn swim in the Med and now we are hurtling towards Christmas. One consequence is that end of year deadline for Spanish non resident tax declarations is also approaching rapidly. This is the tax that all Spanish holiday home owners are supposed to pay.

I have written about this Spanish tax, often called modelo or form 210 tax after the forms you have to submit, many times so I will link to rather than bore you with the details: Spanish tax form 210

You have until 31.12.11 to get the form in. We offer a service where we do it for the taxpayer but this is only available up to the end of November.

I have had a few clients recently who have received letters from the Agencia Tributaria (Spanish tax office) asking to see tax returns going back to 2007 so they do check up. They have access to both local tax records and utility company computer systems so they know who has property in Spain and can cross-check to the returns they have received.

Spanish taxman says "Stand and deliver"

What an absurd song that was! Good fun video though. Certainly more fun than the tax nightmares that have been visited on innocent property owners in the Valencia province recently.

I read about this story on the Costa Blanca News website and am indebted to their reporter Tom Cain for his diligent reporting of this unpleasant situation which seems to be confined to Valencia at the moment. According to the article, property buyers are being hit with back tax demands, sometimes running into the thousands of euros.

Click on the link for the full story - Expats hit hard by property tax probe - but in essence it relates to the tax you pay on purchase of a Spanish home. This is commonly called "stamp duty" by expat buyers and does work like UK stamp duty except that the % you pay is higher - between 7-8% of the purchase price depending where you are buying.

Another difference with the UK is that tax avoidance is rife on property transactions where the sale price in the contract often bears no relation to the actual price agreed. This allows the buyer to save on stamp duty and the seller to reduce their capital gains tax liability. The difference is usually made up in cash and can run into tens of thousands of Euros.

The tax authorities have always known about this practice (it would be impossible not to being completely routine in some areas) but have usually been content to accept it so long as the declared contract price is not too much lower than expected market value. But in recent years some cash-strapped regional governments have sought to levy extra stamp duty on transactions they think have been falsely undervalued.

The article here talks about highly retrospective charges though running into the thousands with very little apparent justification in terms of valuations being too low. Hopefully it will be just something that applies to Valencia and will spread no further but it certainly should give property buyers cause to think twice before committing. Not exactly what Spain needs right now - another reason for foreigners to lack the confidence to buy property here.

See also on our main website - Spanish property taxes for non-residents

Spanish tax form 210 - All change!

A bit of a technical post this week that will only be of much interest to non resident Spanish taxpayers. The system for paying taxes as a non resident changed on 1st April. The changes are not huge but the bureaucratic fiddling about is likely to cause some confusion.

To recap for those of you who are not familiar with Spanish non resident taxes, the tax system in Spain is a bit different to that in the UK when it comes to foreign property owners. In the UK, and most countries, a foreign property owner would only pay tax if they actually earned income in the country e.g. they rented out the house when they weren't there.

Spain taxes rental income like that but also has a quirky and irritating rule that even foreign property owners who don't rent out their property and have no Spanish income must register for and pay income tax. The tax can vary from 20-30€ up to several hundred € a year depending on the rateable value of the property. There is a full description on our main website - Spanish Tax Form 210.

The tax is still payable and the form for paying is still the same (modelo or form 210) but:

- there is no longer a paper copy of the form available so you can't go to the tax office and get a form to fill in

- you either have to complete the form online or print out a copy from the website and present it at the bank

- where there is NIL tax to pay or a return to the taxpayer then this has to be presented (or posted "certificado") at the Agencia Tributaria office

- it can now be used for whatever income non residents have, the main categories being earned income from Spanish assets (e.g. rent or dividends), capital gains and imputed income from property.

- the modelo 215 which was used for rent in the past has now been replaced by the 210

- returns of tax to a taxpayer can now be made to an overseas account (non-Spanish)

That's about it but it's a new law so as we go through the year and start doing our clients' non resident tax returns then we may learn more about how this is all going to work in practice. I will post any updates here or on the main site here: Changes to Spanish tax form 210

‘Tis the season to pay Spanish taxes

A rather dull topic this week but an important one for anyone with property in Spain, because the deadline is looming for declaring non resident taxes. All Spanish income tax declarations for non residents (modelo 210) have to be in by 31st December. The tax is collected either directly from the taxpayer’s bank account on the last day of the year or it can be paid in cash at the bank, with the completed modelo 210.

Resident property owners don’t have to pay this tax but it is worth noting that the Spanish tax office will not consider you a resident unless you have registered as such and filed at least one tax return (even if it is a “nil” return with no tax paid).

Also be aware that the system for non resident property owners who rent out their Spanish homes has changed. As in previous years the annual modelo 210 is not appropriate if you actually earn rental income – you are supposed to file quarterly form 215s. The change is that this year, for the first time, expenses “exclusively relating to the rental” can be claimed against the gross income. Rates (IBI), agents’ fees and advertising costs would fit under this category.

Back to the modelos 210 which non resident property owners have to declare if they don’t rent out. Full chapter and verse on the tax can be found on our website which has a special page (Spanish Tax Form 210) explaining all about it and giving details of our service where we will do it all for you for 30€.

Alternatively you can do it yourself - it is not a particularly complicated form to fill in and you can download it from the Agencia Tributaria’s website here. Remember that you have to register first before you declare (modelo 30). You pay it at the bank, but you will need to fix Agencia Tributaria identification stickers on the form before the bank will accept it. These stickers can be obtained from the Agencia Tributaria offices simply by showing your NIE (once you are registered with them).

The advantage of our service is that you can do it all online / by email even if you are not in Spain, and that includes the registration process. We even allow clients to settle our bill in pounds to a UK bank account.

How to save money on your Spanish non resident tax declaration

The downside to owning a place like this ...

Judging by the increased demand we have recently experienced for our Spanish Tax Form 210 service, holiday home owners are starting to think about their tax returns. There's plenty of time as the declarations for 2009 are not due until the end of the year. For those Spanish property owners who don't anything about their tax obligations, I have pasted in an extract from the Spanish tax office website describing what has to be declared for non residents who DON'T rent out their properties.

For those that do understand that there is income tax to pay and wish to ensure they are on the right side of the law, how can the declaration be made as cheaply as possible? Well unfortunately there is no way (that I know of at least) of reducing the tax burden itself because it is based on a fixed percentage of the property's rateable value (see details below) without allowances or deductions. However if you have or intend to get a tax adviser to make the declaration for you there could be savings to be made.

Many people who do pay the tax use a paying agent to do the paperwork but that can prove costly if you haven't shopped around for a low fee option. This may be the case if you are using the lawyer who handled the original property purchase. How much should you pay? Advoco charges 30€ (upwards) and some other services are being advertised for not much more.

Or why not do it yourself? It sounds a bit radical but it is not so hard particularly after the first year invested in getting yourself organised. There is info on our site (Spanish non resident tax) and others including the government's - see below. If you have any questions posting a question on one of the Spanish forums will usually yield an answer.

Extract from the Agencia Tributaria website explaining the non resident tax charge:

The amount to declare will be that resulting from applying the following percentages to the assessed value of the property as shown on the Property Tax bill (IBI):

· In general, 2%.

· In the case of properties where the assessed value has been revised or modified since 1 January 1994, the percentage will be 1.1%.

This yield is calculated once per year, on 31 December.

If you have not been the owner of the property during the whole year, or if it has been rented for any period, only the proportional part of this amount is declared.

· Tax Return Form: 210, using the general section 210-A and entering 02 as income type.

· When to file the tax return: During the whole natural year after the date of accrual.

· Where to file the return: With the Branch of the Tax Agency or Administration belonging to the Tax Agency responsible for the area where the property is located.

· Tax rate: 24%.