Spanish property owners face a double tax shock

In among a welter of new taxes that have been introduced by the new conservative-led Spanish government, are a couple which will hit foreign owners of Spanish property:

(1) The non resident tax rate is set to rise to 24.75% from the current 24% level.  That doesn't sound much but it comes on top of the reintroduction of the wealth tax and a big crackdown on holiday home owners who neglect to pay their taxes (see our guide What to do if you get a letter from the Spanish tax office)

(2) IBI or local property taxes are also set to rise across the country by an average of €30 for each of the next two years as the government seeks to let local councils raise about another €1 billion in taxes.  It is supposed to be a temporary measure.

Older properties that haven't been revalued for 10 years will be the worst hit as the tax will go up 10%

If you want to see whether you will get off lightly or suffer then take a look at your last IBI bill and look for the "ano rev" or year of revaluation - if it is 2002 or prior it will be a 10% rise, 2002-6 6%, 2009 or later 4%.  Properties revalued between 2007-8 will see no increase as they were the peak property bubble years and the properties are overvalued any way.

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