Non-Resident Imputed Income Tax
Raymundo Larraín Nesbitt, October, 9. 2018
Marbella-based lawyer Raymundo Larraín briefly covers non-resident property owner tax obligations in Spain, with particular focus on the end-of-year annual imputed income tax.
Larraín Nesbitt Lawyers, over 16 years’ taxation experience at your service.
Photo: Amsterdam slender canal houses at dusk.
The following article has been summarised to avoid unnecessary tax technicalities. The quoted tax rates are subject to change from one year to the next. The advice given is of a general nature and should not be construed as tailored tax advice. Seek professional legal advice on your matter – see disclaimer below.
Article copyrighted © 2.018. Plagiarism will be criminally prosecuted
By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of October 2018
As the end of the year approaches fast, I thought it would be a good idea to remind non-residents of their tax obligation to file this end of year non-resident tax on owning property in Spain. However, please indulge me, and allow me to ramble off-topic in the introduction.
Amsterdam, a beautiful northern Venice. It is easy to fall in love with such a gorgeous and culturally refined city, providing you don’t get run over by one of its thousands of bicycle riders!
One of the city’s main bewitching highlights are its beautiful spindly canal houses overlooking the waterways that sprawl throughout the city like watery arteries. These opulent merchant houses were built during the apex of the Dutch Golden Age in the 17th century. Taking my interest further, I decided to visit one. When they kindly opened the door, I could not believe my eyes; a gaunt impossibly steep staircase, straight out of hell, stretched upwards fading in the distant gloom - no lift for all three storeys. Bonkers! In Dutch, stairs are aptly named as “trap” - and Good Lord, what a trap they are!
Unless you are Dutch, and therefore have preternatural cat-like climbing abilities in-built into your genetic pool, these stairs should be avoided like the plague they are by the rest of humans. So much for dreamy canal houses!
What’s the story behind these hellish stair cases? As it happens, a tax story. Devil and taxes go hand in hand it would seem.
Sea trade routes made the Dutch Republic vastly rich in the XVII century with a commercial empire spanning the world, from East to West. As an example of their might, today’s US New York city was founded by Dutch traders and was originally known as New Amsterdam. Wealthy patricians felt compelled to outdo one another, flaunting their newfound wealth building ever more impressive canal mansions in Amsterdam’s Golden Bend (feel free to draw parallels with Western London nowadays).
This exuberant madness would eventually come to an abrupt end with the culmination of the tulpenmanie (or ‘tulip bubble’ craze) where a canal house would be exchanged for a single tulip bulb! Fortunately, four centuries on, we would surely not fall for this *bitcoin*.
A patrician ruler, major of the city, concerned by his peer’s outlandish ostentatious lifestyle, sought to put some restraint and order on his fellow merchants for all this un-Dutch wealth display. He came up with a new tax on the width of houses (!). Albeit Dutch, ever pragmatic, ever keen businesspeople, neatly circumvented the tax law on building impossibly tall narrow houses instead. This ‘efficiency’ led to nightmarish staircases.
As a result, four hundred years on, we have these beautifully wobbling sinuous houses dotting the city’s landscape straight out of a Tim Burton’s movie. Stunning to gaze upon, impossible to dwell in (bar Dutch).
This quaint example just goes on to show how tax laws - bad or good - shape modern society as we know it even centuries on.
Photo credit: Luca Coppola
Extreme sports, you say? That’s for wimps. Try climbing up three flights of Dutch stairs with groceries in one hand, a baby in the other, whilst you are talking on the mobile - that’s the real deal. Dutch (somehow) casually manage it every day.
Non-Resident Taxation in Spain
Unbeknownst to most non-residents, on buying property in Spain, you automatically become liable for a series of property-related taxes. No one will give you the heads up on them, so it is up to you to find out how much you owe and comply with the Spanish Tax Authorities.
For a full review of all taxes non-resident property owners are liable for, you can take a peek at our tax article: Non-Resident Taxes in Spain – 8th December 2015.
Today’s article keeps it short and simple featuring only one tax: Non-Resident Imputed Income Tax (or NRIIT, for short).
Non-Resident Imputed Income Tax (NRIIT)
Long story short, you only pay this tax once a year, on or before the end of December. This tax applies nationwide in Spain.
All non-residents owning property in Spain need to file once a year this testimonial tax.
Even if you do NOT rent out your property in Spain you still need to pay it.
Also, if you do rent out the property part time during the year, on the days you do not rent out your property in Spain these are taxed as imputed income on a pro rata.
Basically, this tax is a legal fiction whereby it is surmised that you derive some form of financial benefit (income) from your Spanish home; that is why it is called non-resident imputed income tax, as it is deemed income. Spanish Tax Authorities take the view an owner derives a benefit in kind from owning property, irrespective of whether it is true or not, and taxes it accordingly.
When is it filed? Once a year, before end of December of the following year. For 2018 we are filing the tax corresponding to the previous year (2017). We are accepting filing this tax until the 20th of December. We advise you file this yearly tax as soon as possible to avoid end-of-year bottlenecks. In fact, you should start filing it now in October to pre-empt any issues.
Tax rates: The imputed ‘income’ is assessed as 1.1% or 2% of the cadastral value. Tax rate is applied on this amount. More on what a cadastral value is in our article: What is IBI tax?
Larraín Nesbitt Lawyers offers you this non-resident tax service:
Non-Resident Income Tax (Fiscal Representation Service) from only €90/year: *
*Our fee includes up to two joint owners. If there are more, higher fees apply.
Advantages of appointing a Fiscal Representative in Spain
- Larraín Nesbitt Lawyers, 16 years’ experience filing expat taxes at your service.
- Professional Indemnity Insurance which you can claim from in case of negligence or malpractice. This cover stands at €1,000,000 with Larraín Nesbitt Lawyers.
- Registered professionals. Larraín Nesbitt Lawyers only employs experienced qualified and registered Abogados and Economists. Registered abogados are subject to disciplinary action by the Law Society so must conduct themselves honourably to continue practising or else risk being barred.
- Deal only with native English-speaking lawyers & economists.
- Ensure you do not overpay on calculating the tax due on your property based on its rateable value and the number of days you have owned it on a pro rata basis.
- Submit the tax returns before the Spanish Tax Office in a timely manner (thus avoiding attracting penalties and surcharges on late payment).
- Setting a fiscal representative’s address to deal with all tax-related correspondence generated throughout a fiscal year.
- Reply to any tax notifications within the deadline ensuring tax compliance.
- Appeal misunderstandings or material errors (additional fees may apply).
- Up-to-date knowledge on fast-paced fiscal changes.
Larraín Nesbitt Lawyer’s Fiscal Representation Service offers you peace of mind.
Let go of all the stress appointing us to deal with your yearly tax in exchange for a small annual fee.
We file taxes all over Spain.
We offer the most competitive fees in the market.
Non-Resident Imputed Income Tax (Fiscal Representation Service) from only €90/year
We are specialized in taxation
Larraín Nesbitt Lawyers, small on fees, big on service.
Larraín Nesbitt Lawyers is a law firm specialized in taxation, conveyancing, inheritance and litigation. You can contact us by e-mail at firstname.lastname@example.org, by telephone on (+34) 952 19 22 88 or by completing our contact form.
“Dan denk ik niet aan al de ellende, maar aan het mooie dat nog overblijft.” – Anne Frank
I don’t think of all the misery but of the beauty that still remains.
“Wat is gebeurd kan niet ongedaan worden gemaakt, maar men kan voorkomen dat het weer gebeurt.” – Anne Frank
What is done cannot be undone but one can prevent it happening again.
Annelies Marie Frank (1929 – 1945). Was a gifted German-born Jewish diarist. She documented her life in hiding during WWII Amsterdam for over two years before being captured by nazis. She would be interned in Bergen-Belsen concentration camp where she would meet an untimely death aged 16. Her Amsterdam canal house has been repurposed as a museum where tourists flock to. It is nigh impossible to visit as it is always fully booked up months in advance.
Article originally published at Spanish Property Insight: Non-Resident Imputed Income Tax (Fiscal Representation Service)
Tax services Larraín Nesbitt Lawyers can offer you
- Non-Resident Imputed Income Tax (Fiscal Representation Service) from €90/year
- Holiday Rental Accounting Service (HRAS) from €100/tax quarter
General tax-related articles
- Taxes on Selling Spanish Property – 8th December 2014
- Taxes on Buying Spanish Property – 8th July 2015
- Non-Resident Taxes in Spain – 8th December 2015
- Renting in Spain - Landlord´s Taxation – 8th of January 2017
- Holiday Home Taxation in Spain – 8th of July 2017
- Non-Resident Income Tax – 8th December 2017
- Holiday Rental Taxation in Spain – 8th July 2018
- What is IBI tax? – 30th July 2018
- Non-Resident Imputed Income Tax (Fiscal Representation Service) – 8th October 2018
Please note the information provided in this article is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. No cats were harmed on writing this article.VOV.
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