You are taxed at source on renting out in Spain

Raymundo LarraĆ­n Nesbitt, November, 29. 2018

Marbella-based lawyer Raymond Nesbitt explains that non-resident property owners are taxed in Spain on letting out their Spanish properties.

By Raymundo Larraín Nesbitt
Lawyer – Abogado
30th of November 2018

 

It never ceases to surprise me when I need to clarify this point to clients.

There is a false widespread misconception that on renting out property in Spain, it’s fine to only pay taxes in your home country and not pay any income tax whatsoever in Spain. This is a mistake, of course.

This error is further compounded by the advent of the Common Reporting Standard (CRS, for short), a treaty signed by over 100 countries to combat tax evasion which came into force in 2018. Your home country will inform the Spanish Tax Office you have been deriving income from your Spanish properties but not declaring nor paying any tax in Spain. This may put you at odds with the tax office.

Take the case of British nationals, for example. There is a Double Taxation Treaty between Spain and the United Kingdom which clearly states that any income derived from letting a property is taxed at source. In other words, you need to declare and pay taxes on your rental income in the country where the real estate is located i.e. Spain. This is black on white, no grey areas to be gleaned.

This is better understood with an example. If you are a British national, and own and rent out property in Spain, you should be disclosing this rental income to the Spanish Tax Authorities and paying tax in Spain on a quarterly basis following this schedule for year 2018:

  • 1Q 2018 January – March. Filed on the first 15 days of April.
  • 2Q 2018 April – June. Filed on the first 15 days of July.
  • 3Q 2018 July – September. Filed on the first 15 days of October.
  • 4Q 2018 October – December. Filed on the first 15 days of January 2019.

 

On being UK-tax domiciled, you must also disclose any overseas earnings to the HRMC, which will give you tax breaks on any income tax paid to the Spanish Tax Office so you do not pat tax twice on the same earnings.

In my experience most property owners are not paying tax in Spain, whether out of ignorance or neglect, and are in fact paying tax only in their home country, if at all. The fact that you are not paying taxes in Spain will come to bite you when you sell on your Spanish property as a non-resident, as you will likely forfeit 3% of the sales proceeds.

Your gross earnings are taxed at 19% if you are EU/EEA resident and 24% for the rest of the world. If you are EU-resident, we offer a taxation service (Holiday Rental Accounting Service) which brings down on average your tax bill by 70%, or more, on applying for lenient landlord tax relief. Just ask our friendly staff on this tax service. Why risk dodging taxes when you could simply play it legal and hardly pay any tax?

 

We will save you more money in taxes than what you spend on hiring us.

 

We offer the most competitive fees in the market. We file taxes all over Spain.

Holiday Rental Accounting Service (HRAS): €100/tax quarter

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. We will be very pleased to discuss your matter with you. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

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