Are you fed up with your partner? Did you know there is a special procedure in Spain to terminate property co-ownership which saves you up to 86% in taxes? Solicitor Raymundo Larraín explains to us how to re-arrange asset holdings in Spain between family and friends without attracting a great deal of taxes. Interested? Read on.

Marbella-based Larraín Nesbitt Lawyers has over 17 years' taxation & conveyancing experience at your service. We offer a wide range of 50 legal and corporate services. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain.

You can review here our client’s testimonials.

Article copyrighted © 2007, 2010, 2011 and 2020. Plagiarism will be criminally prosecuted.

Original article from 14th of November 2.007

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of June 2020

Introduction

Covid-19 has brought in its wake a host of nasty effects, both direct and indirectly.

Directly, by infecting and killing hundreds of thousands of vulnerable people the world over, from all ages.

Indirectly, by drastically changing our lifestyles as we struggle to cope and adjust to our new reality. Governments, in order to protect the most vulnerable elements of our society, are forced to curtail our fundamental rights and limit our ability to move freely, even forcing non-essential businesses to shut down. But more fundamentally, it has forced people into a seemingly never-ending lockdown, trapped within the walls of their own homes. As a result of these necessary draconian government-imposed measures, it has led to Depression-era levels of unemployment and having developed economies in free fall.

We have gone from Greta’s ‘save the planet’ to save ourselves in the span of only two months.

And we thought Australia’s wildfires, from early on this year, which ravaged the land and devastated wildlife, destroying in its wake thousands of homes and taking the lives of hundreds was going to be the major highlight of 2020. How little did we know. Does anyone remember when this was a thing?

Amid this dire financial context of millions of workers being laid off, myriad companies filing for bankruptcy, property price drops of 40%, or more, stock markets plunging into the red wiping whole family’s life savings, couples are forced to live 24/7 under the same roof - with kids. Understandably, this sparks great tensions or even drives a rift, putting relationships under severe strain.

Not everyone has what it takes to come out on top. Escaping from this ordeal unscathed is proving quite the challenge for most couples and as a result we are sadly witnessing more and more couples filing for divorce.

In this article, we explain a special legal procedure that can be followed in Spain to re-arrange property holdings which saves buyers a considerable amount in taxes. On buying resale property in Spain, a buyer is normally subject to 8% Property Transfer Tax (ITP), or even more, on the sales proceeds. However, on following what is known as a ‘Dissolution of Joint Property Ownership’ (or DJPO, for short) a buyer attracts only 1.5% Stamp Duty.

In plain English, this procedure saves you 86% in tax, or more.

Interested? Read on.

Definition

A Dissolution of Joint Property Ownership allows joint owners to re-arrange their share on a property in a tax-efficient manner as it enables the outgoing joint owner to transfer his share to an existing co-owner legally waiving the extreme Property Transfer Tax and paying in lieu 1.5% Stamp Duty (or less).

DJPO requirements

• Both buyer and seller must be pre-existing owners of a property i.e. a married couple who own a property under joint names.
• One of them wishes to terminate the situation and sell his/her share to the other joint owner.
• If there is an outstanding mortgage on the property, a lender’s permission may be required to release the outgoing borrower/owner from his commitments.

Applicable cases

A DJPO is suitable in a number of cases involving joint property ownership:

1.- In a divorce or separation. Couples owning property jointly may decide to split up. Taking for granted they own a property in equal shares, one of them decides to sell their 50% to his ex-partner. The ex-partner will pay him/her his quota and this transaction.
2.- Re-arranging inheritances. Beneficiaries of an inheritance transferring their quota on a property to a fellow heir. E.g. Sisters who inherit property transfer a share between them.
3.- Re-arranging property holdings between family and friends. Stakeholders such as family, friends or investors co-owning a property may decide to re-arrange their holdings.

Associated taxes & expenses

Both buyer and seller are subject to pay taxes on transferring ownership of the asset.

Buyer:

• Pays 1.5% Stamp Duty on the outgoing share.*
• Lawyer’s fees
• Notary fees
• Land Registry fees
• Pays the % of the property’s value

*In some regions of Spain, due to devolved competencies, it is in fact well-below this quoted tax rate.

Seller:

• Pays Capital Gains Tax on the outgoing share.
• If the seller is non-resident, a 3% retention may be practiced on the outgoing share.

Forced Dissolution of Joint Property Ownership

What happens if one of the co-owners refuses to sell? This is when a contentious DJPO comes into play. It involves litigation.

There may be cases in which one of the joint owners may wish to terminate the joint ownership for good and sell the property. Fellow co-owners, for whatever reason, may turn down the proposal to sell the property as a whole and likewise may refuse to buy him out. This will result in a bitter gridlock that will erode personal relations.

To bypass the deadlock, any joint owner is entitled to force a DJPO through a competent law court (Arts 406 and 1062 of the Spanish Civil Code). The court’s ruling will overrule any dissent and the asset will be disposed of regardless of opposition from fellow co-owners. The property will then be auctioned off publicly to the highest bidder.

However, a forced dissolution through a law court is only advisable as last resort wherein the disagreement is serious resulting in a protracted stalemate. The reason is that all joint owners stand to lose significantly on following it. Sadly, at times, this may be the only legal solution to bring an end to an ongoing co-ownership quarrel.

In conclusion

A Dissolution of Joint Property Ownership is optimal to mitigate a buyer’s tax burden. In fact, you save 86% in taxes, or more, in a legal manner.

However, a DJPO may not apply in all cases. Seek legal advice on the matter.

A non-contentious DJPO works almost like a conveyance and can be arranged within a few days providing both parties agree to it. It can be arranged without any need to fly over to Spain by way of granting your appointed Spanish lawyer a specific Power of Attorney. The new re-arranged ownership will then be lodged at the Land Registry after the associated taxes are settled.

A DJPO neatly puts to rest the financial side of couples’ ongoing marital disputes, legally saving them a great deal in taxes. It’s a win-win.

At LNA we can represent you following a DJPO for a very competitive fee, regardless of the property’s location in Spain. We act nationwide. Ask us free of compromise.

"Toute nation a le gouvernement qu'elle mérite." – Joseph de Maistre

Joseph-Marie, comte de Maistre (1753 - 1821). Was a Savoyard lawyer, diplomat, writer, and philosopher. Together with the Anglo-Irish statesman and philosopher Edmund Burke, Maistre is commonly regarded as one of the founders of European conservatism.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, 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.

Legal service Larraín Nesbitt Abogados (LNA) offer you:

• Dissolution of Joint Property Ownership

Related DJPO articles

• Lifetime Loans or Reverse Mortgages in Spain Explained – 21st February 2011
• Advice to Struggling Mortgage Borrowers in Spain – 8th March 2011
• Dissolution of Joint Property Ownership – 8th of May 2011
• Spanish Mortgage Loans: Beware of Abusive Clauses – 8th January 2012
• Spanish Mortgage Loans: An Overview – 21st February 2012
• Mortgage Collar Clauses Revisited (‘Cláusulas Suelo’) – 8th December 2013
• Bank Repossessions in Spain – 21st February 2014
• Bad Debtor’s List (‘Fichero de Morosos’) – 8th April 2014
• Spanish Creditors Pursuing Debts Abroad – 8th May 2014
• Dación en Pago Explained or How to Hand Back the Keys – 8th December 2014
• Dissolution of Joint Property Ownership (blog post) – 8th of September 2017
• Spain’s Supreme Court rules that in Dissolutions of Joint Property Ownership Stamp Duty is only paid on the outgoing share – 14th of November 2018
• Dissolution of Joint Property Ownership in Spain – 8th of June 2020

Article originally published in Spanish Property Insight: Dissolution of Joint Property Ownership in Spain

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. VOV.

2.007, 2.010, 2.011, and 2.020 © Raymundo Larraín Nesbitt. All Rights Reserved.

Lawyer Raymundo Larraín gently reminds us of the tax obligation to submit tax form 720 (modelo 720, in Spanish) over the next weeks if you qualify. Last day for submission is the 31^st of March 2020.

The following tax article has been summarised to avoid unnecessary tax technicalities. The quoted tax rates are subject to change from one year to the next. Seek professional legal advice on your matter – see disclaimer below.

Copyrighted © 2018, 2019 and 2020. Plagiarism will be criminally prosecuted.

Photo credit: courtesy of Self Bank

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
21^st of February 2020

In 2013 the Spanish Tax Office implemented a new tax obligation whereby all tax residents in Spain, who hold over €50,000 in assets abroad, need to complete this tax return before end of March 2020 deadline.

By 2018, over 5,000 taxpayers had already been (heavily) fined on failing to disclose they held substantial assets abroad. This figure continues to increase year on year. We stress the fines for non-compliance are the steepest we’ve ever seen. In fact, so much so, they have been challenged at Brussels. The infamous modelo 720, despite being the object of heated controversy, remains very much an active tax obligation with which taxpayers must contend with. If you fall within its scope, I strongly advise you to comply or else face the risk of stiff fines.

It should be stated this tax form is only for reporting purposes; you do NOT pay any tax on submitting it. Resident taxpayers already pay income tax on submitting their annual I.R.P.F. tax returns once a year.

You also have Mark Stucklin's pungent article explaining it which - unlike mine - doesn’t pull any punches.

I have structured my article as a FAQ for ease of comprehension.

Brexit and the new wave of British residents in Spain

Unless you have been living under a rock for the previous four years, you will know the UK vowed to leave the EU by the 31/01/2020. As a consequence, thousands of non-registered expats (who were effectively living in Spain under the radar, whether purposely or not) have now stepped forward into the limelight and rushed to apply for Spanish residency over the last year.

Applying for Spanish residency is a self-admission that you are in fact tax resident in Spain; the residency procedure is monitored continuously by the Authorities to ensure you retain your resident status (i.e. so they can turn down renewals when the applicant no longer complies with the residency requirements).

As scores of new residents will be entirely oblivious of their new tax obligations, i.e. submitting tax return 720, it has prompted me to write this short article to shed some light on the matter and act as a gentle reminder on their newly-acquired tax obligations with the taxman.

Who needs to declare?

All Spanish tax residents who own assets overseas on or over €50,000.

E.g. Mr. and Mrs. Smith live all year round in Mijas Costa, Spain. They own two houses in Berwickshire, England, have open bank accounts in the UK and receive UK-based pensions.

Mr. and Mrs. Smith are in fact tax resident in Spain and they both need to submit tax form 720.

Again, and for the avoidance of doubt, if you are non-resident in Spain you do NOT need to submit this tax return; it is only for residents.

Who is considered tax resident in Spain?

The Spanish Tax Office applies - amongst many others - the following broad criteria:

• You spend more than 183 days within a calendar year in Spanish territory.
• Your centre of financial interests is located in Spain.
• Your spouse and/or underage children live in Spain.

Reporting categories

There are three reporting categories: bank accounts, investments and immovable property.

Obligation to report

You must report all assets in a particular category if the value of your total assets within it exceeds €50,000.

2020 tax submission period

From the 1^st of January until the 31^st of March 2020.

Can I file it after the submission period?

Yes, but hefty penalties apply. Ask us.

If you have already filed tax form 720 in the past

You only need to file it again if:

• The value of an existing asset grew by more than €20,000, or
• You sold an asset, or
• You obtained a new asset.

Penalties for non-compliance

The disproportionate fines levied are (very) stiff.

• Failing to file 720 or filing it incorrectly: €5,000 per infraction.
• Minimum fine of €10,000 for each group of assets.
• Penalty of 150% on unpaid income tax.

The Common Reporting Standard and you

Please take good note that with the advent of the Common Reporting Standard (CRS), signed by over 100 countries to combat tax evasion, as from the 1^st of January 2018, the Spanish Tax Office is being spoon-fed fiscal information by your home tax office.

For example, both HM Revenue & Customs and Ireland’s Revenue Commissioners are busy supplying the Spanish Tax Office with detailed information (and vice versa) on all your overseas assets and reported income derived abroad as from the 1^st of January 2018.

In plain English, your home country’s tax office will likely have already informed the Spanish Tax Office of the assets you hold abroad. It is in your best interests to be pro-active and come clean before you are served with a legal notice imposing humongous fines on you; as it’s happened already to over 6,000 unsuspecting taxpayers. The tax office likes waiting till the last moment before imposing fines to rake in as much interests as is legally admissible before the statute of limitations kicks in. Fines on non-compliance start at five figures and often are six-figures, or higher.

The last word

We strongly advise you to submit tax form 720 if you are (tax) resident in Spain to avoid steep penalties. If you plan to submit it, please contact us well ahead of the submission deadline (31^st of March 2020) as it takes days to prepare and process. If you are unsure if you qualify for it, just give us a buzz and one of our friendly staff will answer your queries to allay your fears.

Larraín Nesbitt Lawyers offers the following competitively-priced taxation service:

Tax form 720

"No one is too small to make a difference.” – Greta Thunberg

Greta Thunberg (2003). Pronounced ‘tOOn-bairyeh.’ Swedish 16-year-old climate change activist. Known for her forward speaking manner which does not hold any punches addressing world leaders. She has successfully led an international campaign to fight climate change, galvanizing the interest of the young (and not so young!) which has garnered much media attention. She is the youngest person to date to hold the prestigious Time Person of the Year 2019, sorry Trump.

If only we had more Greta’s and less dumps, what a wonderful world this would be.

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 to book an appointment.

Related tax articles

Tax form 720 – 20th April 2018
Tax form 720 – 21st March 2019
Spanish Tax Office to fine 5,000 taxpayers over tax form 720 – 1st September 2019

Tax form 720 – Modelo 720 – 21st of February 2020

Article originally published at Spanish Property Insight: Tax form 720 – Modelo 720

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. Voluntas omnia vincit.

2.018, 2.019 and 2.020 © Raymundo Larraín Nesbitt. All Rights Reserved

Are you selling (or gifting) property in Spain? In this taxation article we explain how our law firm can assist you bring down your seller’s taxes significantly, even negating them.

Marbella-based Larrain Nesbitt Lawyers has over 16 year’s taxation & conveyancing experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2019. Plagiarism will be criminally prosecuted.

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. Seek professional legal advice on your matter – see disclaimer below.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of May 2019

Introduction

Congratulations, you have found a buyer for your Spanish property!

On selling (or gifting) property in Spain, you are liable for two taxes: plusvalia and capital gains tax (CGT, for short). For a more detailed take on both, please read our in-depth tax article: Taxes on Selling Spanish Property.

In this short article, we will focus on four strategies to mitigate a seller’s exposure to CGT; which range from completely negating it, to reducing it significantly.

4 strategies to mitigate a seller’s CGT liability

1. Absolute relief

All tax residents over 65-years-old are exempt from paying CGT on selling their main abode (vivienda habitual, in Spanish legal jargon).

2. Rollover relief

Any resident seller under 65-years-old is exempt from paying CGT on selling their main home providing the following conditions are met:

• Seller is under sixty-five year-old.
• Seller is (tax) resident in Spain.
• Dwelling must be his main home (main abode and must have dwelled in it permanently for the 3 previous years). It may be less than three years under exceptional circumstances i.e. job change, marriage or separation.
• Sales proceeds reinvested in a new main home (in Spain or in the Union, including the United Kingdom in a pre-Brexit world). Any sales proceeds not reinvested will be taxed on a pro rata.
• 2 year deadline to reinvest the sales proceeds (on a new main home). 

3. Pension annuities

This third tax relief is in addition to the above two main home tax reliefs. Applies to residents.

Any capital gains made by resident taxpayers over 65-years-old will go untaxed provided the following are met:

• Sales proceeds reinvested in pension annuities.
• Capped at €240,000.
• Six-month deadline as from sale.

4. Traditional method

Your lawyer can offset from your CGT liability on selling, all expenses that went towards buying the property plus any refurbishment costs, provided you have VAT invoices to back them up. Applies to both residents and non-residents.

• Lawyer’s fees (on buying).
• Notary fees (on buying).
• Land Registry fees (on buying).
• Taxes (on buying).
• All property-related improvements (not maintenance costs) i.e. glass curtains, refitted kitchen, roof retiling, wood flooring, A/C installation, house alarm etc.
• Estate agent's commission (on selling): VAT invoice.
• Lawyer’s fees (on selling): VAT invoice.

We offer the most competitive fees in the market.

Conveyancing in Spain – Selling

We are specialized in conveyancing

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, 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.

Article originally published in Spanish Property Insight: Capital gains tax mitigation on selling property in Spain

“Notre-Dame de Paris est en particulier un curieux échantillon de cette variété. Chaque face, chaque pierre du vénérable monument est une page non seulement de l’histoire du pays, mais encore de l’histoire de la science et de l’art.” – Victor Hugo. Notre-Dame de Paris, livre troisième.

Victor Marie Hugo (1802 – 1885). Was an outstanding French novelist, poet, and dramatist ascribed to the Romantic literary movement. He is widely regarded as one of the greatest French writers to date. Amongst his many famous novels are Les Misérables and The Hunchback of Notre-Dame (Notre-Dame de Paris).

Conveyancing-related articles

• How to Buy Property in Spain Safely – 10th October 2014
• House Hunting in Spain – Interview with The New York Times. June 2015
• Buying Property in Spain – 10 reasons to hire a Lawyer – 8th November 2016
• Selling Property in Spain – 10 Reasons to Hire a Lawyer – 8th December 2016
• Buying Property in Spain from a Private Seller (Resale Property) – 21st of February 2017
• Buying Property in Spain from a Developer (Off-Plan Property) – 8th March 2017
• How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
• 8 Tips on Buying Off-Plan in Spain – The Address Magazine (pages 358 - 373). December 2018
• 7 reasons on why you need legal representation on selling in Spain – 7th March 2018
• Home Seller's Checklist – 11th September 2018
• Save taxes on selling your Spanish home!– 1st March 2019
• Capital gains tax mitigation on selling (or gifting) property in Spain – 8th May 2019

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. VOV.

2.019 © Raymundo Larraín Nesbitt. All rights reserved.

Lawyer Raymundo Larraín explains how to profit from knocking off 70%, or more, from your tax bill on renting out in Spain (applies to both holiday lettings and long-term rentals)

Marbella-based Larrain Nesbitt Lawyers has over 16 year’s taxation & conveyancing experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2017 and 2019. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8^th of March 2019

Introduction

Becoming a landlord in Spain has never been easier and more profitable than today:

• Rental yields climbed steadily by two digits (14.5%) YOY for a third consecutive year. Source: Idealista.
• Spain has broken its tourist record for its sixth year in a row! It has consolidated its hospitality status as the world’s second tourist destination, attracting almost 83 million visitors in 2018. Sources: BBC, El País and SPI.

Adding to all this good news, following new regulation, all non-resident EU/EEA property owners, who lease property in Spain, are entitled to deduct from their tax bill all property-related expenses. Iceland, Liechtenstein and Norway tax residents may also benefit from these generous tax deductions. Switzerland is excluded.

That is quite a lot of money you can offset every tax quarter, greatly mitigating your landlord tax bill on renting out. This new tax change translates into average tax savings of 70%, or more, for landlords. If you are not EU-resident, you cannot benefit from it.

This hinges on you receiving from your suppliers a VAT invoice. It must meet the following requirements.

Not submitting quarterly tax returns in Spain on your rental income is no longer an option, following new draconian tax laws that have turned all holiday platforms, and other intermediaries, into tax office whistleblowers retroactively as from the 1^st of January 2018. All your rental income is now being reported to the Spanish taxman, unbeknownst to you. Fines for non-compliance are very steep. More on this here: Property portals and rental platforms to pass on landlord details to the Spanish Tax Authorities. Are you prepared? AirBnb, for example, explains its new tax 'sharing' data policy with the Spanish Tax Office on its website.

Landlord tax relief

You may claim as tax relief all the following property-related expenses:

• Interests arising from a mortgage loan to buy the property (not a personal loan).
• Local taxes and administrative charges and surcharges that impact on the rental income or else on the property itself (i.e. IBI tax, SUMA tax, refuse charge).
• Expenses arising from formalising rental contracts such as lets or sublets (i.e. Notary and/or Land Registry fees); legal defence (i.e. hiring a lawyer for tenant eviction purposes).
• Maintenance costs may be offset; refurbishment expenses (improvements) are excluded (however, you may offset them on selling on the property).
• Community of owners’ fees: these receipts have no VAT, by law.
• Home insurance premiums: fire, theft, civil liability etc.
• Property repairs: plumbing, roof retiling, painting, pool pump etc.
• Utility invoices: electricity, water, gas, internet, and landline.
• Cleaning: cash payments are not tax-deductible, you need a VAT invoice.
• Concierge, gardening, alarm & security services (i.e. gated communities).
• Lawyer’s fees: are 100% tax-deductible! To calculate and submit you quarterly tax returns.
• Property management fees: to manage your rentals.
• Advertising expenses: online/offline.
• Marketing expenses.
• Home depreciation and amortization. The calculation is 3% on the highest value of the following two: sales price or cadastral value; the value of the land is excluded.

Requirements to benefit from these lenient tax allowances

• You are tax resident in the Union or EEA (your nationality is irrelevant).
• The expenses you claim are in direct relation towards the upkeep of the property i.e. claiming travelling expenses would be excluded.
• You have VAT invoices to back up your tax relief claim.

- Is your tax advisor reducing your tax bills by 70%, no?

- Does he moan it is much too complicated, or make up excuses?

- Do you suspect he’s holding back on you?

Don’t put up with it! If you dislike time-wasters and overpaying taxes, come and speak to us. We will reduce your tax bill by 70%, on average. Call or email us to book an appointment. We will review your personal tax situation and advise accordingly. The procedure is fast and easy. We make life simple.

We offer the most competitive fees in the market.

Holiday Rental Accounting Service (HRAS) from only €125/tax quarter/property

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 to book an appointment.

Article also published at Spanish Property Insight: Save 70% on your landlord tax bill.

*Second Referendum*

"Once you eliminate the impossible, whatever remains, no matter how improbable, must be the truth." – Arthur Conan Doyle

Sir Arthur Ignatius Conan Doyle (1859 – 1930). Edinburgh-born, he was originally trained as a physician but would achieve world-renown as a writer of detective stories. He is universally known as the father of fictional character Sherlock Holmes. His fiction works are considered milestones in the crime fiction subgenre.

Tax & legal services available from Larraín Nesbitt Lawyers:

• Non-Resident Income Tax (Fiscal Representation) 
• Holiday Rental Accounting Service (HRAS) 
• Registration of Holiday Homes (Andalusia)
• Conveyancing in Spain – Buying

Holiday lettings-related articles

• Holiday Rental Laws in Spain – 8th of March 2015
• Non-Resident Taxes in Spain – 8th December 2015
• Holiday Rental Laws in Andalusia (Decree 28/2016) – 8th of February 2016
• Renting in Spain - Landlord´s Taxation – 8th of January 2017
• Holiday Home Taxation in Spain – 8th of July 2017
• Holiday Rentals in Andalusia Made Easy – 3^rd July 2017
• Non-Resident Income Tax – 8^th December 2017
• Holiday Rental Taxation in Spain – 8th July 2018
• Renting in Spain: are you still overpaying income tax every quarter? – 16^th October 2018
• You are taxed at source on renting out in Spain – 30^th November 2018
• Did you get an email from AirBnb over your Spanish tax details? – 21st December 2018
• Important information from the Spanish Ministry of Finance – 7^th January 2019
• Property portals and rental platforms to pass on landlord details to the Spanish Tax Authorities. Are you prepared? - 12th January 2019
• Holiday lettings: VAT invoice dissected – 11th February 2019
• Save 70% on your landlord tax bill – 8th March 2019

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. VOV.

2.017 and 2.019 © Raymundo Larraín Nesbitt. All rights reserved.

Marbella-based Larraín Nesbitt Lawyers has over 16 year’s conveyancing & taxation experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats acquiring property all over Spain, including Madrid and Barcelona.

Article copyrighted © 2015 and 2018. Plagiarism will be criminally prosecuted.

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. Seek professional legal advice on your matter – see disclaimer below.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of December 2018

Introduction

The new Stamp Duty law brought about by the landmark ruling of Spain’s Supreme Court last October, calls for an updated version of this key taxation article.

The most notable change is that borrowers will no longer be paying Stamp Duty on applying for a mortgage loan in Spain. This translates into saving thousands of euros, on average.

As a rule of thumb, purchase costs add 10 – 13% over and above the purchase price. I collate below the taxes and associated fees on buying.

Be aware there are minor discrepancies from one region to the next, as Spain’s seventeen Autonomous Communities have competence, within limits, over some taxes i.e. Property Transfer Tax (ITP) and Stamp Duty (AJD). Each region is empowered to fix the tax rate, within a sliding scale, that varies between 6 to 11% for ITP and between 0.5 and 1.5% for AJD.

Buyers should be mindful of the Complementaria or ‘Bargain Hunter Tax’. It is a supplementary tax the seventeen regional Spanish Tax Offices levy on buying property as a result of today’s low real estate values post-crash (particularly for resales).

I will split my article distinguishing between two property types for taxation purposes:

I. New-build (or off-plan).
II. Resale.

The tables below are a simplified approximation.

I. New-Build or Off-Plan Property

You can read further in our articles 8 Tips on Buying Off-Plan in Spain and Buying Property in Spain from a Developer (Off-Plan Property).

II. Resale Property

You can read further in our articles Buying Property in Spain from a Private Seller (Resale Property) and How to Buy Rural Property in Spain.

Post-Completion Taxes and Maintenance Upkeep

I refer to our in-depth article Non-Resident Taxes in Spain.

Once you have purchased, you will face the associated running expenses. Make sure you have budgeted these expenses carefully so as to avoid unpleasant surprises! Some of the luxury gated communities with lush tropical gardens and beautiful infinity pools that dot the Spanish coastlines have pretty steep maintenance expenses (tallying several hundred euros a month!).

1. IBI tax: 0.4 – 1.1% of cadastral value per annum (this is not the market value, it is well below it).
2. Rubbish collection tax.
3. Community fees (if you buy into a Community of Owners).
4. Non-Resident Imputed Income Tax (NRIIT): 1.1% or 2% of a property’s cadastral value per annum.*

*Distinction is made between EU and non-EU/EEA-residents as well as revised/unrevised cadastral values on calculating Imputed Income Tax.

Conclusion

Take thorough legal advice to budget your purchase carefully before you commit. Request a full breakdown of taxes, fees and associated expenses. The initial reservation contracts, that strike the property off the market, are normally non-refundable. So, if finance fails the real estate agency and/or seller are entitled to withhold the initial reservation deposit unless specific wording is added to the reservation contract to safeguard against this event.

Attaining finance from a lender should not be taken for granted. Spanish lenders are risk-averse these days and expect a non-resident buyer to come up with a 30 to 40% deposit. That said, lenders are once again dipping their paws brazenly into the market, luring borrowers with enticing 100% mortgage loans.

We are in a buyer’s market. There is plenty of property to choose from, do not rush in or be pressurised to sign on the dotted line. Take your time to consider matters carefully and budget accordingly.

And to close, my shameless plug; hire an experienced conveyance law firm such as Larraín Nesbitt Lawyers.

We offer the most competitive fees in the market.

Conveyancing – Buying

We are specialized in conveyancing

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, 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.

Article originally published in Spanish Property Insight: Taxes on Buying Spanish Property.

“The only advice anybody can give is, if you wanna be a writer, keep writing. And read all you can, read everything.” – Stan Lee

Stanley Martin Lieber (1922 – 2018). Exceptionally gifted Jewish American storyteller, comic book writer, editor, and publisher. This titan became Marvels’ Comics primary creative leader for several decades. In his teens, he won the New York Herald Tribune’s so-called “Biggest News of the Week Contest" prize for three straight weeks, goading the newspaper to write him and ask him to please let someone else win. Through his hard work and determination, he went on to inspire millions of children the world over for generations, of which some would even grow up to become lawyers and write articles of their own.

Buying property related articles

• How to Buy Property in Spain Safely – 10th October 2014
• House Hunting in Spain – Interview with The New York Times. June 2015
• Buying Property in Spain – 10 reasons to hire a Lawyer – 8th November 2016
• Buying Property in Spain from a Private Seller (Resale Property) – 21st of February 2017
• Buying Property in Spain from a Developer (Off-Plan Property) – 8th March 2017
• How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
• Licence of First Occupation – 8^th September 2018
• 8 Tips on Buying Off-Plan in Spain – The Address magazine (pages 358 - 373). December 2018
• Taxes on Buying Spanish Property – 8th December 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. VOV.

2.015 and 2.018 © Raymundo Larraín Nesbitt. All rights reserved.

Marbella-based lawyer Raymond Nesbitt explains the importance of IBI tax and the consequences of non-payment.

Article copyrighted © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8^th of November 2018

Introduction

With the ongoing off-plan property boom firmly underway, I thought it would be a good idea to write a gentle reminder for new-build owners on their duty to pay this local tax on the following year from buying a house.

Unbeknownst to most non-resident property owners, on buying property in Spain, you automatically become liable to pay IBI tax on the following year. No one will give you the heads up on this tax, so it is up to you to find out how much you owe and comply with the Tax Authorities.

IBI tax is of crucial importance because it has associated a valuation for tax purposes of your home known as 'cadastral value' (valor catastral, in Spanish) which is used as the benchmark to calculate any, and all, property-related taxes.

IBI Tax - Definition

The Impuesto sobre Bienes Inmuebles (IBI, for short) is a tax that applies to both residents and non-residents. In some parts of Spain, it is known as SUMA. All property owners must pay this tax every year.

This is a local tax levied by the town hall where your property is located. It is paid once a year (normally due in August through to November). This is Spain’s equivalent of the United Kingdom’s Council Tax. It varies from one town hall to the next. It is based on the rateable value of your property (0.4 – 1.1% of cadastral value per annum); for cheap properties (think rural land) it can be as low as a few euros whereas posh pads, in sought-after prime locations such as Marbella and Sotogrande, command several thousand euros/year.

Cadastral Value - Definition

Is the assessed value local Tax Authorities give to a property. It is usually well below the market value. This rateable value is used as the taxable base to calculate a series of taxes. You will find the cadastral value of your property in one of your local tax bills (i.e. IBI). Be aware that a store room or garage space may be regarded legally as a distinct separate entity from your main home and therefore subject to their own individual cadastral values. A cadastral value, in general terms, is 30 to 40% below the current market price of a property. So it does not equate to a property's true market value, it is actually well below it (which is good news).

Importance

• IBI tax is used as the benchmark to calculate all property-related taxes.
• On selling, a buyer’s lawyer will demand copies of the IBI invoices for the previous 4 years.

When is it due?

• Town halls are empowered to rule on this, so it varies. Normally, it is payable once a year, typically from August through to September. Whoever owns the property on the 1st of January is liable to pay this tax, by Law.

Sample IBI tax invoice

Just follow the link supplied: sample IBI invoice

Consequences of not paying IBI tax

• It may lead to your property being impounded and sold off in a public auction. Spanish town halls, besieged by dropping revenue, are becoming increasingly adept at pursuing aggressively this local tax post-credit-crunch; particularly for high-end property.
• It is not possible to file and pay NRIT and NRIIT taxes, as it requires for its calculation IBI tax. This in turn attracts fines, delay interests and surcharges.
• On selling, a buyer’s lawyer will practice a huge retention to safeguard against any unpaid IBI tax.
• As a seller, you may forfeit the 3% sales proceeds tax rebate (plus legal interests). On selling, when a seller is non-resident in Spain, buyers must withhold 3% of the sales proceeds by law and pay it into the Spanish Tax Office. Non-resident sellers are entitled to a tax rebate on the 3% (subject to criteria).

Real case: Mr Daniel David Brockman, a prominent New York-based US tax lawyer and patron of the Arts, lost the property of a huge residential area in Marbella he was going to develop known as Urbanización Sierra Blanca because he failed to pay IBI tax to Marbella’s Town Hall. This estate is currently valued at over one billion dollars.

Conclusion

Non-payment of IBI tax is the daftest fastest way to lose ownership of your Spanish property.

If you haven’t been paying this local tax, you should contact Larraín Nesbitt Lawyers ASAP to get it sorted out.

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

Setting up IBI tax: from only 200

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 info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

“What the Arab world needs most is free expression.” – Jamal Khashoggi

Jamal Ahmad Khashoggi (1958 – 2018). Was a Saudi journalist, writer and the former general manager and editor-in-chief of Al-Arab News Channel. He was also a Washington Post Global Opinions contributing columnist and served as editor for Saudi newspaper Al Watan. An outspoken critic of his country’s iron-ruling family, he bravely did not shy away from bringing to public light serious matters and staunchly defended the civil rights of his countrymen, specifically the freedom of speech. About to marry his fiancée, he was brutally butchered inside the Saudi consulate complex in Istanbul, Turkey, by a state-sponsored death squad at the behest of the highest level. You can read his last column here.

Article also published at Spanish Property Insight: IBI Tax Explained.

Legal & Tax services Larraín Nesbitt Lawyers can offer you

• Conveyancing – Buying 
• Conveyancing – Selling 
• Non-Resident Income Tax (Fiscal Representation) from €90/year
• Holiday Rentals Accounting Service (HRAS) from €100

Taxation-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
• Spain’s Non-Dom Tax Scheme – 8th July 2016
• Renting in Spain - Landlord´s Taxation – 8th of January 2017
• Holiday Home Taxation in Spain – 8th of July 2017
• Non-Resident Income Tax – 8^th December 2017
• Tax advantages on becoming resident in Spain – 8th March 2018
• Holiday Rental Taxation in Spain – 8th July 2018
• Holiday lettings: with or without VAT? – 21st June 2018
• IBI tax explained – 31st 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. VOV.

2.018 © Raymundo Larraín Nesbitt. All rights reserved.

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
8^th of October 2018

Introduction

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 17^th 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 20^th 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 100/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.

Conclusion

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 100/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 info@larrainnesbitt.com, 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 100/year
• Holiday Rental Accounting Service (HRAS) from 125/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 – 8^th December 2017
• Holiday Rental Taxation in Spain – 8th July 2018
• What is IBI tax? – 30^th 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.

2.018 © Raymundo Larraín Nesbitt. All rights reserved.

Marbella-based lawyer Raymond Nesbitt gives us an overview on how the taxation for holiday homes work in Spain from a non-resident landlord perspective. For an abridged version of this article here: Holiday Rental Taxation in Spain.

Larraín Nesbitt Lawyers takes the stress off your taxation making it easy, freeing you up so you can relax and spend more quality time enjoying what you value most in life.

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 © 2018. Plagiarism will be criminally prosecuted

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8^th of July 2018

Introduction

I often get emails from distressed clients moaning on how the taxation on holiday lettings is convoluted and scares them off. I can relate to someone who, unaccustomed to dealing with taxes, let alone Spanish ones, may feel somewhat overwhelmed by the sheer over-complication and admin red tape involved.

Fortunately, that is where lawyers and economists step in, simplifying matters, and lending you an expert hand to file these taxes in exchange for a reasonable fee in your own language.

Following a new batch of regulation, non-resident landlords can now benefit from generous tax relief which used to be earmarked exclusively for Spanish resident taxpayers. These new laws have had a huge impact in taxation, vastly reducing non-resident landlord’s tax bills.

However, in our experience, few tax advisers are actually taking advantage of these changes in non-resident taxation or else purposely ignore them so as not to ‘overcomplicate’ themselves on filing tax forms! This translates into their clients facing large tax bills which could have been legally avoided if some care and diligence had been put in.

Larraín Nesbitt Lawyers offers a standardized tax service in English for non-residents which is easy to understand and very competitively priced. Do not allow yourself to be discouraged from renting out your Spanish property. As we care to quote in all our holiday home tax articles:

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

Ideally, this article should be read in tandem with the one we wrote last year on the same topic: Holiday Home Taxation in Spain.

Who qualifies for landlord tax relief?

• You are EU/EEA-tax resident
  
• You can attain a tax residency certificate from your home country

What makes our rental tax service different and why should you hire us?

• We offer to reduce your non-resident landlord tax bill by a minimum of 40% – or money-back guarantee. No questions asked. *
• On average, we reduce landlord’s tax on rental income by 70%, or more.
• Deal only with native English-speaking lawyers and economists. No lost in translation shenanigans.
• Very competitive fees.
• Fast, responsive, easy-to-understand tax service.
• We will calculate and put in writing exactly how much money on taxes we have saved you through our tax service.

*luxury rentals are excluded from this offer

New changes to non-resident taxation: the taxman knows

The Spanish taxman knows you are renting. Three landmark changes in taxation took place in 2018 which constitute game-changers.

Don’t make the glaring mistake of underestimating the Spanish Tax Office (AEAT) thinking it is unaware of your rental income business. You will be caught and slapped a fine. The Spanish Tax Office is actively cracking down on taxpayers, both resident and non-resident, who fail to file and report their rental income. Spain’s AEAT is slow albeit relentless.

1. The Common Reporting Standard (CRS).

Over 100 countries signed an agreement to combat tax evasion. This agreement came into force in Spain on January 2018. It has as a pivotal hallmark the automatic exchange of fiscal information between countries on taxpayers. Signatory countries no longer need to formally request information on taxpayers, they receive it automatically - without even having to ask for it. Both the United Kingdom and the ‘not-so-united’ Kingdom of Spain have both signed it. It is foolish to think the (Spanish) taxman is not aware of your Spanish rental income if you have been declaring it in your home country in lieu of Spain. This tax on rental income should have been declared and paid in Spain, not in your home country i.e. in the UK. As a result of the CRS, you may have received earlier on this year letters from your Spanish bank asking you to disclose tax information or else threatening you to block your accounts in Spain. 

An in-depth look into the impact of the CRS in our article: Non-Resident Income Tax.

Bottom line, your home country is busy informing the Spanish Tax Authorities - and vice versa - on your tax affairs: reported income, savings, assets, investments, pension pot etc.

2. Full disclosure agreements signed in 2018 between the Spanish Tax Office and property portals (AirBnb).

Despite putting up a cat fight, the US giant AirBnb finally caved in and agreed to bury the hatchet on signing a full disclosure agreement with Spain’s Tax Office (source: Cinco Dias, The Ibizan). The newly updated privacy policy conditions for Spain, effective 25^th May 2018, now read as follows on section 3.10:

"3.10 Tax Office

Hosts and Guests expressly grant us authorization, without additional notification, to disclose data of the Hosts and Guests and other information regarding both or their transactions, reservations, accommodations and taxes on accommodation to the relevant tax agencies, including, among other information, the name of the Host or Guest, the ad addresses, dates and amounts of transactions, NIF / CIF and contact information, as well as the amount of taxes that the Hosts have received from Guests (or that they owe to the first).”

These new terms apply to all properties located within Spanish territory. It doesn’t matter if you sign an agreement in the UK, it is the Spanish terms that are applied because the properties are located in Spain.

In short, AirBnb will tell the tax office everything they need to know. The tax office will be able going forward to calculate how much back tax you owe on undeclared rental income (and slap you fines and delay interests). This exchange of information begins end of 2018 / early 2019 backdated to May 2018.

It follows that if the Spanish Tax Office had AirBnb bend the knee - the most powerful of the pack - other portals will follow suit. It is only a matter of time.

If you have not been declaring and paying tax on your rental income in Spain, you should pre-empt fines, delay interests and surcharges by coming clean and filing taxes before the Spanish Tax Office is on to you.

Be proactive and speak to Larraín Nesbitt Lawyers to regularize your tax situation for a nominal fee ASAP. Be smart, avoid fines, penalties and delay interests!!

3. Tax form 179

Last month, we saw the creation of the new quarterly tax form 179. This form creates the obligation for holiday letting intermediaries (i.e. property portals) to report to the Spanish Tax Office on a quarterly basis. They will supply all relevant information to the tax office on property identification, guest details, landlord’s rental income, number of days hired, method of payment, etc. Non-compliance by letting intermediaries has associated fines that range from €20 to €600,000.

Non-payment: Tax office penalties

The Spanish Tax Office has already issued warnings to over 134.000 property owners advertising holiday lettings over unpaid tax. Fines for non-payment of tax on rental income range from 50 to 150% of the undeclared amounts, plus delay interests. The AEAT can collect taxes dating back 4 years. These fines are in addition to those levied by Regional Tourist Authorities (see section below) on unlicensed holiday rentals (up to six-figures!)

If you want to take your chances with the Spanish Tax Office, good luck with that, you will receive a nasty letter such as this one: requerimiento inspección.

You only have 10 days to answer (in Spanish) the tax office’s letter. If you are a non-resident, chances are you won’t be able to and will be landing yourself in hot water.

Don’t risk it, pay your taxes. Larraín Nesbitt Lawyers will greatly reduce your tax bill.

Regional Tourist Authorities – attain a holiday rental licence

Several regions across Spain, on the back of popular uproar and nudged by the hotel industry, have enacted holiday home laws over the last years which range from the overtly permissive to uber-restrictive (i.e. Balears, Catalonia). All these regions require you attain a tourist rental licence if you do not want to be fined for leasing illegally to tourists.

The regional fines for non-compliance are steep across the board, reaching 6-figures in most cases. Take good note that these humongous fines imposed by Regional Tourist Authorities are totally unrelated, and in addition, to those imposed by the Spanish Tax Office on any undeclared rental income (see section above).

If you plan to offer your property out as a holiday rental, you should first register it and attain a Tourist licence from your Regional Tourist Authority.

---> Larraín Nesbitt Lawyers offers a 24-hour registration Tourist licence service exclusive to the region of Andalusia: Registration of Holiday Homes (Andalusia). We will set you up and make it very easy for you to start renting out legally in a jiffy.

Non-Resident Landlord Tax Obligations

Non-resident landlords are liable for the following two set of taxes, depending on whether you rent out or not.

I. You lease your property: Non-Resident Income Tax (NRIT)

Paid quarterly

On owning property in Spain and renting it out, whether long or short-term, you need to file a quarterly tax on your rental income. One tax form needs to be filed for every joint owner.

Filed: quarterly, on the first 15 days of every January, April, July and October.

Tax rates:

• Resident in E.U., Iceland or Norway: 19% of net profit
• Rest of the world: 24% of net profit

--->We offer you this tax service: Holiday Rental Accounting Service (HRAS)

Flat fee: €125/tax quarter/per property*

*Includes only up to two joint owners. More than two joint owners, has a higher fee. Does not include additional accounting services such as VAT invoicing i.e. your tenant is a company.

II. You do NOT rent out your property: Non-Resident Imputed Income Tax (NRIIT)

Paid once a year

Even if you do NOT rent out your property in Spain, regardless, non-residents still need to file once a year this testimonial tax. Also, on the days you do not rent out your property in Spain these are taxed as imputed income on a pro rata.

It is a legal fiction whereby it is surmised that you derive some form of financial benefit from your Spanish home; that is why it is called non-resident imputed income tax as it is deemed. Spanish 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.

Filed: once a year, before end of December of following year.

Tax rates: Rent is assessed as 1.1% or 2% of cadastral value. Tax rate is applied on this amount.

--->We offer you this tax service: Non-Resident Income Tax (Fiscal Representation).

Flat fee: €100/year *

*This fee includes up to two joint owners.

Conclusion

Dodging taxes on rental income is risky business in Spain following the changes above, besides many others I do not care to list e.g. cross-checking utility consumption against properties which are purportedly ‘empty’ etc.

Bottom line, the tax office is launching a widespread campaign to catch all those landlords who systematically fail to pay taxes on their holiday rentals. Be legal, don’t get caught out.

Why pay more taxes than you ought to?

Don’t overpay taxes – contact us. Our team of native English-speaking lawyers and economists has a long track record (over 15 years' experience) successfully assisting expats on their tax matters in Spain.

Come and speak to Larraín Nesbitt Lawyer’s friendly staff, we will mitigate your tax exposure with efficient tax-planning and avoid non-optimal taxation scenarios, within the law.

We file taxes all over Spain.

We offer the most competitive fees in the market.

Holiday Rental Accounting Service (HRAS) from only €125/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.

"Ofrecer amistad al que busca amor es dar pan al que se muere de sed." – Gabriel García Márquez

Gabriel ‘Gabo’ José de la Concordia García Márquez (1927 - 2014). Colombian master novelist, short-story writer, screenwriter and journalist. Awarded the Nobel Prize in Literature in 1982. Outstanding example of the ‘magic realism’ literary Bewegung. Among his most lauded novels are One Hundred Years of Solitude, The Autumn of the Patriarch, and Love in the Time of Cholera. From humble origins and through great personal sacrifice, he turned in deposit bottles and collected old newspapers for cash in Paris, he rose to prominence with the invaluable support of his wife and closest friends. 

Article also published at Spanish Property Insight: Holiday Rental Taxation in Spain

Legal & tax services available from Larraín Nesbitt Lawyers:

• Non-Resident Income Tax (Fiscal Representation) from €90
• Holiday Rental Accounting Service (HRAS) from €100
• Registration of Holiday Homes (Andalusia)
• Spanish Inheritance Tax (IHT)
• Spanish Inheritance Tax Assessment Report (SITAR)
• Wealth Tax
• Spanish Resident Income Tax (IRPF)
• Tax form 720

Holiday rental taxation-related articles

• Holiday Rental Laws in Spain – 8th of March 2015
• Non-Resident Taxes in Spain – 8th December 2015
• Holiday Rental Laws in Andalusia (Decree 28/2016) – 8th of February 2016
• Renting in Spain - Landlord´s Taxation – 8th of January 2017
• Holiday Home Taxation in Spain – 8th of July 2017
• Holiday Rentals in Andalusia Made Easy – 3^rd July 2017
• Non-Resident Income Tax – 8^th December 2017
• Holiday Rental Taxation in Spain – 8th July 2018
• Holiday lettings: with or without VAT? – 21st June 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. VOV.

2.018 © Raymundo Larraín Nesbitt. All rights reserved.

Contrary to popular belief, it is not all bad news on becoming resident in Spain. Lawyer Raymundo Larraín sheds some light on the matter, casting away some widely held prejudices.

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 © 2018. Plagiarism will be criminally prosecuted.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8^th of March 2018

Introduction

2018 will go down as a year of changes. The advent of the Common Reporting Standard (CRS, for short) coupled with the dreaded Brexit will significantly dent the taxation of non-residents in Spain.

‘Fake’ non-residents in Spain will have already started to feel the heat from their lenders as from early January in the shape of letters, emails and phone calls requesting clients confirm their tax details that will be relayed over to the Spanish Tax Office. Moreover, some Spanish banks have even contacted some of my clients threatening them with freezing their bank accounts in Spain unless they could prove their alleged 'non-resident' status. This is quite the change from what we were used to in Spain in previous years where it was ‘no pasa nada’.

The Spanish Tax Office receives information from 47 different sources (!). So, going forward, ‘fake’ non-residents are playing a cat and mouse game with the tax office that will likely end (very) badly for them. Not to mention they could also get into trouble with their home country’s tax office as well. I already made it clear in previous taxation articles that you have to come out clean in 2018; or you are resident, or you are non-resident in Spain for tax purposes. You can no longer sit on the fence gaming the system to your advantage.

The purpose of this article is to give some pointers on why becoming (tax) resident in Spain is not as bad as some people would have us believe. Mind you, if you do become tax resident in Spain, you will be taxed on your worldwide income unless you are lucky enough to attain from Spain’s Tax Office a coveted Non-Domiciled tax status (only affluent taxpayers need apply, thank you very much) which basically legally exempts you from paying tax on your worldwide assets/income. So much for equality.

Advantages on becoming resident in Spain

The below list is open-ended, there are many more I do not mention (regional variations).

Income tax

• Holiday home rentals: Landlords can benefit from lenient tax relief which on average reduces your tax bill by 70%, or more. Ideal for those with tourist rentals.
• Residents and EU-residents pay a much lower percentage as opposed to non-residents (approximately 21% less tax).
• Residents in Spain do not have to pay every year Non-Resident Income Tax.
• You do not need to file an income tax return for earnings below €22,000 from one employer (not as self-employed)*.

Inheritance tax:

• Take advantage of lenient tax allowances (at a three-tier level: national, regional and local) which make a vast majority of foreign inheritors not having to pay ANY inheritance tax whatsoever in Spain. For example, in Andalusia inheritances under one million euros are untaxed (per beneficiary). Post-Brexit inheritance taxes in Spain will be punitive for most British residents. If you are concerned on this, you can commission from us a Spanish Inheritance Tax Assessment Report (SITAR) which lays out clearly how much inheritance tax your heirs stand to pay in Spain. You can of course apply for unilateral tax relief from the HRMC (on the inheritance tax bill paid in Spain) despite their being no double-taxation treaty on inheritance matters.
• 95% of tax reduction on a heir’s taxable base on his main home (up to 99.99% in some regions in Spain i.e. Andalusia). **

Gift tax

• Multiple regions in Spain offer generous tax allowances between next-of-kin i.e. Valencia offers €156,000 tax-free for cash gifts to under 21-year-olds. €100,000 euros tax-free for over 21-year-olds.

Capital gains tax (on selling your property in Spain)

• No 3% of the sales proceeds withheld by the Spanish Tax Office on selling your property in Spain.
• Rollover relief: investing the sales proceeds in a new main home in Spain (or in the European Union) will negate completely your cgt liability.
• Absolute relief:  pay no capital gains tax on selling your property in Spain. Over 65-year-olds are not liable for cgt on selling their main home. ***
• More details on this in our in-depth taxation article: Capital gains tax mitigation on selling (or gifting) property in Spain – 8th May 2019

Plusvalia tax (on selling, on inheriting)

• Town halls offer significant discounts to residents. Up to 95% in some cases.

IBI tax (Spain’s council tax)

• Significant discounts available to residents.

Wealth tax

• Wealth tax: huge reductions available for residents (€300,000 on main home, per partner) besides a personal tax-free allowance of €700,000. A resident couple may apply for a combined €600,000 tax reduction on their main home (in addition to their own personal tax-free allowance of €700,000 each).
• Spain’s Non-Dom Tax Scheme (for affluent expats)

Other advantages

• Access to free state healthcare: more information in my article How to apply for healthcare in Spain.
• Voting rights in local elections: enrolling on your local town hall census (Padron) allows your town hall to receive more funds which in turn are used to improve public services (more ambulances, increased medical attention, discounts on public services etc.). This also allows you the right to vote in local elections.
• Mortgage loan applications: Non-residents are limited to 60 - 70% LTV. Whereas Spanish residents are handed out more lenient terms, generally being able to borrow 80% LTV, or even more. When you are starting out your own business in Spain, this can make a key difference on the money you can raise.
  
• Lease agreements: Non-residents, perceived as a greater financial risk because they have no ties to Spain, are required additional financial assurances from their landlords (read increased deposits i.e. 6-months in advance). Whereas Spanish residents are left off the hook and only need to comply with the bare minimum.

_{* Subject to terms.
** Subject to a cap.
*** Subject to terms.}

Conclusion

Do you still think that becoming tax resident in Spain offers no real advantages? Think again.

Our team of native English-speaking lawyers and economists have a long track record (over 15 years' experience) successfully assisting expats on their tax matters in Spain. If you pay more taxes than you should, it is only because you want to.

Come and speak to qualified professionals, we will mitigate your tax exposure with efficient tax-planning and avoid non-optimal taxation scenarios.

Larraín Nesbitt Lawyers, small on fees, big on service.

“Está el hoy abierto al mañana.

Mañana al infinito.

Hombres de España: ni el pasado ha muerto,

ni está el mañana ni el ayer escrito" – Antonio Machado.

Antonio Cipriano José María y Francisco de Santa Ana Machado y Ruiz (1875 – 1939). Brilliant Spanish poet and one of the leading figures of the Spanish literary movement known as the Generation of ’98. Died in exile during the fratricidal Spanish Civil War. He is credited as being one of Spain’s most popular poets. Amongst his timeless classics, Campos de Castilla stands head and shoulders above the rest.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, 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.

Article also published at Spanish Property Insight: Tax advantages on becoming resident in Spain.

Legal services Larraín Nesbitt Lawyers can offer you

• IRPF (Spanish Resident Income Tax) from €295
• Conveyancing – Buying from €995
• Conveyancing – Selling from €795
• Non-Resident Income Tax (Fiscal Representation) from €90
• Holiday Rental Accounting Service (HRAS) from €100

Related articles

• Buying Property in Spain from a Private Seller (Resale Property) – 21st of February 2017
• Buying Property in Spain from a Developer (Off-Plan Property) – 8th March 2017
• How to inspect an off-plan property overseas – Q&A with The Sunday Times. July 2017
• Buying Property in Spain – 10 Reasons to Hire a Lawyer – 8th November 2016
• Selling Property in Spain – 10 Reasons to Hire a Lawyer – 8th December 2016
• Non-Resident Taxes in Spain – 8th December 2015
• Non-Resident Income Tax – 8th December 2017
• Tax advantages on becoming resident in Spain – 8th March 2018
• Capital gains tax mitigation on selling (or gifting) property in Spain – 8th May 2019

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. VOV.

2.018 © Raymundo Larraín Nesbitt. All rights reserved.

Solicitor Raymond Nesbitt gives us a year-end recap of the taxes non-resident landlords are liable for on owning and renting out property in Spain. Additionally, he walks us through the impact of the Common Reporting Standard.

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. Seek professional legal advice on your matter – see disclaimer below.

By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
8^th of December 2017

Introduction

I’m going to split this month’s contribution in two sections:

1. I will kick off my article with the novelties introduced by the Common Reporting Standard as it marks an inflection point on non-resident taxation in Spain. This landmark agreement will force scores of non-resident taxpayers to think carefully on whether they come clean and become tax resident (in Spain) as this may have associated great fiscal advantages (listed below). The driving point I want to make clear in this article is that after this tax milestone becomes effective next 2018 nothing will ever be the same.
2. The second part of the article acts as a gentle year-end reminder of the taxes non-residents have to pay on owning property in Spain. In my experience, the vast majority of non-residents are blissfully unaware of their tax liabilities on owning and renting property. This apathy has serious negative consequences as I care to explain below (i.e. losing substantial money on selling property in Spain; explained below).

I. The Common Reporting Standard and you

Whilst it is true the Spanish Tax Office (AEAT) traditionally adopted a blind eye towards non-resident non-tax compliance in the not so distant past, this is no longer the case by a long shot. The AEAT has dropped its paternalistic leniency and has been busy honing its claws and fangs on the wake of the Great Recession devising new methods to extort exact taxes. The widening public deficit in Western countries, led eagerly by care-free politicians obsessed with short-term opinion polls, has spurred taxmen to collect taxes in a more resolute manner leading to ‘creative’ solutions and burgeoning cross-border co-operation.

As an example of this budding trend, over 109 countries around the world, including all those belonging to the Organisation for Economic Co-operation and Development (OECD), signed three years ago a pilot initiative to automatically exchange fiscal information to combat tax evasion. As from 2018 Spanish Tax Authorities will automatically receive a great deal of fiscal information from non-resident owners, including UK and Irish nationals. This initiative is known as the Common Reporting Standard (CRS) and is a shameless mimic of the US’s wildly successful 2010 FATCA agreement which has proven adept at catching legions of non-compliant U.S. taxpayers.

In a nutshell, what the CRS does is to pull away the warm mantle of fiscal anonymity and make everyone lose their financial privacy. Its wide-reaching ripples have spilled over to multiple tax havens as well, namely UK overseas territories and the Channel Islands. Graphically, it is like the tideline receding all of a sudden, leaving ill-advised swimmers stranded and stark naked before the taxman.

All those expats who purposely – and sneakily – like gaming the system from a cosy hedge without declaring income (or paying taxes) in one country or another will have a problem going forward. You can no longer dwell and thrive in a grey area, in-between countries, to avoid paying taxes. If you own assets and receive rental income in one country but live in a second country, chances are both countries are going to know and act upon it, soon.

Leading up to this moment, the Spanish Tax Office slyly pre-empted this by requesting from resident taxpayers to comply with what is known as tax form 720 which discloses any assets tax residents in Spain hold abroad over €50,000. The Spanish Tax Office, after casting its own net and sniffing around, will now be able – for the first time ever – to cross-check tax declarations of hundreds of thousands of resident expats in Spain against the tax information supplied by fellow OECD tax offices in search of ‘discrepancies’. God forbid.

Fines for tax model 720 follow a sliding scale, but any ‘incongruity’ is fined starting at €10,000 and any data ‘omitted’ is fined starting at €5,000. Fines can lead up to a staggering 120% of the undeclared amounts you hold abroad on being resident in Spain. The afore does not preclude the fines for Income Tax which additionally can be up to 150%. In a classically fashioned pincer movement – coincidentally, no doubt – Spain’s Criminal Code was recently amended during the infamous Tax Amnesty to double the statute of limitations from 5 to 10 years in cases of tax evasion (defrauded amounts over and above €120,000). The cynic in me clearly sees a two-pronged strategy to nudge unwilling taxplayers (sic) to cross the line and become fully tax-compliant disclosing assets abroad or else face the risk of harsh penalties. Carrot or stick; it never ceases to amaze me how such a simple strategy is yet so very effective. In the spirit of full disclosure, Brussels has challenged the eye-watering fines of tax model 720, but for the time being they are very much enforceable by Spain.

The Spanish Tax Office hasn’t been dithering over the last two years and has been busy leading a pro-active hounding of non-taxpayers clawing back taxes. With particular emphasis on those living opulently in lavish villas locked up in a string of shadowy holding structures which nominally belong to third parties without paying a monthly rental. They have also been actively targeting property owners who fail to declare their annual Non-Resident Imputed Income Tax. And recently, over the last year or two, regional Tax Authorities have also jumped into the fray actively chasing non-compliant holiday home landlords on the back of the new raft of holiday home regulations as has been widely reported by Spanish Property Insight and other high-profile media. As an example, in my blog post from last October, I explained how the region of Andalusia have begun to fine non-compliant holiday home landlords with fines which range from €2,000 up to €150,000: Andalusia starts fining holiday home landlords.

Bottom line, for your own sake, if you own assets in Spain, get your taxes sorted out pronto because it is a ticking time bomb and time is running against you.

Now that I have caught your attention, and perchance given more than one reader a stomach ache, I list the tax obligations of expat landlords in Spain.

II. Non-Resident Income Tax

Unbeknownst to most non-resident Spanish property owners, irrespective of whether you let your property out or not, you are liable for tax every day of the year.

1. Non-Resident Imputed Income Tax (NRIIT) – You do NOT let property

On owning property in Spain, even if you do NOT rent it out you must nonetheless file and pay once a year NRIIT. It is a legal fiction whereby it is surmised that you derive some form of financial benefit from your Spanish home; that is why it is called non-resident imputed income tax as it is deemed. 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 is taxed accordingly.

On selling your property, the Spanish Tax Office will verify you are up do date paying NRIIT; otherwise they will simply pocket all or part of the 3% retention a property buyer is forced to withhold on buying your property and pay it into the Tax Office. Losing 3% of the sales proceeds is a large amount of money for most people. You can pre-empt this on being up to date with this tax. This tax is ultra-low, and its true purpose is to serve as 'control'.

This tax is collected once a year. To be paid before the 31^st of December of the following year.

You can contact us until the 21^st of December 2017 to file and pay your Non-Resident Income Tax (scroll below for our law firm's contact details).

Our law firm offers the following legal service to file this annual tax at a very competitive fee: Non-Resident Income Tax (Fiscal Representation).

Stragglers are welcome!

2. Non-Resident Income Tax (NRIT) – You let property (long or short-term)

In addition to filing the above annual tax, when you rent out Spanish property, whether as a long or short-term rental (i.e. holiday home or seasonal let), you also need to file and pay quarterly NRIT in Spain. On the days a property is effectively not rented out (think short-term lettings) a landlord is still liable for Non-Resident Imputed Income Tax on a pro rata basis (see section one above). Put simply, one way or another, you pay tax on the property every day of the year.

Following the double taxation treaty between Spain and the United Kingdom (updated in 2014), non-resident landlords need to file and pay tax on their rental income in the country where the real estate asset is located. So, for example, if a British national owns property in Catalonia (Spain) and rents it out as a holiday home during the summer season, they must declare and pay tax on their rental income into the Spanish Tax Office. If this British landlord is declaring and paying his Spanish derived rental income only in the UK, where he is tax domiciled, he would in fact be breaching Spanish tax laws. Thousands of British make this glaring mistake and are going to get into trouble with the Spanish Hacienda. UK tax domiciled owners need to declare and pay tax on their rental income in both countries. Following the double taxation treaty, HM Revenue & Customs gives tax breaks on any rental income tax paid in Spain, so you don’t have to pay tax twice.

This tax is collected quarterly, on the first 20 days of every January, April, July and October.

Generous landlord tax relief is available even if a landlord is non-resident in Spain (albeit EU/EEA-resident). This tax relief can greatly reduce a landlord’s taxable base. More details on this taxation and landlord tax relief, in my articles:

• Renting in Spain: Non-Resident Landlord's Tax Relief – 14th of January 2017

• Holiday Home Taxation in Spain – 8^th July 2017

Our law firm offers the following bespoke accounting service to file this quarterly tax for a nominal fee: Holiday Rentals Accounting Service (HRAS).

Resident: to be or not to be – that is the question

To ascertain whether you qualify as resident or non-resident the Spanish Tax Office applies the following criteria:

• You spend more than 183 days in a calendar year in Spanish territory.
• Your centre of financial interests is located in Spain.
• Your spouse and/or underage children live in Spain.

If any, or all three, above apply you will be regarded as resident for tax purposes.

Resident in Spain: tax advantages

Now that we have gotten out of the way that you can no longer game the system pretending not to be resident in Spain following the introduction of the CRS, you may be surprised to learn there are a great number of tax advantages on becoming tax resident in Spain.

Post-Brexit, many of the tax advantages that British could benefit from as members of the European Union will cease to exist. As an example, in a recent Spanish Inheritance Tax Assessment Report (SITAR) we completed on behalf of a UK-domiciled client, it resulted in him having to pay 2,300% more (two thousand three hundred pc) in IHT post-Brexit than if he were Spanish (or EU) tax resident. Food for thought.

I have collated a few tax advantages on becoming tax resident in Spain, but there are many more. Speak to us for more details.

• Income tax: landlords can benefit from lenient tax allowances which on average can reduce your tax bill by as much as 40%. Ideal for those with tourist rentals.
• Income tax: residents and EU-residents pay a much lower percentage as opposed to non-residents (approximately 25% less tax).
• Income tax: residents in Spain do not have to pay Non-Resident Income Tax.
• Income tax: earnings below 22,000 euros from one employer are not obliged to make a tax return in Spain (does not apply to self-employed)*.
• Inheritance tax: take advantage of generous tax allowances (national, regional and local) in place which make a majority of inheritors not having to pay ANY inheritance tax whatsoever in Spain.
• Inheritance tax: 95% of tax reduction on a heir’s taxable base on main home (up to 99.99% in some regions in Spain i.e. Andalusia). **
• Selling your property in Spain: pay no capital gains tax. ***
• Selling your property in Spain: no 3% of the sales proceeds withheld by the Spanish Tax Office.
• Wealth tax: huge reductions available for residents (€300,000 on main home, per partner). A couple can apply for a combined €600,000 reduction.
• Spain’s Non-Dom Tax Scheme (for affluent expats)

* Subject to terms.
** Subject to a cap.
*** Subject to terms.

Conclusion

Following the CRS, Spain’s Tax Office will now have unprecedented access to fiscal information from your home country as from 2018. This will allow it to boldly cross-check fiscal information of thousands of expats, resident or not in Spain. And what’s better, they won’t even have to ask for it as it is automatically exchanged between OECD members.

The always divisive red line that separates tax avoidance (legally acceptable tax planning) from tax evasion (criminally pursuable) has grown ever thinner. Make no mistake, as from 2018 the net is closing in. There will no longer be a warm cosy grey area to shelter in. The question is if you will fall in line or remain out of line

If you choose the former, we can help you sort out your tax affairs regularising them for a nominal fee for your peace of mind. We only charge for our legal services; a pain-free stomach is gratis. 

Act now, before it is too late. Contact us free of compromise on your tax matters, we are here to help.

“You never know who's swimming naked until the tide goes out.” – Warren Buffet.

Legendary American business magnate, investor, and philanthropist. Wharton School graduate nicknamed the ‘Oracle of Omaha’. CEO and Chairman of Berkshire Hathaway. Despite a reported net worth of $80bn as of 2017, true to himself, he still lives in the same house he bought in 1958.

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, litigation, conveyancing, and inheritance. 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.

Article originally published at Spanish Property Insight: Non-Resident Income Tax

Legal services Larraín Nesbitt Lawyers can offer you

• Non-Resident Income Tax (Fiscal Representation)
• Holiday Rentals Accounting Service (HRAS)
• Spanish Inheritance Tax (IHT)
• Spanish Inheritance Tax Assessment Report (SITAR)
• Wealth Tax
• Tax Model 720
• IBI Tax (Town Hall Rates)

Taxation-related articles

• Spain’s Wealth Tax Reloaded – 8th September 2011
• Spanish Wealth Tax (Patrimonio) – 8th November 2011
• Fiscal Novelties Affecting Spanish Property Owners – 8th December 2012
• Buying and Owning Spanish Property through Companies: Pros and Cons – 7th March 2014
• Taxes on Selling Spanish Property – 8th December 2014
• Changes to Spain’s Inheritance and Gift Tax Law – 21st February 2015
• La Complementaria or ‘Bargain-Hunter Tax’ – 8th May 2015
• Taxes on Buying Spanish Property – 8th July 2015
• Dispelling Spanish Inheritance Tax Myths – 8th August 2015
• Non-Resident Taxes in Spain – 8th December 2015
• Spanish Inheritance Tax for Non-residents (Part I) – 8th February 2016
• Spanish Inheritance Tax for Non-residents (Part II) – 8th March 2016
• Spain’s Non-Dom Tax Scheme – 8th July 2016
• Inheritance Tax Novelties in Andalusia. FAQ on IHT – 8th September 2016
• Renting in Spain - Landlord´s Taxation – 8th of January 2017
• Renting in Spain: Non-Resident Landlord's Rental Tax Relief – 14th of January 2017
• Which beneficiaries are hit worst by Spanish Inheritance Tax (IHT)? – 2nd June 2017
• Holiday Home Taxation in Spain – 8th of July 2017
• Andalusia to slash Inheritance tax for inheritances under 1 million euros – 21st September 2017
• Spanish Inheritance Tax Assessment Report (SITAR) – 8th of October 2017
• Non-Resident Income Tax – 1st December 2017
• Non-Resident Income Tax – 8^th December 2017

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. VOV.

2.017 © Raymundo Larraín Nesbitt. All rights reserved.