What taxes to pay in Spain
What taxes do you have to pay in Spain? When do you have to pay them? Are there differences for residents and non-residents? Questions we have tried answer in this article – information provided by Perez Legal Group.
Tax obligations for non-residents who own a property in Spain
If a property is not rented to a third party, the owner(s) will have to pay an annual tax based on the deemed rental value of the property. The taxable base is 2% of the cadastral value of the property (or 1.1% if this value has been revised within the last 10 years) and the tax rate is 24%. For EU residents, this tax rate was reduced from 1 January 2016 to 19%. In both cases, property costs cannot be deducted. The deadline to submit an annual non-resident tax declaration is 31 December.
If the property is rented to a third party, the rental income must be declared and tax is payable to the Spanish tax authorities. For EU citizens, the tax rate is 19% of the net rental income. For non-EU citizens, the tax rate is based on the gross rental income and the tax rate is 24%. For EU citizens, only costs that are directly related to the generation of the rental income are deductible (ie. agent fees, cleaning, laundry, repairs and maintenance). For all other property costs (ie. local rates, community fees, utility costs and mortgage interest), these are deductible on a pro rata basis based on the number of days the property is rented.
The deadlines to submit quarterly non-resident tax declarations are 20 January, 20 April, 20 July and 20 October.
Tax obligations for residents who own a property in Spain
A person is regarded as a tax resident if they spend more than 183 days in Spain in a calendar year. They can however be considered a tax resident if the centre of their family/business/economic activities is in Spain, irrespective of the number of days spent in Spain in a calendar year, unless they can prove official tax residency in another country. Spanish residents are obliged to declare all of their income and their worldwide assets (including all forms of capital gains, gifts and inheritances received).
The Spanish tax year is the calendar year 1 January to 31 December.
Since 1 January 2013, Spanish residents have been required to declare their ownership of non-Spanish assets as follows:
1) Properties outside Spain – You are required to declare the type of property, the address, the date of purchase, the ownership percentage and the purchase price of the property (ignoring the percentage of ownership).
2) Bank accounts outside Spain – You are required to declare the name of the bank, the full address of the bank, the type of account, the account details (including IBAN), the date the account was opened, the ownership percentage, the bank balance at 31 December and the average bank balance during the fourth quarter (ignoring the percentage of ownership).
3) Other investment assets outside Spain – (ie. investment bonds, shares, insurance products and any other related financial assets). You are required to declare the name and type of investment, the date of purchase, the type and ownership percentage and the value as at 31 December (ignoring the percentage of ownership). This information may vary depending on the type of asset. For example, you will need to provide the ISIN number for shares listed on the Stock Market). This annual declaration should be filed in March of each year.
If the sum of the assets in each of these categories exceeds €50,000, a Modelo 720 declaration must be completed and submitted to the Spanish tax authorities. In subsequent years, this form will only be required if the assets in any of the three categories increases by more than €20,000. Please note, you should keep an eye on exchange rates when calculating this figure.
The deadline to submit a Modelo 720 declaration is 30 March of each year. You should take these M720 rules very seriously because the tax fines in the event of a tax inspection or a late filing can be penal.
Due to the ‘esoteric’ rules and implications behind this legislation, you should seek professional advice and guidance before filing of this declaration.
Income Tax Declaration
As mentioned above, Spanish residents have to declare their worldwide income. Depending on the type of income, the taxes are as follows:
1) Income from dividends, deposit interest and all forms of capital gains. This is usually called “investment income” and the tax rates for 2018 are 19% for the first €6.000, 21% on the next €44.000 and 23% on the balance.
2) Employment income, self-employed income, pension income and rental income. The tax rates, after personal and family allowances, for 2018 are between 12% and 48%.
3) If you have sold a property in the last tax year, you will have to declare any capital gains. This is calculated based on the difference between the selling price and the purchase price less any inherent taxes and costs. The capital gain is then taxed at the relevant investment tax rates as detailed above.
Finally, any taxes paid in another country where there is a double taxation agreement may be credited against the taxes payable in Spain.
The deadline to submit an Income Tax declaration is 30 June of each year.
Information and documents needed to prepare an income tax declaration
Full details of all family members – including name, nationality, address, marital status (single, married, divorced, etc.), details of children and dates of birth.
A copy of the NIE number for all the family members.
A copy of the previous year’s IBI receipt for the property which is your home dwelling, showing the cadastral reference for the property.
If the property where you live is owned or rented. If it is rented, the DNI/NIE of the landlord and the rent paid during previous year.
If the property owned has an outstanding mortgage, the capital and interest paid during previous year.
Copies of the income tax declarations submitted for the previous four years (as there may be useful allowances and deductions available for the current tax year2017).
Any other relevant information.
Certificates showing any salary income received.
Certificates showing any pension income received.
Any other related income.
Self-employed income (autónomos):
Details of income and expenses during the previous year.
Copy of the Modelos 130/131 for the previous first, second, third and fourth quarters.
Copy of any social security payments made during the previous year.
Income from properties:
Rental income and property costs incurred (community fees, utility bills, local rates, insurance, agents fees, etc.) for all properties.
A copy of the previous years IBI receipt for each property.
Periods where each property has been rented during previous year.
A copy of the purchase deed for each property.
Income from investments:
Bank interest – bank certificates (information fiscal) from Spanish Banks. In the case of foreign banks, details of interest received and any tax paid at source.
In the case of dividend income received, certificates showing the income received and the tax paid.
Income from other investment products (bonds, annuities, life insurances, etc.) including capital gains and losses.
Profit or losses from the sale of properties, shares, bonds or any other type of investment. For each asset, the dates for the purchase and sale and the purchase and sale price.
If the value of your net worldwide assets exceeds €700.000, you will have to pay wealth tax. The tax bands start at 0.2%. The deadline to submit a Wealth Tax declaration is 30 June each year.
The Wealth Tax rates in Andalucia are as follows
Companies and self-employed:
Companies and self-employed workers must submit quarterly tax declarations, annual tax declarations and bookkeeping accordingly. The deadlines to submit tax declarations are 20 January, 20 April, 20 July and 20 October.
VAT (Modelo 303) – This is a tax that is granted to the State when acquiring or buying products. In other words, it is a consumption tax paid for the value of products and services. All companies and self-employed workers registered for VAT must declare VAT (Modelo 303) quarterly. The deadlines are 20 January, 20 April, 20 July and 20 October.
IRPF (Modelo 111) – All companies and self-employed people registered for IRPF must complete an IRPF (Modelo 111) quarterly. The deadlines are 20 January, 20 April, 20 July and 20 October.
IRPF (Modelo 115) – All companies and self-employed people registered in IRPF for the rental of premises must declare the IRPF (Modelo 115) quarterly. The deadlines are 20 January, 20 April, 20 July and 20 October.
Annual Taxes (Modelos 390, 190 & 180) – These are annual payments for the above mentioned taxes. The deadline to submit annual taxes is 30 January. for Modelo 390 and 31 January for Modelos 190 & 180.
Modelo 347 – Annual Informative declaration (suppliers and clients more than €3.005 during the year). The deadline to submit Modelo 347 is 28 February.
Modelo 130 – Only self-employed people have to submit Modelo 130. This is a tax to declare quarterly income and expenses. The deadlines are 20 January, 20 April, 20 July and 20 October.
Modelo 232 – Only companies have to submit Modelo 232. Since November 2017, Spanish Companies are obliged to submit this annual tax return declaring transactions with related persons and companies (transactions with shareholders, directors, family, etc.) and transactions within tax havens.
The categories are as follows:
Category 1 – Information on transactions with related persons or companies (transactions with shareholders, directors, family, etc.).
Category 2 – Transactions with related persons or companies in case of application of the reduction of income from certain intangible assets.
Category 3 – Operations with countries considered to be tax havens. The deadlines for Modelo 232 is 30 November of each year.
The above information has been provided by the Perez Legal Group, Avenida Ricardo Soriano 4-1, 29601 Marbella. Services: Tax, Accounts & Fiscal Advice for companies and the self-employed, Conveyance & Litigation Law, Inheritance services for foreigners and Spanish wills. www.perezlegalgroup.com
Please note: The information provided above is based on our understanding of current legislation. It is not legal advice, but it has been provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you seek professional advice.