Spanish Income Tax on rental income

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    • #53616

      Hi All.

      I have a problem with my spanish income tax on rental income. Where an apartment is let in Spain, as a non resident, I am exposed to a flat rate of 24% on the gross rent, without any deductions for legitimate expenses such as repairs, service charges, depreciation of furniture etc. In essence, it is a tax on turnover as opposed to profit.

      However, I understand that if I was Spanish resident I would be allowed such deductions in arriving at my taxable rental income.

      In my case, given my legitimate expenses on my apartment, the 24% Spanish tax will exceed the rental profit I have made on this apartment.

      Up to 2007 Spain charged non residents 35% Capital Gains Tax while residents were charged 15%. This was discriminatory to EU citizens and a case was taken to the European Court. The Authorities were forced to change. Both residents and non residents are now charged 18%.

      Surely, a similar discrimination applies to the differinig rules for residents and non residents for Income Tax on rental income. I don’t know of any juristiction that taxes rental turnover as opposed to profit. Both the UK and Ireland charge profit. Does anyone know if this situation is likely to change or if there is any case being taken to Europe on this issue.

      I do appreciate that many non residents do not declare Spanish rental income, and given the flat 24% rate, suddenly I understand why but I wish to be fully compliant as I am a tax advisor myself. 😕

    • #78304

      I am lead to believe that the double taxation treaty between the UK and Spain allows for the tax you pay in Spain to be deducted against tax paid or due in the UK. If you also download a copy of the self assessment tax form (SA106) from the HMRC website, it will detail the items you can set against your UK tax liability, such as wear and tear, decoration, etc. This is probably a simplistic view as I haven’t yet had to look into it too closely.


    • #78373

      I think you are miscalculating your tax liability. On notional letting income (regardless of whether you actually have the property rented at all) for a non resident (and a 2nd home owning resident) the tax is 24% of 2% of the valor catastral.

    • #78374

      this may help also re tax on actual rental income

    • #78623


      I regret to say that I believe Hillybilly is incorrect.

      “On notional letting income ,regardless of whether you actually have the property rented at all), for a non resident (and a 2nd home owning resident) the tax is 24% of 2% of the valor catastral” (end quote)

      If you do not rent, you pay 24% of the 2% of the valor catastral BUT if you actually rent out the property, the tax is 24% of the GROSS rental received, WITHOUT ANY DEDUCTIONS. This is not a tax on profit it is a tax on turnover and I believe this is not sustainable under European Law. Spanish residents are allowed the standard deductions before arriving at their net taxable rental income.

      There is a huge missinterpretation by Spanish property owners that they have no liability on Spanish rental income aside from that quoted by Hillybilly. This is simply not true, the reality is just completely ignored.

      I live in Ireland, but the Irish Revenue rules are virtually the same as the UK rules and I will be allowed make deductions for all the normal real rental expenses in assessing my Irish tax.

      My problem is that 24% of the gross rental turnover payable in Spain will very greatly exceed my top rate Irish Income Tax (41%) payable in Ireland (as it would be in the UK) on the difference between the gross rental income and the related genuine rental expenses such as interest, management, service charges, depreciation on fixtures and fittings etc.

      My additional point is that I believe it against European Law for Spain to treat EU non residents differently to Spanish residents. It is not done in the UK or Ireland or any other EU country that I am aware of.

      The Spanish were forced to change their Capital Gains Tax rules last year to charge non residents and residents the same rate of 18%. Previously, residents were charged 15% and non residents 35%.

      Very interested in feedback



    • #78647

      As an ex rental agency I was obliged legally to withhold actually 25% of gross rental income on behalf of non residents for tax. The non resident can then make deductions but I believe in order to do so one has to have a fiscal representative in Spain and possible run this via a spanish company.

      I know there are various tax treaties, but it would be on my nech to not withhold this tax.

      Made rentals totally impractical.

      Certainly I agree it is unjust and the sum should be paid whole but its not the Spanish way.

    • #78819

      Jcashman: Yes, it is grossly unfair and discriminatory. When the CGT was reduce to equalise between resident & non resident. I did raise this issue with Mark at the time.

      I also agree that Hillybilly is incorrect, as I feel that she had perhaps miss understood the situation. The notional tax is payable on the property where the owner does not rent it. The % is also based on catastral value.

      Inez: I am confused with your reply. If you are saying that you are entitled to offset your legitimate expanses against the rental income if the property was registered to a Ltd company. As the company will be a Spanish company and buy its nature will be a resident and to be accurate a Spanish resident company.

      I have posted on the forum on related matters namely:

      1) Descrimantion against EU citizens.

      2) Does not encouage non resident to invest in Spanish buy to let. Apart from an impotent rent act/legal system

      3) The notional Tax was introduced by the Spanish some 20 years ago to bring in the black money. I have a feeling that the present policy of providing rent subsidy to tenant/landlord by the Government is also heading this way.

      Spain is not or ever has been a Country condusive to investments. This is before you get out of the corruption side of life, from Taxi Drivers at the airpoert, Banks,mobile phones, lawyers, notary, developers, furniture retailors. Work shy, illtrained and non motivated work force. Yes I do love Spain.

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