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As a courtesy of Mar Durio, a collaborator of CostaLuz LAwyers who is a tax advisor located in Arcos de la Frontera.
TAXES IN SPAIN.-
– When you buy a property in Spain, and after the payment of all the taxes involved in the proper purchase, having a property create several taxes to be paid annually, as in every other country of the world. In this country, there are four different taxes: Two to be paid to the Town Hall, and other two to the Inland Revenue Offices:
TOWN HALL:
– I.B.I. (Impuestos sobre Bienes Inmuebles): This is the annual contribution for having a house in this area. It appears once a year, around July/August every year.
– RUBBISH COLLECTION: It appears twice a year, 1 Semester to be paid around April, and the 2nd Semester that uses to appears at the same time of the above I.B.I.
INLAND REVENUE OFFICES:
– WEALTH TAX: A tax for having a patrimony in this country, and it is calculated over the Purchase Price shown in the Title Deed, and should be paid every year since January to December.
– INCOME TAX: This tax is an average of the possible income takes for having a property in Spain, (it does not matter if you rent it or not, or if you have an income or not, and it was created to avoid tax evasion in general from foreigners who have houses in Spain and rent them). It is calculated on the 0,5% of the above Cadastral value, and has to be paid at the same time as the previous one.
– LEASED URBAN PROPERTY: The income to be declared in this case is the total amount collect-ed from the tenant, without deducting any expenses.
This income is chargeable when it is claimable from the tenant or when it is collected (if earlier). Each rent due is taxed separately and, consequently, a return must be filed for each rent due.
Nevertheless, collective returns may be filed which may include various chargeable income of one or more taxpayers falling within a calendar quarter. If the collective return includes the income of several taxpayers, the person filing it must be a representative or one of the persons which the law regulating this tax defines as being jointly and severally liable (payer or administrator).
– Filing period: for ordinary returns (form 210), the deadline is one month after the date on which the rent is due. Collective returns (form 215) relating to a quarter must be filed within the first 20 calendar days of the month of April, July, October or January following the first, second, third or fourth calendar quarter, respectively.
– Tax rate: 25%.Theses taxes could be deducted in your own country’s tax declaration.
Once all this explained, we inform you as well that either you can declare by yourself, or to use the services of a Fiscal Representative.
If you decide not to pay these taxes, it should be under your own decision, but let advise you of what you should have in mind: that, when you decide to sale your property in the future, as foreigners, you will have a legal retention of the 5% over the sale price, which will be given back to you once the Tax Offices checked that all the previous taxes are paid. If they find some unpaid taxes, they will discounted them from the retention previously made for said purposes, with their corresponding penalties for not pay in due time. Therefore, as you can see, taxes are going to be paid in one way or another.
CAPITAL GAINS FROM THE SALE OF REAL ESTATE PROPERTY
A capital gain as a result of the sale of real estate property is subject to taxation. When a change in property takes place the income is considered due.
In general terms, a capital gain is determined by subtracting the purchase value from the sale value.
The purchase value is made up of the price paid for the property to which the amount of the expenses is to be added, excluding interest rates, and taxes related to the acquisition, , that have been paid by the present transferer. This value is to be modified by the application of the up-to-date coefficients established on an annual basis by the General Budget , depending on the year of purchase.
The application of these coefficients requires that the property had been acquired at least one year before the date of sale.
If the property had been rented, the purchase value determined as mentioned before, must be reduced by the amortization corresponding to the rental period. The amortization is to be updated by the mentioned coefficients depending on the year.
The sale value is the amount for which the transaction has been carried out, having deducted the amount of the expenses and taxes referring to the transfer which the vendor has been responsible for.
The difference between the sale value and the purchase value, so determined, will be the capital gain subjected to taxation.
Nevertheless, if the property that is presently transferred had been acquired prior to December 31, 1994, the capital gain that had been determined previously will be reduced by 11.11% annually for each year of ownership exceeding two years. In order to assess the period of ownership, the number of years between the date of purchase and December 31, 1996, has to be taken into account, rounded to the next higher whole number. The amount of the capital gain subjected to taxation can be determined by applying to the capital gain previously obtained.
If the individual who is selling the property had acquired it on two different dates or the property has been improved, the evaluation has to be undertaken as if they were two different capital gains, with different ownership periods for the application of the reduction coefficients and different up-to-date coefficients.
The person who purchases the property, even if he/ she is resident or not, is obliged to withhold and pay to the Treasury 5% of the agreed price. This payment is to be considered in the case of the vendor, as an advance payment of the tax corresponding to the transaction. Therefore, the purchaser has to forward to the non-resident vendor a copy of form 211 that has been used for the payment of the withholding in order for the vendor to be able to deduct this amount from the tax due to be paid, as a result of the assessment of the capital gain. If the amount withheld exceeds the tax due, the vendor may request a tax-refund.
Nevertheless, if between the date of the acquisition of the property or the latest improvements (refurbishment) and December 31, 1996, ten or more years had passed, no capital gain should be considered. Therefore, there is no necessity of withholding and paying the 5% of the price of the transaction. In this case it is necessary to draw up a public document declaration stating that no refurbishment had been carried out.
In case that the withholding is not paid, the property will be tax due.
Tax form to be used is form 212. Only in case of a property to be sold, that is co-owned by a non-resident married couple, a single tax-assessment may be filed.
Filing period: Three months after the end of the deadline of the period for payment of the withholding. The purchaser has to make the payment of the withholding no later than one month after the date of sale.
Filing place: At the District or Local Office corresponding to the location of the property.
Tax rate: 35%
Tax-refund of the excess withheld: In case of capital losses or in case that the withholding exceeds the tax due, it is your right to receive a tax refund of the excess withheld. The refund procedure starts with the presentation of a 212 form at the District or Local Office indicated. The refund will be forwarded by means of a bank transfer to the account stated in the return. The account holder has to be the taxpayer or representative. In the latter case, the representative has to be lawfully entitled to receive the payment. In case that there is no bank account open in Spain, a cheque payment may be requested. In any event, the 211 form filed with the withholding payment has to be attached to the 212 form for non-residents.The Tax Administration is obliged to carry out a provisional settlement within six months following the deadline established for the filing period of form 212. If the provisional settlement has not been performed within this period, the Tax Administration will forward the excess of the self-assessed tax due. Once six months have passed, without having ordered the refund, due to reasons attributed to the Tax Administration, interests rates on the amount pending payment will be paid.
María del Mar Durio
Tax adviser
mardurio@hotmail.com
Tlfno: 616466030
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