The threshold to be considered a permanent resident in Spain is living in the country for 183 days or more. You will be treated the same in regards to taxation as Spanish citizens.
Liabilities for Residents and Non-residents differ in many respects. Non-resident property owners have to pay taxes on their property, whether they have rented it out or not. For residents there is a difference, you do not have to pay taxes on a property which is used as a main residence. You will only be liable to pay taxes for other properties if your income rentals are over the limits established by the Spanish Inland Revenue.
Personal Income Tax (IRPF)
In Spain you are liable to pay Income Tax on all of your worldwide assets and income which includes any pensions obtained from your home country. This Income Tax is a progressive tax and is different to Non Residents Income Tax which is a flat rate tax. Basically the more you earn the more you pay.
The tax assessment period is from January to December and the taxes are paid in the following year i.e. taxes from 2019 are liable for payment in 2020.
Spain has a double taxation treaty with other European countries as well as Norway and Ireland. What this means is that if you inform the Inland Revenue that you are a tax resident in Spain where you will be paying your taxes, you will not be liable and taxed twice on the same income.
Listed below are your tax responsibilities in Spain as Resident:
Every property in Spain has an alphanumeric code (Catastral Nº / The Rateable Value) like a license plate for the car. You will find this code on the local tax bill (IBI) and it can also be checked at The Cadastre site – http://www.sedecatastro.gob.es
When you raise your tax return this number must be quoted to ensure the correct taxes are being paid for the correct property. Every property has a ‘Referencia Catastral’.
With regards to rental income from your property, if your yearly income from renting is over 1000€ pa you will need to declare the entire amount that your tenant has paid you. Some costs can be deducted such as interest, mortgage costs, community fees etc.
We can advise you on all costs which can be deducted.
Local Property Tax (IBI)
This is the tax called IBI and all property owners are liable to pay it. The tax is calculated on the council’s assessment of the rateable value of your property. The Town Hall issues a yearly invoice informing you of this year’s IBI amount. You can set up a direct debit to pay this bill. This can help in regards to alleviating late payment problems and any associated fines.
The rateable value of your property is in direct correlation with your properties Catastral reference number (included in your title deeds). Occasionally mistakes can happen and can help solve any problems with this reference number.
Income tax includes any income you have received via third parties (i.e. wages from an employer, pension income or unemployment income).
Deductions from your wages by your employer, such as national insurance payments and taxes will reduce the amount of taxes on your annual tax return. We can advise you of other deductible expenses which can reduce your tax liability.
Any income received via savings and investments has to be declared on your annual tax return.
Capital Gains Taxes
This is applicable to the sale of property. It is calculated as the difference between the original price paid for the property (including all costs and taxes paid in origin, excluding interest, paid by the transferee) and final sale price of the property (less any costs or taxes paid by the seller).
The resulting amount will be taxable up to 27% depending on the amount of the capital gain.
Wealth Tax (Impuesto de Patrimonio)
Wealth tax is calculated on your accumulated assets which can include any of the following: cash, bank deposits, money funds, and savings in insurance and pension plans, investment in real estate and unincorporated businesses, corporate stock, financial securities, and personal trusts.
This is applied to any residents who have total assets with a value above 700.000€ excluding the main residential dwelling with a maximum value of 300.000€.
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