According by Spanish Fiscal Law you have to pay, each year, THE ANNUAL TAX FOR NON – RESIDENTS(wealth tax), because you are a person who owns an urban property in Spain.
For example, because you have bought a property in the year 2004, you will have to pay the annual taxes in the year 2005, for the first actual year.
For this reason, and according with the Spanish Law, you have to appoint a Fiscal Representative to carry out tax duties.
The Fiscal Representative is the person who is charged to pay all your taxes in Spain
These services includes:
- Study the circumstances of the client.
- Calculating, filling in, and the payment of the yearly Wealth Tax on behalf of the client.
If you are resident in Spain we can also be pay your tax every year; Please contact us if you require more information of this.
There are a number of taxes in Spain, as in any other European country. There are taxes on the purchase, yearly taxes on properties, income taxes, wealth taxes, vehicle taxes and others. We shall just briefly mention the taxes you may have to pay, as a property owner or resident.
1. Taxes on the purchase
If you buy a dwelling from a promoter, you pay IVA (VAT).
If you buy a property from a private person, you pay ITP (Impuesto de Transmisiónes Patrimoniales – transfer tax on private assets).
The IVA is 7% for buying a dwelling, but can be 16% on buying a plot, a garage or a swimming pool, separate from the purchase of the dwelling.
The ITP is 6 or usually the 7%.
The tax is always calculated on the value declared in the public title deed (escritura publica). In addition to the tax, you must also pay notary fees and registration costs (around 3%). Normally, it is the buyer both paying the tax and costs.
2. Taxes on construction
You may have to pay the municipal tax on construction, if you build a house, or make improvements or extensions to it, or even work done in the garden. This tax is basically 2% on the real costs of the work, but increases in municipalities with a greater number of inhabitants.
Moreover, you have to pay IVA (VAT) on the construction, but only the reduced type of 7% if it is for constructing or reforming your dwelling, the same for building garages and/or swimming pools, if they are built at the same time as the dwelling.
3. «Plus Valía»
This is a municipal tax on the increase in the value of residential land (not on the building), from one ‘escritura’ (title deed) to the next.
The basis for the calculation of the tax is the fiscal value (valor catastral) of the land at the time of the transfer. A set of percentages are applied on this value for the number of years that have passed since the previous transfer, up to 20 years, in relation to the number of inhabitants of the municipality.
This is a tax to be paid by the vendor, but it can be agreed between vendor and buyer, that the buyer pay. One can find what the tax will be by going to the town hall with the ‘escritura’. They can calculate the figure in a few minutes.
4. IBI – The yearly rates
IBI (Impuesto de Bienes Inmuebles) is the name of the local property tax. It is based on the «valor catastral» (fiscal value), determined by the «catastro» (cadaster office in the provincial capitals). The valor catastral is revised every 10 years, and adjusted every year in relation to inflation. This yearly tax is 0,4% on residential property (fincas urbanas) and 0,3% on agricultural properties (fincas rusticas). However, municipalities may increase this percentage in accordance with the number of inhabitants and the services given. Often the IBI (and sometimes other local taxes or charges) are being collected by provincial tax collection agencies. For instance, in the province of Alicante, the agency SUMA collects most of the local taxes for most of the municipalities.
We would recommend that you have a standing order for the IBI payment with your Spanish bank. Special forms for doing so can be found in the banks, as well as in the town hall or tax collection office.
IBI – local property taxes
When you own a property in Spain, you must pay local property taxes, called IBI. We can tell you how to register for IBI and how to pay.
IBI (local rates) is a municipal tax which has to be paid every year by owners of homes, premises, garages or plots, i.e, any urban property or buildings and also by owners of agricultural land or buildings.
The amount of your yearly payment is determined by the value assigned to your property by the administration – known as Valor Catastral (rateable value). The rateable value of your property is calculated on the value of both the land on which your property is built and the building itself.
The tax rate which has been approved by each Town Council – and which is the same for all properties within the municipality – will be applied to this rateable value. For example:
Rateable value Local tax rate Yearly payment
30.000 Euro x 0.8% = 240 Euro
How to read your IBI bill
Organismo = Part of administration
Ident. Valor = Identification of value
Ref. lista = Reference on listing
Concepto tributario = Concept of taxation
Zona = Area
Num. Recibo = Receipt number
D.N.I. o C.I.F. = Identification number of taxpayer
Objeto Tributario = Tax object
Periodo = Interval of taxation
Año = Tax year
F. Alta = Year of fiscal registration
Referencia catastral = Catastral reference number
Nat. Bien = Class of property
V. Catastral = Catastral value
B. Imponible = Rateable value
Tipo = Tax rate
Cuota = Gross taxes
Bonificación = Deductions
Deuda = Net taxes
Rev. Valores = Year of last revision of value
Sujeto Pasivo = Taxpayer
Domiciliación Bancaria = Direct debit
Sello y Fecha = Stamp and date
Total a Pagar = Total amount to be paid
Periodo de Cobro = Payment period
Referencia = Reference
How does your property become liable for tax?
As from 1 January 1995, whenever you purchase a home, you are obliged to apply for the property to be registered. The official application form is known as Modelo 902 and you can obtain it from your local tax office. The buyer of a property is the person obliged to declare the property for registration. However, in the majority of cases it will be the promotor of a block of apartments or a group of houses who submit this application. When you pay the IBI on your property for the first time, you will be billed by mail and the following years it shall be possible to have it done by direct debit through your bank.
How to register your property
For all foreign owners outside the province of Alicante: Be aware that SUMA is the provincial agency for collecting municipal taxes in that province. In other provinces, there may be two alternatives: that similar provincial agencies exist under other names, or that the municipalities themselves collect the taxes.
5. Tax on vehicles
If you bring your car registered on normal plates in one of the countries belonging to the European Union or the European Economical Space to Spain, and register it on Spanish registration plates, there are no customs to pay and also no IVA, only the special registration (see Short-Information on Cars). If you import your car registered outside the European custom area, you must also pay customs and IVA on the present value of the car.
When you have a car registered on Spanish licence plates, you must pay local vehicle tax, based on the volume of the motor. For a private car, the basic tax ranges from 13 Euro per year up to 90 Euro, increased by certain percentages in municipalities with a greater number of inhabitants.
This tax is also a local one and the bill will be presented at a certain time of year by the municipality or the tax collecting agency. Again, it pays to instruct your bank to pay it, and inform the tax authorities.
6. Income tax (Impuesto de la Renta)
Any foreign resident in Spain must make an Income Tax return for personal obligations and on his worldwide income. If you reside more than 6 months per year in Spain, you are considered a tax resident even if you have not taken a residence permit. However, certain types of income (like public pensions for complete and permanent invalidity) are exempt from Income Tax in Spain, and there are tax agreements between a number of countries and Spain, defining in which country to pay which taxes.
The tax rates at present (fiscal year 2001) goes from 18 to 48%. Income under 7.813 Euro is exempt and under certain conditions, if you have an income of less than 21.000 Euro, you are also exempt from paying income taxes. From 2003 the tax rates will be lowered.
A non-resident property owner must pay income tax on the letting value of his dwelling, even if he does not rent it out. The letting value is calculated as 2% of the fiscal value (valor catastral), and a non-resident pays 25% tax on this every year.
You will not yet get a bill for the income taxes in Spain, but must present the declaration yourself, or use a tax representative. For the non-resident, tax representative is obligatory, if he does not accept to have communications directed to his property in Spain.
The period for presenting the declaration for the preceding tax year (same as calendar year) is May-June each year for fiscal residents, and during the year for non-residents.
7. Wealth tax (Patrimonio)
The «patrimonio» is a tax on your assets (mainly property, bank account, car, bonds, stocks and shares). The fiscal residents pay wealth taxes on their worldwide assets, but are exempt from including their dwelling in the tax form, if it has a value of less than 150.000 Euro.
The non-residents pay wealth taxes only on assets in Spain.
The rates are 0,20% for assets up to approximately 162.273 Euro, increasing with higher values. The return for the wealth tax is done together with the one for the income tax.
8. Capital gains tax
Is in reality part of your income tax. It refers to increases in value of your assets. For property it is calculated as the difference between the value declared in your purchasing escritura and the value to be declared in the sales escritura with certain reductions for cost of registration and sales commission.
Moreover, the capital gains are reduced in accordance with the number of years you have had the property in an escritura. This is the rule for properties bought before the end of 1996. F or the years from new legislation in 1996, an inflation correction figure on the investment must be used. There are no capital gains tax on properties registered on an unchanged title deed from before the end of 1986.
A resident selling his main residency to buy another home, can write off the costs of the purchase of the new home from the capital gains in accordance with a special calculation. Never make the title deed to the new home before you have made the title deed for the sale of the previous one! Non-resident vendors must permit that the buyer makes a retention of 5% in the registered sales price, and pay this to the tax authorities as a guarantee for tax payments. A retention need not be made if the vendor has bought the property in an «escritura» previous to 31 December 1986. A resident need not make a retention and includes the capital gains (or losses) in his income tax return.