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Non Resident Income Tax

According to Spanish Tax Laws, people with residency in other countries who own a property in Spain are subject to Income tax (Non Resident Income Tax)

Usually, foreign people who decide to purchase a property in Spain are not aware that after becoming a property owner they have some tax liabilities apart from the local tax (annual rates bill) and other utility bills attached to the property they have just bought. The reality is that according to Law, non resident property owners are liable to pay income tax.

Regardless of whether the real estate is let or free, the revenue obtained is subject to non resident income tax. However the treatment is different:

A) Non let urban property (assigned to the use of the owner or to family or friends rent free). The tax is calculated on a percentage of the rateable value (as shown in your annual rates bill/local tax).

B) Let or sublet urban property: The tax is calculated on the basis of the annual income of the property (rent).

In Spain the fiscal year is from 1^st January – 31^st of December, but non resident income tax is paid in arrears, from 1^st January until 31^st December of the following year. Therefore, the revenue obtained in 2011 is subject to tax payment in 2012 (from 1^st Jan. – 31^st Dec).

If you are not resident inSpain, you own a property and no one has informed you of the non resident income tax, please seek professional advice

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And …, do you pay Wealth Tax?:

In 2011 Spanish Government reinstated the Wealth Tax for an initial period of two years.

Those who have assets in Spain worth more than 700.000 Euros also are subject to Wealth Tax: If the value of all your personal assets in Spain is over the 700.000 Euros allowance, the balance is subject to Wealth tax, i.e:

861.000 Euros – 700.000 Euros (tax allowance) = 161.000 Euros subject to wealth tax.

For more information about non resident income tax, wealth tax, exemptions or revenue not subject to taxation, please contact us