TAX PLANNING

Spanish operates a system of self-assessment for the collection of taxes. There are three levels of taxation: By the Government, By the Andalucia Government and by the Local Authorities (Town Halls).

Direct Taxation

• Personal Income Tax
• Wealth Tax
• Corporate Income Tax
• Inheritance and gift Tax

Non Direct Taxation

• Value Added Tax (VAT): This tax is applicable when buying from a promoter, developer or habitual trader. The rates are; 16%, 7% and 4% The VAT of 16 per cent is applicable to most sales of goods and services, and specifically when purchasing plots of land or garage spaces, and 7% is applied to sales of new private houses.
• Transfer Tax (ITP) at seven per cent
• Stump Duty Tax (AJD) at one per cent

Both residents and non-residents with property in Spain are under an obligation to file tax returns there. Persons become officially resident in Spain for tax purposes if they live more than 183 days in the calendar year on Spanish territory or if the principal centre or base of his economic interests are in Spain. Evenmore, there is a presumption of residence when an individual´s family lives in Spain.

Personal Income tax

Residents are taxed on world wide income.

Non-residents in Spain are required to declare income earned in Spain at a general rate of 25% and a 35% on Capital Gains of assets located in Spain.

A non resident that has a property in Spain may have the following circunstances:

If the property is used by the owner or not rented, then the law established that there is a presumed yield of 1,1% or 2% (depending if the catastral value has been or not modified and updated from January 1994) of the catastral value, and if the property does not have a catastral value, then a 1.1% is applicable to the 50% of the acquisition value of the house, over which 25% is payable on an annual basis. The filing period is the calendar year (1 st of January till 31 st of December).

If the property is rented then a 25% is applicable over the income without the possibility of deduct the expenditures for renting, being the period for file the tax form within 30 days from the date the income is collected.

And finally when the property is disposed of in future he or she would be liable to pay 35% as “Capital Gain Tax”, the taxable gain is reduced by a percentage that varies depending on the period that the asset is held (these reduction is only applicable for properties purchased before 31 st December 1994). The period for file the tax form is within four months from the completion day. Furthermore, when a non-resident disposes a Spanish real estate a 5% must be withheld by the purchaser from the sales price and he pays this amount to the Tax Authorities. This tax withheld is on account of the final tax liability (Capital Gains) of the seller from the sale.

Wealth Tax

Non residents are required to declare and pay wealth tax on their assets situated in Spain. There is a scale starting on 0.20% of the value of the property (normally the acquisition value of the house) up to 167.129,45 euros and thereafter it increases accordingly.

Plusvalia Municipal is a local tax based on the increase in the value of urban land whenever land is transferred. According to the law the seller must pay this tax but it can be agreed by the parties involved in the transaction that the purchaser is responsible for paying this tax.

IBI is also a Local Tax based on assessed property values known as the catastral value (valor catastral) which normally is a fifty percent of the market value.

For further information on Personal Income Tax, Wealth Tax or Corporate Tax please do not hesitate to contact us at . We will be pleased to study your particular case and explain you how these taxes can affect you.

Fiscal Representative

Eventhough it is not compulsory for non-residents to appoint a Fiscal Representative when the only asset in Spain is a property, it is advisable to have one. Using a Fiscal Representative in Spain all comunications from the Tax Authorities will be sent to your representative so it can be attended promptly and without delays, also you representative will inform you yearly about your Tax Liabilities in Spain and will acquire the forms, complete the same and pay the taxes in your name, all within the require period of time.

Our annual standard fees for being your fiscal representative of private individuals are 150 Euros plus VAT which includes filling in necessary annual tax returns such as Personal Income Tax and Wealth Tax.

For further information on fees for companies please contact us.