As travel continues to open up, it’s worth knowing the tax rules that apply to non-resident property owners, and how Brexit has brought extra costs for British owners. Erardo Ferrer of Lanzarote Abogados gives us a brief outline.
NON-RENTAL OWNERS
Individuals who own a Spanish property and have no rental income are required to submit an annual return using Form 210, and must pay income tax based on the rateable value (Valor Catastral) of the property.
When your Spanish property is not rented out, a deemed income tax (Renta Imputada de Inmuebles Urbanos) is due annually. This deemed income is calculated in reference to the official rateable value (valor catastral) of the property.
The most up-to-date valor catastral will be found on your annual property tax (Impuesto sobre Bienes Inmuebles, or IBI) bill. The normal calculation of the taxable income is 1.1% of this valor catastral.
The current tax rate for owners who are not resident in Spain varies according to whether they are residents in EU/ EEA countries or not. For an Irish non-resident owner, for example, it will be 19%. Following Brexit, British residents are now third-country nationals and (like any other third[1]country nationals such as Russians or Americans) are subject to a tax of 24%.
RENTAL OWNERS
However, when the property is rented out, a quarterly return and tax payment must be submitted, also using Form 210.
As a non-resident with property in Spain that you rent out, you are obliged to submit tax returns on a quarterly basis. If you are a citizen of an EU country, Norway or Iceland, all expenses relating to the rental of the property (including mortgage interest) are deductible for tax purposes. However, if you are a citizen of a non-EU country, then the full amount of income that you receive is taxable with no allowances.
The current tax rate for Spanish rental income earned by non-residents is 19% for residents of the EU, Norway or Iceland and 24% for others.
To find out more and deal with these costs in the most efficient way, seek expert legal advice.
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