Owning property in Spain is a popular investment and lifestyle choice for many non-residents. However, with property ownership comes certain tax obligations that must be understood and managed to remain compliant with Spanish law. Two key taxes that non-residents should be aware of are the IBI tax and the non-resident income tax.
What is IBI Tax?
IBI (Impuesto sobre Bienes Inmuebles) is a local property tax levied annually by the municipal authorities where the property is located. Think of it as the Spanish equivalent of council tax or property tax in other countries. The amount payable depends on the cadastral value of the property, which is determined by the local government based on factors like location, size, and property type.
For non-residents, paying the IBI is mandatory, regardless of whether the property is rented out or used solely for personal purposes. Failure to pay IBI can result in fines or even the municipality placing a lien on the property.
Non-Resident Income Tax
Non-residents who own property in Spain are also subject to the Non-Resident Income Tax (NRIT). This tax is based on the potential income the property could generate if rented out, even if it is not currently rented.
– Rental Income: If you rent out your property, you must declare and pay tax on the rental income. The tax rate for non-residents is generally 24% of the gross income, although this may vary depending on whether you are a resident of an EU/EEA country with a tax treaty.
– Imputed Income: If the property is not rented out, you are still required to pay tax based on a deemed or imputed income, calculated as a percentage of the cadastral value (generally 1.1% or 2%, depending on the region).
Tax returns are typically filed annually with the Spanish Tax Agency (Agencia Tributaria), and non-residents must keep detailed records of any income and expenses related to the property.
Additional Considerations
– Wealth Tax: Depending on the value of your assets in Spain, you may also be liable for Spanish Wealth Tax.
– Capital Gains Tax: When selling the property, non-residents are subject to capital gains tax on the profit made from the sale.
For more information on all aspects of non resident taxes contact us for a consultation with one of our tax advisors and let Xerxes Tax and Law ensure you meet your obligations.