CAPITAL GAINS TAX

Capital gains mean that the value of your assets is increased as the result of the sale of your property and is subject to taxation. When there is a change in ownership of a house, the income is considered due for tax. The taxable amount is the difference between the purchase value declared on the property deed and the value to be declared on the sale property deed. This excludes interest rates and taxes related to the purchase process less of course any expenses for improvements etc that you can prove (so wise if you have had a lot of work done) but you need to back this up with proper receipts where you have paid the IVA (VAT)

Save any facturas/bills to offset your capital gains... If you have done a lot of work to your property which has increased the value it has probably cost you a lot of money so you need to account for this, otherwise it will look like you have made a lot more on your property than you really have and you will pay more tax than you should.

The Spanish tax administration applies a formula based on the date of purchase of the Spanish villa. The consequence is that the Capital gains are reduced in accordance with the number of years you have owned the property.

Now, a Resident and a Non-resident owner of a Spanish house offering it for sale will pay 18% on the net gain after selling it, and a retention of 3% will be made by the buyer in the registered sales price. This amount will be paid to the Spanish tax agency as a guarantee for tax payments, in order to avoid the non-resident seller “forgetting” to pay the Capital Gains tax . Again it is very wise if you think you may be in this position to save any receipts in relation to the property regarding home improvement etc as this can be offset.

Once the house is sold, both residents and non residents will pay 18% on the net gain and it is not necessary to make a retention on the sale price, for a resident as a resident it is assumed that you will be here to fill in your annual tax form and this will include the capital gains on the next tax Declaration.

Many people who are residents in Spain when they sell, have every intention to leave the country without the retention and no intention to fill in a tax return. They should note that although there is not much, if any evidence that they will be approached for this at the moment, it does´nt mean that they never will...So it is worth considering at some point in the future they may well be.

Methods of Payment

Electric, water and telephone are debited directly from your bank account. The electric and telephone invoices showing details of consumption, telephone calls made, etc are sent separately by post to either your Spanish or English address, as requested. Each of these services has a standing charge of 20 – 30 Euros every two/three months, even though the house may be uninhabited. Municipal taxes and Local Authority Rates can also be debited directly from your bank account, instructions can be found on the bill, alternatively take into your bank and they will arrange this, the same goes for your car tax (saves forgetting!).

Tax declarations must be submitted for the payment of the Wealth and Income Taxes and the tax forms are available from your local Tax Office, and must be completed and paid at the same Tax Office. Previously, it was necessary to appoint a Fiscal Representative to complete these tax forms for you. However, this is no longer the case (PROVIDED that is YOU ONLY OWN ONE PROPERTY IN SPAIN as it may be more complicated if you own more) and you may prepare the tax declarations yourself if you know how.

When you are in your property!

Municipal Taxes (Basura) are the expenses which must be paid to the Town Hall (Ayuntamiento) for rubbish removal. The amount due varies from one town to another and is normally paid during the months of March or April every year. The annual cost is between 30 – 90 Euros. Some people dont have these, we have never had a bill or ever paid this! 

Please note: The onus is on you to pay the Basura and IBI each year, even if you do not receive a bill. If you dont pay it goes as a debt on the property... so maybe we will have to pay in the end!

Local Authority Rates (IBI) are based on the rateable value of your property (Valor Catastral) which is determined by the Rates Office. The amount charged usually lies between 0.5% and 0.7% of the rateable value. This is an annual tax normally payable in August or September every year.

Business Tax

What is it?

Annual tax to be paid on the exercise of a business, professional, or artistic activity.

There is a large number of small businesses that don’t need to pay this tax to stimulate small business creation.

This tax rate depends on many factors, such as size and location of the business, the type of business, and number of employees, and has to be paid in the Spanish tax agency.

IVA

This is the Spanish equivalent of VAT and it is declared and paid quarterly at 16% on goods and services.

Property Tax

This is more or less the equivalent to council tax in the UK and goes towards paying for local council admin, education and sanitary services. This includes street and beach cleaning, social assistance, community substructure, sports and other amenities.

Taxes & Non Resident home owners in Spain

1. Annual Real Estate Tax IBI - This is a local tax and levied by the council payable by property owners.
   • Each property in each municipal is included in a census and is given a value which is called its Catastral value (see section on Registered property) The amount payable is calculated by applying the tax rate set by the council to the Catastral value. Each year a Property tax payment slip is issued for each property on the census and councils normally allow this payment to be made by direct debit to and from a bank account which makes it easier for the tax payer to pay the tax before the deadline and avoid any surcharge which is added for late payment.
   • The period for payment differs depending on area but is normally around the months of September/October and November each year
2. Dustbin & Drainage tax - Basura already covered earlier.
3. Income tax already covered earlier in the section
   • Non-residents must file a property tax return if they own a property in Spain at 31st December each year regardless of the value of the property.

• The Catastral Value as reflected in the property tax receipt for the year in which the tax return refers
• The value assessed by the administration for purposes of other taxes
• The price you bought the property for or value

Form period and place for filing the return

Form 214 is the Simplified return for non residents (dwelling for own use) Get your 214 Form here

Filing period - The entire calendar year immediately following one year to which the return refers

Place - the branch or office of the State Tax administration Agency corresponding to the place where the property is located

United Kingdom/Spain Double Taxation Convention (SI 1976 Number 1919).

• Click on - Oficina Virtual – Right hand side with the picture of two keys.
• Scroll down
• Under the heading - Otros Trámites
• Click on - Etiquetas
• Under the heading - Sin certificado de usuario
• Click on - Solicitud de envío a domicilio 
• A separate window will open that looks like this:

In the 1st box - Teclee el NIF: - type in your NIE (NIF) number

In the 2nd box – type in your surname first, followed by your Christian name(s)

There are only so many characters so just one “middle” name will do.

Then click on ENVIAR

Another window will open which says

Your sticker/label request is being dealt with and soon you will receive them at your address.

(This is your address in Spain)

Of course the Spanish Tax Office knows your address in Spain, as by giving your NIE (NIF) number, this ties in with the Escritura of the property you bought, hence they will post out to that address.

The Spanish tax office will not send out to a UK address. So if you are not resident the whole time you could:

• Go to the tax office in person on your next visit to get the Pagatinas
• Ask a resident neighbour to look out for them and take them in for you
• ask the security guard to hang on to them for him till your next visit?

• Note: If you entered the NIE (NIF) & Name again (as I did to get these web prints for you), the following message comes up:

RECIENTEMENTE SE HAN EMITIDO LAS ETIQUETAS QUE SOLICITO, SI EN 15 DIAS NO LAS HA RECIBIDO PUEDE USAR DE NUEVO ESTE SERVICIO

This translates as:

You have already ordered your labels, if they are not delivered within 15 days, you can use this service again to re-order them.

If you have any queries regarding this process or other tax matters please contact Sue for her very useful guide which if you buy now will save you much more money in the long term or email her at suechester@blueyonder.co.uk

INCOME TAX

Residents

This tax is applied to Spanish residents, living in Spain more than 183 days per year, on their world earnings, and they have to complete an Income tax form every year, during May or June of the following year.

People earning more than € 21,035.42 a year in SpainFigure from 2007 so may be more now please check, are obliged to make the income tax declaration and a progressive tax structure is applicable to the world income of the year, with a starting rate of 17 % up to 48 %.

It is recommended that you ask a gestor for help and advice on your annual declaration tax - especially if you are not fluent in Spanish.

In order to avoid the double taxation, Spain has made tax agreements with some countries which is useful for example if you live part of the year in Spain and the rest of the year in England. These agreements allow you to deduct the income tax paid in your country. If your country does not have this agreement you can ask for direct deduction of foreign tax paid or foreign compensation.

Non-residents

Non-residents living in Spain more than 183 days per year are considered Spanish tax payers, even if they have not obtained their residence certificate (which you should have if you spend this amount of time here anyway and this has superceded the residence card which is no longer obtainable).  They have to declare their worldwide income to the Spanish Tax Department hacienda, completing the same forms as the Spanish residents.

The Spanish Tax Ministry is called Agencia Tributaria and has a telephone Information Services to help tax payers and also there is a possibility of making the Income tax online. The other option to make your Income tax when you’re living in Spain, is presenting the Tax Forms in the Tax Office where you live or, if you don’t know how to fill in the forms, use the service of the agency (remember to take with you all the receipts, bank statements and title deed of your property to the tax office)

Online Income tax: 901 33 66 33 

Appointments with a tax agency staff: 901 22 33 44

Queries: 900 333555 (free phone)

When your tax declaration is ready, you can present it at the Tax Agency or at your Bank.

Non-residents are also liable for this tax on any Spanish income, such as money deposited with a Spanish bank and income derived from any business in Spain. You may have noticed getting print out/receipts from the bank with FISCAL written on them, you should save these and present these to your fiscal representative.

For more information visit the Agencia Tributaria for non residents

The forms required for non residents are 211, 212, 213 & 214

SPANISH TAX ON YOUR VEHICLE

This local tax is based on the volume of the motor. The tax which ranges from 7 euros from a 50cc quad bike to 160.00 euros for a small truck is increased by a percentage in some cities with a bigger number of inhabitants. For an average car, it is about 121.00 euros a year, and it is only payable if you have a car registered on a Spanish licence plate.

This Spanish tax is paid once a year, normally in March/ April but before May  9th normally and the bill must be presented to the tax collecting municipal agency but you can pay it through any bank.

SPANISH INHERITANCE TAX

Spanish inheritance tax is payable on the increase of wealth asset by the inheritor, obtained by reason of death.

GIFT TAX

Gift tax is based on the increase of wealth, produced by reason of gift while the donor is still living.

Who is responsible for paying these taxes?

The tax is payable by the heirs or beneficiaries.

When and where does the inheritance and gift tax have to be paid?

• Inheritance tax has to be paid the following six months after becoming the new Spanish property owner or receiving the assets, in accordance with the last will. Just as in the UK.
• Gift tax will be paid in the following 30 days after the date of the transfer.

These taxes will be paid at the Provincial Tax Office (Delegación Provincial of the Consejería de Economía y Hacienda) in your nearest town.

Reduction on the Inheritance tax

The amount to deduct from the inheritance tax depends on the relationship with the deceased. The conditions are:

• The inheritors (wife/husband, children or parent) are also residents in Spain and have been for at least 3 years
• The property was the principal residence/family home of the deceased
• The inheritor will not sell the property for the next 10 years; If they sell it, they have to pay the inheritance tax.

You should ask for legal advice in regards to the tax liability and the maximum amount for this exemption. The amount to pay in taxes depends on the relationship with the deceased. As complicated as it is you would be well advised to seek expert help on these matters from an expert in Spanish law.

You may also wish your will to be overuled by the will in the country of your birth, i.e. for your English will to rule over your Spanish one. You will need a solicitor to action this for you and it will need to be witnessed at the Notary.

You do need to obtain a Spanish Will if you have property here as the laws are different to that in the UK and you could end up leaving money to people you don't want to, that is if you are lucky enough after having paid all these taxes to have any left!!!

COMPANY TAX

This is a direct tax on profits obtained within the taxation period, (which normally coincides with the calendar year) unless a different period is stated. In any of the cases the tax period cannot exceed 12 months.

Spain's standard corporate income tax rate is 35%.
Small and medium size companies with yearly sales of less than 3 million euros may qualify for certain tax incentives:

• A Tax rate of 30% is applicable to the first 90,000 euros of taxable income.
• Accelerated depreciation of certain fixed assets.
• 10% tax credit for investments and cost in internet, information technology, and communications.

See an expert to help with this - it will probably save you money in the long run - even if it costs you a little at first.

TAX OBLIGATIONS AS OWNERS OF PROPERTY IN SPAIN

WHAT TAX OBLIGATIONS DO YOU HAVE AS SPANISH PROPERTY OWNERS?
As owners of a Spanish property you have to fulfil the following obligations:

To make the proper declaration of Income and Wealth Tax every year
To pay the correct taxes every year

ARE THERE ANY DIFFERENCES IN TAXES BETWEEN RESIDENTS AND NON-RESIDENTS?:-
Yes, there are.

If you have not applied for the Spanish Fiscal Residence for example you are not declared as a resident and reside here for less than the specified amount of time to be non-residents you must make all the declarations and payments for taxes in the country in which you are resident. In Spain you only have to make the proper declarations and payments for Wealth and Income Tax for NON-RESIDENTS.
This applies to you as a non-resident even if you not reside full time in Spain!

For example: If you originate from the UK, and you have been living in Spain for two years, and you never applied for the Spanish Fiscal Residence, you have to make the declaration of taxes in the UK, and in Spain only declare the taxes as a SPANISH NON-RESIDENT, because, although you are non-Spanish resident, you own a property in Spain.

If you have applied for the Spanish Fiscal Residence, you must make all the declarations and payments of taxes in Spain. This applies for all tax on your worldwide wealth and this means your income - be it from the UK or Spain - for your worldwide wealth.

For example: If you come from the UK, and you are living in Spain for two years, and you did apply for the Spanish Fiscal Residence, you then have to make the declarations of taxes in Spain, as SPANISH RESIDENTS. So, you should declare in Spain all earnings, pensions, assets, etc. that you could have either in Spain, or in any other country in the world.

HOW COULD YOU OBTAIN THE SPANISH RESIDENCE FOR TAX PURPOSES?
Applying for the Spanish Fiscal Residence in the Spanish Customs.

This is a document which is given to you, once you demonstrate that you are living in Spain for more than 6 months (this is usually demonstrated with the Padron, or with the electric and water bills which you obtain at the Town Hall. This puts you on the electoral roll but it also enables the town you reside in to collect the proper allowances for the amount of people living there and so it is important for the quality of life there).

WHEN DO YOU HAVE TO MAKE THE TAXES DECLARATIONS AS RESIDENTS AND/OR NONRESIDENTS?
In both cases, once every year.

ARE THESE OBLIGATIONS FOR ALL THE SPANISH REAL ESTATE OWNERS?
Yes, independently of whether you are resident or non resident, you have tax obligations to declare every year, as in any other country.

"I HAVE SOME FRIENDS WHO ARE LIVING IN SPAIN FOR A LONG TIME AND THEY NEVER MADE ANY DECLARATION IN SPAIN”.
This is very likely because prior to now many people did not know or were not advised in the correct way how to go about organising their legal obligations. Or quite simply they did not have a tax advisor to help them make the proper declarations because maybe they could not be assisted in the right way by their legal or tax advisors.

The law is getting much stricter with so many foreigners coming to live here they are making many changes in which they can detect if or not you are paying your taxes in the proper way.

WHAT ARE THE CONSEQUENCES IF YOU DO NOT FULLFIL THE TAX OBLIGATIONS?
After the new regulations which are in force after 1st of January 2007, Spanish Residents and Non-Residents with a property in Spain will be inspected by the Spanish Customs. If they detect that, in the previous 4-5 years they have not made the proper declarations, or these are not made in the following way, they will be forced to pay these taxes, together with additional fines.

“HOW CAN I FULLFIL ALL MY SPANISH TAX OBLIGATIONS?”
Contracting SPANISH LEGAL ONLINE TAX SERVICES. We have specialist tax advisors and economists at your disposal, who will study your situation individually.

There are other companies and professionals in the market who are offering these kind of services to Spanish owners. They are not all specialists in these matters, and are not fully prepared and up to date in their knowledge to give legal and tax advice in a new, and more controlled system which is now operational in Spain after January 2007.

“IF I DECIDE TO CONTRACT THALASSA ADVOCATS AS MY TAX ADVISORS, HOW WILL YOU DEAL WITH MY TAXES?”
We will request from you all the necessary paperwork to make the declarations directly by post, or by security courier. As your previous Solicitor I have the majority of documents already to proceed, so, in many cases only additional paperwork will be needed.

With these documents we will work out on your behalf what your actual tax liabilities are and once we have some this we will instruct you what you need to do with regards the payments, and, once they are ready, we will instruct you about the payments.

If you take us up on this offer, you will have a specialist tax advisor at your disposal when you need them to make your proper declarations of taxes in Spain, and directly from home.

THIS IS AN ONLINE SYSTEM
This service is created to give you the most comfortable solution to your tax obligations, without losing time with costly visits and parking charges etc in visits to the tax advisor office, parkings, etc.

“WHAT SERVICES WITH REGARDS TAXES CAN THALASSA OFFER ME THEN?”
This service includes:

• explanations of the Income and Wealth Tax declarations for the client, and for the wife/husband, or partner who is currently living with the client.
• Payment of the taxes
• 10 queries per individual year by post, or e-mail
• Obtaining of the best individualized solutions for tax purposes
• Inheritance Tax Advice

For more information contact: 
Juan Carlos or Maria 
at

Corredera, 37

03202 Elche (Alicante) SPAIN

TLF:+34 966 614 384 FAX: +34 965 420 60

jc@tlacorp.es

www.tlacorp.es

(Patrimonio) Wealth Tax as we know it...as of May 2008 we are just awaiting confirmation of the end of the Wealth tax...

This is a tax payable on your wealth in Spain (property, funds in a bank account earning interest, etc). It is not as much as people often think and if you own a property the amount taxable is halved with your spouse or partner. The value used to determine the tax payable is the rateable value or the amount declared in the Escritura (the higher amount must be used). The tax charged is 0.2% of this amount. This tax is payable in arrears, i.e. in 2007 you will pay the Wealth Tax for 2006 etc.

Spanish residents and also non-resident owners of Spanish villas are liable to pay wealth tax on their worldwide assets and property in Spain. So you are eligible to pay this if your property is worth more (on the escritura/deeds) than the amount below but if you are a joint owner with a partner this is doubled.

Non-Residents pay this Spanish tax without deductions

Residents have deductions in their worldwide assets:

Individual allowance €108,182.18 (€216,364.36 for a married couple).

If you own a property then it rises to €150,253.03 (€300,506.06 for a married couple when the property is the main residence). So there will be a lot of people exempt from this amount if their property is worth less - unless they have lots and lots of savings too !

The wealth tax applies only to assets with a value above 170,000 euros. The tax rate starts at 0.2% and rises to 2.5% for properties with a value above 10,695,996 euros. The value of your Spanish villa is the official catastral value included in the IBI receipt.

Non-Residents Income Tax (Renta) is a tax that must be paid whether or not your property is let out. It is based on the rateable value of the property. As it is a tax on your OWN USE or RENTAL of the property, it is only applicable if you have a HOUSE or DWELLING. You do not pay any Renta Tax on a plot of land alone. 

1. For the OWN USE of your villa, the calculation is as follows: 1.1% of the rateable value x 25%
   • Furthermore, this Tax is only payable for the period you have owned the villa – i.e. if you bought the villa on 1st June 2006, in 2007 you will pay Renta Tax as above which would be apportioned for the 7 months you have owned the property. This Tax is payable at any time during the year and always in arrears, i.e. in 2007 you will pay the Renta Tax for 2006.
2. When the villa is LET OUT for part of the year, the calculation is as follows:
   • a) RENTAL INCOME 25% of GROSS Rental Income This tax is payable 25 days after each receipt of rental income.
   • b) OWN USE FOR REMAINING MONTHS 1.1% of rateable value x Number of months not let out 12 x 25%. This tax is payable any time during the year, always in arrears.