RESIDENCY AND TAX
You are a resident in Spain if you spend 183 days or more in the country during a calendar year. All Spanish residents pay tax in Spain. If there is any confusion as to whether you should be taxed in Spain or the UK (if you are a UK resident normally), then the actual country of residence will be decided upon using definite criteria. The good news is there is a “Double Taxation Treaty” to ensure that you are not taxed twice. Non-residents need to have proof that they are not resident in Spain for tax purposes. This is achieved by means of a certificate that can be obtained from local police stations. Anybody with a property in Spain will have a bank account. Any non-resident without the necessary certificate could find their account frozen – so please pay careful attention to the specific rules of the country.
It is vital that you do not rely solely on the information supplied through this site and that you employ your own suitably qualified tax adviser. If you are considering purchasing property and subsequently spending a good amount of time in Spain, we recommend that you speak to a qualified adviser prior to making any decisions so that you are fully aware of the tax implications of your decisions.
All residents will pay income tax and have social security deductions applied to any earned income. As is true in the UK, the rates are often revised and it is therefore advisable to consult a professional in these matters.
CAPITAL GAINS TAX
This is a tax applied to profit on assets sold. The most common example of such an asset is property. The profit made on a property when sold compared to the price when purchased is taxed. This is not as bad as it seems at first sight. Allowances are made for inflation during the time that you have owned the property and for any improvements that you have carried out as an owner of the property. If you buy another property within the following two years, then this is also taken into account and it is possible that no tax will be due. Anyone over 65 years of age who sells a property, which has been their main residence for three years or more, will not be taxed.
Residents in Spain pay this tax on the value of anything inherited anywhere in the world. Non-residents only pay the tax on anything located in Spain. Prior to the tax being assessed allowances are made for relatives. Once again we stress the importance of obtaining suitable professional advice. Please note – anybody with property in Spain should have a valid Spanish will and testament. To ensure that your will is legal and binding, we recommend that you consult an expert in the field.
RENTAL INCOME TAX
If you are a non-resident and rent out your property you will be taxed on the rental income – minus allowable expenses. If you do not rent it out then you will still be taxed. A small “Deemed Income” is assessed and tax paid on that amount.