REAL PROPERTY IN SPAIN – NON-RESIDENT TAX
The usual double taxation treaty signed by Spain with other states:
Income from immovable property, including income from agriculture or forestry, may be taxed in the Contracting State in which such property is situated.
Under the Spanish tax law we can distinguish between two circumstances: when the property is empty or used by the owners and when the property is rented.
DEEMED RENTAL INCOME – EMPTY PROPERTY (IMPUTACIÓN DE RENTA)
The tax base consists of an estimation of the catastral value. To that base we have to apply a tax rate of 24.75% for 2014, 19.50% for 2015 and 19% for 2016, 2017 and 2018.
For the part of the year during which the property has not been rented, the period to submit tax form number 210 will be from 1st January to 31st December of the following year, calculating the tax base within a proportional basis according to the days that the property has not been rented.
The tax base will consist of the gross income (in the case of residents outside of the European Union or the European Economic Area), without deducting any expenses.
The tax base will consist of the net incomes (IN THE CASE OF RESIDENTS IN AN EUROPEAN COUNTRY OR IN THE EUROPEAN ECONOMIC AREA).
The net income is calculated by deducting the expenses needed to rent the property out. When the property is rented out for a period during the year we must deduct the expenses on a pro rata basis.
Examples of expenses are: Mortgage interests, Maintenance, Local taxes (IBI), Estate Agent, Lawyer, Insurance, Amortisation…
EXPENSES: You can deduct all expenses needed to rent the property (advertisement, legal fees for submitting forms, lawyer fees in the case of tenancy agreements, estate agency, IBI tax, town hall tax, electricity, water, maintenance, mortgage interests, amortisation…). You have 4 years to deduct the expenses. If the expenses are higher than the income, you can only deduct the same amount of expenses as income and the surplus can be deducted in the following quarter.
To deduct all of the year’s expenses, the Tax Agency criteria state that the expenses can only be deducted when you rent the property, and the period during which the property has been empty is not relevant in comparison to the period during which the house has been rented. Following this criteria, if the house is only rented for three or four months (consecutively), even when the house has been available on the market, the only deductible expenses are those on a proportional basis. If the property has been rented for longer than it has been empty or it has been rented all year long (even intermittently), you would be able to deduct all annual expenses and amortisation.
Amortisation: the same as in the previous paragraph. The amortisation is calculated as follows: 3% over the building value. The building value is taken on a proportional basis from the catastral building value (specified in the IBI bill).
The tax rate (24.75% for 2014, 19,50% for 2015 and 19% for 2016, 2017 and 2018) is applied to the final amount which gives us the payable tax.
As regards tenancy agreements, form 210 has to be submitted quarterly.
If the property is rented out for one period only (e.g. summer time) the 210 form must be submitted at the end of this quarter, and for the rest of the year the form has to be submitted as if the house were not being rented out (please see above – Deemed rental income).
Period to fulfil the tax obligation on a quarterly basis (in the case of renting):
1sQ (Jan, Feb, March): from 1st to 20th April.
2Q (April, May, Jun): from 1st to 20th July
3Q (Jul, Aug, Sep): from 1st to 20th Oct
4Q (Oct, Nov, Dec): from 1st to 20th Jan
If the house is empty for a quarter, you are not under the obligation of submitting the form because it would be included in the annual form (as explained above).
If during a quarter you have received income but no profit, i.e., same income as expenses, you are not under the obligation of submitting the form. In this case there is another income tax form (to be submitted in the last quarter, 1st to 20th Jan) stating the income and expenses during the year. In other words, it is another annual form specifying the period during which the house has been rented but without any profit.
Therefore, the only quarter for which you are under the obligation of submitting the form is the one during which you receive profit.
Every quarter you have to provide the tenants name and NIE (if they have it) and the days they have been in the property.