If you own a rental property in Spain you may be interested to know that changes in tax rules mean that many individuals can reduce their tax liability by utilizing certain expenses which had not been available for offset in previous years. This may in some cases eliminate your Spanish tax liability entirely. (available for residents in EU countries)
What expenses can be off-set?
In the majority of cases Mortgage Interest is the most considerable expense. However in addition to this the following expenses can also be offset against taxable rental income: Bank charges – Rates/local taxes- Management fees- Letting agent fee- Advertising costs- Insurance- Maintenance Costs
What if I do not rent my property?
Even if you do not rent your property you are still required to submit a Deemed Income tax return. If this applies the tax is calculated based on the cadastral value of the property. The cadastral value of the property is shown on your annual IBI receipt. If the property is not let for part of the tax year the deemed income will be apportioned for the non rental period only.
When tax returns are due?
Rental income tax returns must be filed quarterly if there is tax liability for the quarter. An annual return is not required if quarter returns have been filed for all 4 quarters. However, an annual tax return must be filed in cases where there were rental periods in which no tax liability arises. For such cases a filing deadline of the 20th January after the relevant year end applies. The deadline for submission of Deemed tax return is 31st December following the relevant year end.
If I declare my income in my home country do I still have to pay taxes in Spain?
This is a common misconception amongst non-resident property owners in Spain. If you are in receipt of Spanish sourced rental income you must first declare this income in Spain. It is likely that you will also be required to declare this income on your tax return in your country of residence. Spain has double tax treaties with a number of jurisdictions and relief is generally due via tax credit in circumstances where the income is subject to tax in both locations.
What can I do if I would like to find more information?
If you would like to find out more about Spanish taxes, Spanish income tax obligations, Deemed income tax, Capital Gains Tax, UK/ Ireland income tax obligations regarding Spanish sourced income you can contact Property Tax International.