Taxes in Spain
TAXES IN SPAIN
Some of the main taxes for residents and non-residents in Spain include the following:
- Wealth Tax
- Income Tax
- Capital Gains Tax
In 2008, the Spanish Government had abolished this Tax. The last fiscal year that this Tax was due on was the year 2007 and in 2008 it had, to all effects, been annulled.
Wealth Tax has now been reinstated in Spain. In September 2011-2013 this tax was brought into force once again. Those who are liable to pay Wealth Tax are individuals who are fiscal residents in Spain as well as some non-residents who have assets in Spain
The re-introduction of the Wealth Tax was initially to be applicable only for the fiscal years 2011, 2012 and has now been extended to the fiscal year 2013. Further changes have also been introduced to this reform affecting mostly those in the higher wealth brackets.
Spanish Wealth Tax is based on the total net assets held on December 31 of each year and the tax rates range from 0.2% to 2.5%. Fiscal residents are liable for wealth tax on their net worldwide assets, while non-residents are taxed only on their net assets located on Spanish territory or taxable in Spain.
Each resident may deduct from the Wealth Tax the value of their main residence in Spain up to a maximum of €300.000. For Wealth Tax for the year 2012 following table:
TAXABLE TAX DUE REST OF TAXABLE BASE UP TO % APPLICABLE RATE BASE 0 0 167,129.45 0.24 167,129.45 401.11 167,123.43 0.36 334,252.88 1,002.75 334,246.87 0.61 668,499.75 3,041.66 668,449.76 1.09 1,336,999.51 10,328.31 1,336,999.50 1.57 2,673,999.01 31,319.20 2,673,999.02 2.06 5,347,998.03 86,403.58 5,347,998.03 2.54 10,695,996.06 222,242.73 and above 3.03
Wealth Tax is levied on an individual basis. When a property or other asset belongs to two or more individuals, each person will pay tax according to the percentage of the property held in their name and the corresponding loans. In the case of married couples, if assets are shared by both spouses, 50% shall be assigned to each unless proof to the contrary is presented.
FISCAL RESIDENTS in Spain must file Income Tax and declare the income they receive regardless of their source.
For tax purposes, one is considered a FISCAL RESIDENT if one resides in Spain over 183 days per calendar year, regardless of whether one is officially resident.
NON-RESIDENTS must also pay Income Tax (IRNR) on income received through the ownership of property in Spain. There are two forms of taxation applicable depending on the source:
- Income gained on property rentals: 24.75% on returns.
- Derived benefit on own use of property: 24.75% of 1,1% of the rateable value of the property (if the rateable value has been revised after 01.01.1994, otherwise, the applicable rates will be: 24.75% of 2% of the rateable value of the property).
CAPITAL GAINS TAX and RETENTIONS
Capital Gains tax on the sale of properties for non-residents is set at 21% for 2012, 2013 and 2014 payable on profits earned on the difference of the property value between the year of purchase (purchase price plus costs) and the year of sale (sales price minus costs), based on the approved annual percentage increase on the base value approved by law. Capital Gains Tax for residents for 2012 and 2013 is set at 21% for the first 6.000€ profit, at 25%, for profit between 6.001€ up to 24.000€ and at 27% for profit of over 24.001€. Law 16/2012 of December 27 is an amendment to capital gain for residents obtained as a result of the sale of a property that has been less than a year in the taxpayer’s assets. In this case, the Capital Gains is taxed based on the general Capital Gains tax scale mentioned above. The sale of an individually owned property acquired prior to December 31, 1994, special transitory taxation conditions apply. All non-resident sellers, regardless of when they acquired the property, are subject to 3% retention of the sales price, paid to the Tax Office by the purchaser on account of the seller. If the amount withheld exceeds the tax liability, you may obtain a refund of the excess in the future table border=”2px”> Taxable base rate on savings Applicable rate% Up to 6,000 € 21% Between 6,000€ and 24,000€ 25 % From 24,000€ 27 %
The tax on Capital Gains generated from the sale of urban properties located in Spanish territory acquired between May 12th and December 31st 2012 will be exempted by 50%, with some exceptions.
Building your own home in Spain
Providing that a building plot is situated within urbanization, or an area zoned within the Municipal Plan for such use, outline planning permission will already have been granted for the construction of a detached home. However, building regulations, which vary considerably, dictate the permissible size of the villa according to the size of the plot. Care should therefore be taken before proceeding with the land purchase that one will be allowed to construct one’s chosen home on it. Panorama will be pleased to provide a list of bilingual architects, and to arrange viewings of some of their previous work. House surveys A building survey, as it is understood in the U.K., is not necessary in Spain for mortgage purposes. It is nonetheless advisable when purchasing an older property. Common things to check for are the condition of the plumbing and electrical installations, waterproofing, roofing, and so on. These checks, as well as a full structural survey, can be carried out by a Spanish technical architect or indeed by a qualified British Chartered Surveyor. Any fees involved would be to the account of the prospective purchaser.
Since the beginning of the banking crisis in 2008, Spanish banks have gradually started to lend money again to purchasers, and loans during 2010 have become easier to obtain, and more frequent. However, their criteria are much more stringent than before. A qualified foreign applicant can reasonably expect a mortgage loan to be approved for between 50% and 70% of the official valuation price of the property. However, the purchaser must prove that between 30% and 35% of his net disposable income after taxes and after other mortgage commitments, is free to service the new loan. Additionally, please note that valuations from some bank valuers can be as low as 20% to 25% below real, proven market values. This is not always the case, but the banks are apparently encouraging low valuations. The easiest loan to obtain is that for 50% of the property’s value. However, the banks are equally concerned about the ability of the applicant to service the mortgage loan, and still require a lot of documentationç A foreign applicant should not be discouraged, however, and it is important to meticulously prepare the documentation needed by the bank. Current conditions dictate the need to have at least two or three banks to apply to. Your agent and lawyer can be very useful in this procedure, which can take anywhere from three weeks to almost two months from the time all the documentation is submitted. A sample documentation required by the Spanish banks does not vary substantially from that required by banks in other countries, and includes:
- Two years’ tax returns.
- If you are receiving a salary, the last 6 months payslips, as well as proof of any other regular income. If you are a company owner, the proof of your various means of income.
- A list of your current monthly mortgage payments (if you have any).
- A statement of one’s total assets and liabilities, confirmed by a professional accountant.
- Copies of one year’s bank account statements
- Copies of your passport
- In all cases, there will be a mortgage application form to fill in, and sometimes additional documentation is required, depending on the case.
Purchasers or sellers of property should always consult qualified Lawyers and Tax Advisors.