As
in most countries, the taxation laws in Spain are somewhat complex and it is
always a good idea to take specialist advice. There are, however, some
straight-forward rules that may be applied if an individual meets certain
criteria.
 The
first of these relates to residential status; if an individual spends more than
183 days each year in Spain (these do not necessarily have to occur consecutively), they are deemed to
be a resident for tax purposes, irrespective of whether they hold a residence
permit (residencia). This means that tax is due to the Spanish Tax Authority,
La Hacienda, on world-wide assets, with a set-off allowed on tax paid to the UK
authorities under the UK’s Double Tax Treaty with Spain. As always there are
exceptions and one should confirm one’s tax status with an independent tax
advisor.
The
situation is less complicated for an individual spending less than 183 days a
year in Spain and does not hold a residencia; they are considered non-residents
for tax purposes, thus only paying tax to the Spanish authorities on their assets
and income in Spain. A non-resident would be liable to UK tax on their
world-wide assets and income, but would also be able to set off the taxes paid
in Spain under the afore-mentioned Double Tax Treaty.
The
following taxes have to be paid, irrespective of whether an individual is
considered a resident for tax purposes or not.
Vehicle Road Tax Road
tax in Spain is paid to the local authority between March and May of each year,
and is known as ‘impuesto municipal sobre vehiculos de tracción mecánica’. Rates
are set by individual municipalities, and are based on a combination of the
‘fiscal horsepower’ of the vehicle and number of residents in the municipality;
the larger the town, the higher the rate will be. Municipal Property
Tax ‘Impuesto
sobre Bienes Inmuebles’ (IBI) is an annual property tax and is sometimes referred
to as ‘contribuciones’. It is equivalent to local rates and is paid to the
local authority for local council administration, education, sanitary services
(including street and beach cleaning), social assistance, community infrastructure,
sports and other amenities. Based on the ‘valor catastral’ of the property,
rates vary from 0.4% to 1.1% depending upon the region. Refuse
Collection and Mains Drainage An annual
payment for refuse collection and local mains drainage (basura and
alcantarillado) is also due, which can be combined with payment for water rates
in areas that are not metered. For those areas that are on water meters, paying
directly to the water supplier, payment for refuse collection is likely to be a
stand-alone annual payment, again payable to the local authority. Community Tax ‘Comunidad de Propietarios’ are fees charged by the
elected organisation or committee responsible for the running of the urbanisation
on which a property is situated; they are a legal requirement and failure to
pay can result in a fine or, in extreme circumstances, even the forced sale of
your property. Amounts vary depending on location; they are likely to be higher
on a larger development where the Comunidad is responsible for more services, such
as a communal swimming pool and leisure facilities. As a very rough guideline,
these charges may range between around 0.5% and 1.5% of the value of your
property. Capital Gains Tax Historically residents
and non-residents were treated differently in respect of capital gains tax
liability; however on January 1st 2007 the new Income Tax Act came
into force. This was largely due to EU pressure, after complaints from foreign
taxpayers that they were being discriminated against under the previous system.
The Income Tax Act changed
certain articles of the Non-Resident Income Tax Act, in particular, the capital
gains tax rate which was reduced from 35% on net gain to 18%, in line with the rate
of tax for residents.
Another
significant amendment to the Act was the reduction in the amount of retention
tax that a property purchaser must pay to the tax authorities on account of the
potential capital gains tax liability of a non-resident seller. This has been reduced
from the 5% of the declared purchase price to 3%.
To
explain this further, when a non-resident sells their Spanish property the purchasers
must pay 3% of the sales price directly to the Spanish tax authorities and will
only pay to the seller 97% of the agreed price. This retention tax is effectively
kept ‘on account’ by the Spanish tax authorities until the non-residents’
capital gains tax liability is calculated. Once the capital gain is determined,
i.e. the profit less any inflationary considerations for the period that the
property was owned, and the appropriate tax due is calculated, the Spanish tax
authorities will deduct the retention tax from the capital gains tax due to be
paid. If, the capital gains tax due on the sale of the Spanish property is more
than the 3% retention tax the seller has to pay the difference. If, however the
capital gains tax liable on the sale of the Spanish property is less than the 3%
retention tax the difference will be refunded by the Spanish tax authorities.
Plusvalia Plusvalia
is a tax levied by the local Town Hall and is paid on the sale of a property or
piece of land. It is based on a combination of the area where the property is
located, the size of the plot, and on the ‘valor catastral’. It is, in essence,
a tax on the increase in value of the land, which by law, the seller is obliged
to pay; however it is common practice for the parties to negotiate and write
into the sales contract, who will pay the amount due. Property Transfer Tax For
a residential property sold from a developer for the first time, transfer tax
of 7% is due, and in the case of plots of land without existing built property,
the figure is 16%. Both transfers are also subject to Stamp Duty of 1%.
On
resale properties the transfer tax is set at either 6% or 7% depending on the
region. The Province of Granada, in the region of Andalucía, is subject to 7%
transfer tax.
Value
Added Tax The
Spanish equivalent of VAT is I.V.A, and is charged at 16% on goods and
services.
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