tax law

Tax in Spain
A non resident who owns a property in Spain must file three separate tax forms every year:
Property Income Tax

Spanish Property Wealth Tax. (this tax is no longer payable as of 1st of January 2009)
Annual Real Estate Tax

Property Income Tax (Tax form 210)

Tax authorities presume that you generate an income by owning a property in Spain and therefore, taxes always at the flat rate of:

24% of the rental income, for the periods during which the property is rented out. (25% for fiscal years prior to 31/12/2007).
24% of personal income, for the periods during which the property served a personal use. (25% for fiscal years prior to 31/12/2007).

For owners of a property which is for personal use only (not rented out), a simplified tax return form can be filed within the filing period beginning January 1st through December 31st of the following fiscal year.

Spanish Wealth Tax (Tax form 214)

(This tax has been abolished by means of Law 4/2008).

Although this tax is not longer payable, owners must be up to dated with their payment up until the year 2008. This is very important for two reasons: (1) if you intend to sell your property and would like to claim the 3% tax withholding that the buyer must apply, as a payment in advance of your capital gain, you have to file all the outstanding tax forms (214). (2) Tax Authorities can look back at previous fiscal years and review your tax returns (up to a maximum of 4 fiscal years) and you would be held liable for paying such tax, pay an interest rate on that amount and receive a fine of 20% of the amount due.

The type of tax form to be filed and applicable filing period will depend on the number of properties owned:

For owners of one (1) property for personal use (not rented out) a simplified tax return (tax form 214) can be filed within the filing period beginning January 1st through December 31st of the following fiscal year.

For owners of two (2) properties or more, the filing period begins January 1st through June 30th of the following fiscal year and the applicable tax form is the nº 714.

Please note that your mortgage (only actual liens) can be taken into account when calculating the Spanish Wealth Tax.