Assessing your tax liabilities after buying your Spanish property
When assessing how you will be taxed after buying property in Spain, the best piece of advice the Spain Buying Guide can offer is to speak to a qualified tax advisor, who will be able to explain the tax system in Spain and how it applies to you. Here are some of the key points about tax while living in Spain.
The tax year in Spain
Unlike in the UK, the Spanish tax year runs from 1st January to 31st December, and the annual tax return must be made between 1st May and 20th June of the following year.
The tax you pay may well be affected by your residency status; if you spend fewer than 183 days a year in Spain, you are a non-resident, but will still have to pay tax on any income earned in Spain.
If you own a property or have a business in Spain, you must complete a tax return each year. Even if your Spanish property isn’t rented out, you will still earn ‘imputed income’ on this property, and must pay tax on it. Spain has a double taxation agreement with the UK, meaning you will never be taxed by the UK on any money that you have already paid tax on in Spain.
Property taxes in Spain
The main property tax payable in Spain, which must be paid by all property owners, is IBI (el impuesto sobre inmuebles urbanos); this is similar to Council Tax in the UK, and is a contribution towards street cleaning, education, local amenities, and so on. This tax is calculated based on the rateable value of a property (the valor catastral). Paid alongside the IBI, on an annual basis, you will also need to pay a second tax that goes towards waste collection and drainage (basura y alcantarillado).
The importance of paying your Spanish taxes
If you fail to pay these key taxes when they are due, you will receive a fee of 3% of the sale price of your property (in addition to the tax itself) – and you will find that the Spanish authorities do not accept any excuses for those who do not pay taxes. Residents who fail to pay Spanish income tax will be required to pay a sanction on top of this tax, usually between 50-150% of the original cost.
Additional taxes in Spain
In addition to property and income taxes, there is also annual motor vehicle tax paid by all those who own a vehicle in Spain. This is paid directly to your local town hall, and will depend on several factors: the power and age of the vehicle and your location – for example, you should expect to pay more in a large city than you would in a small village.