Five Spanish Non-Resident Taxes

For many of my regular Spanish resident readers there are elements of this that will not apply but I was writing specifically for a non-resident audience. It equally applies however to non-residents who have already purchased. By all means, email me if you want more detail.

To begin I’ll list three common myths that are wrong. These have all been said to me or written to me;

• ‘I’m not liable to Spanish Inheritance Tax because I’m not a resident’ – wrong
• ‘I live in the UK and pay my taxes to the tax office in Salford Quays. I have a house in Spain but I’ve no need to pay Spanish taxes’ – wrong
• ‘The people who rent my Spanish house pay me in pounds so I don’t need to pay Spanish tax’ – wrong

The following is the leaflet contents I referred to earlier;

There are 5 key taxes most applicable to non-resident property owners.

Income Tax

Every non-resident owner of a Spanish property has to pay an annual tax to account for their "share" of the property. Although it's called an "income tax" it's not actually based on your level of income, but on a "deemed" or "notional" income, which is a percentage of the rateable value of the property multiplied by the non-resident tax rate of 24.75%.

This tax is based on the calendar year and is always due within 12 months of the end of the tax year, so for the 2020 tax year, tax needs to be paid before 31st December 2021.

Property or IBI Tax

Property rates in Spain is referred to as IBI and, like the UK, this tax will be levied by your local council in Spain. The council will assign a rateable value to your property and then your rates or property tax will be a % of this amount. The % will depend on your council, but in most cases it will be somewhere between 0.5% and 1%. So if you had a rateable value of €50,000 and your local percentage was 0.75%, then your annual rates bill would be €375.

This tax is also based on the calendar year but will normally be payable between June and September each year, again this will be dependent on your local council.

Rental Income Tax

Up until the end of 2009, rental income tax was 24% of the gross income you received on any rentals. So if you generated €1000 by renting out your property, then you would have to pay €240 in tax. You could not offset any expenses - i.e. cleaning, utilities, insurance, mortgage interest, marketing, management fees etc.

However, since January 2010, the rules have changed, which means that you can now offset expenditure when calculating what income, or effectively profit, will be subject to tax of 24.75%.

In theory rental income tax returns need to be submitted each quarter, to account for income received in the preceding 3 months

Capital Gains Tax 

When a non-resident owner sells their property, they will make a capital gain or a loss upon the sale, which is the difference between what they paid for the property and the proceeds of the sale. The buyer of the property should always withhold 3% of the sales value and pay this to the Spanish tax office as an "advance" of the buyer’s potential capital gains tax. It is then up to the buyer to calculate their gain or loss, and if a gain has been made this will be subject to 21% tax. The buyer should pay the 3% within 1 month of the sale date, and the seller then has a further 1 month in order to submit their calculation of a gain or loss and the corresponding tax returns.

Inheritance Tax

Inheritance tax for non-residents is a tax on the beneficiaries and not on the deceased as it is in the UK. The tax rates themselves can vary depending on the relationship of the beneficiaries to the deceased, the amount that is being gifted, their age, and even their wealth in Spain and in the very worst situation tax rates can reach levels of 81%!

The other major issue for UK people is that transfers between husband and wife in Spain are not tax exempt as they are in the UK, so if a spouse were to die, then the surviving spouse, in most cases, will need to pay inheritance tax (as well as probate) in order to take on the additional 50% share of the property.

It will normally take approximately 6 months to deal with the probate issues in Spain and pay any outstanding inheritance tax, before the property deeds can then be altered.

No Inheritance Tax is payable if the property is owned by a UK company, since even if a shareholder dies, the company can continue in existence and the shares passed on to a beneficiary under UK rules. This requires SPECIALIST advice.

* * * * * * *

This is a very basic outline of taxes in Spain, applying to non-residents. Both residents and non-residents are always encouraged to seek professional advice.

Email : davidgoodall.spain@gmail.co.uk

Facebook : https://www.facebook.com/financialpagesinspain

Twitter : @davidgspain

Website : http://www.financial-pages-in-spain.co.uk/

Blog : http://expatsfrombritain.blogspot.com/

You will note that the leaflet does not contain the Spanish titles of the taxes, as it is aimed at a UK audience. 

Further reading recommended, includes the following;

Scam Watch Just say NO to cold calls

Professional Advice  Legal, Tax and Property advice is always best

Money Transfers – Foreign Exchange  beating the banks on bank transfers!

Please email me if there is anything I can help with.

David Goodall

Financial Pages in Spain

Email

Foreign Exchange - Money Transfers - ONLINE & WORLDWIDE

By-pass your bank for a better deal, saving time and money.

This excellent service, with great rates and high quality customer service, by linking to the very best Foreign Exchange Platform – Currency UK

Questions and Answers

Currency UK - Key Facts

• Send & receive International payments online 24/7
• Track from start to finish
• Bank beating exchange rates
• Free registration without obligation (helps YOU to find out more)
• Fully Regulated by UK Financial Conduct Authority (FCA) & 100% secure
• Part of the Currencies Direct Group 

What does Currency UK do?

Currency UK   allows you to exchange currencies at market leading exchange rates. Currency UK will transfer your purchased currency to your nominated bank account anywhere in the world.

What does Currency UK NOT do?

Currency UK does not provide facilities for you to gamble on the currency exchange markets. Currency UK does not provide travel money for your holidays.

How can YOU get the the best exchange rate?

Currency UK  has developed smart technology to reduce the costs of trading currencies. We pass these cost savings onto our clients. Other currency brokers employ teams of highly paid traders to talk to clients and convince them to deal through their brokerage. This is an expensive way to run a foreign exchange trading company and the costs are passed onto their clients. Banks have a long established history of charging high fees and providing poor rates of exchange which nets them fat profits at the expense of their clients

What hours are Currency UK open for business?

Currency UK is open for online trading 24 hours per day, 7 days per week, 365 days per year . Currency UK is open for telephone based trading between the hours of 9am and 5pm British standard time.

How can I get help or support?

Currency UK is fanatical about providing a fantastic support to our clients. Between the hours of 9am and 5pm British standard time, call us on +44 (0)203 004 4444. Email us 24 x 7 there is always someone ready to respond.

How do I open an account with Currency UK ?

Any private individual or company can open an account  through  Currency UK. Click the 'Open Account' button on any of the Currency UK pages. You will need to fill in a few pieces of information but it is a very quick process. In fact, we aim to open your account and have you up and trading within 5 minutes of you clicking the open account button. Note that we do have strong anti-money laundering procedures in place.

What are the fees, charges and commissions?

Opening an account is FREE. Trading amounts over £3000 is FREE. Currency UK will wire your purchased currency to your nominated bank account anywhere in the world for FREE. Fixing a rate for the future is FREE. Placing an order to be executed if the currency exchange rate reaches a particular level is FREE, even if you cancel the order 5 minutes later. Currency UK does not apply any hidden commissions or fees. The only fee ever charged is if you exchange an amount below £3000. In this case we will charge you £10 for the telegraphic transfer fee to deliver your purchased funds to your destination account. Currency UK earns revenue by applying a small price difference between the exchange rate at which we buy currencies and the exchange rate at which we sell currencies.

What are the maximum & minimum amounts that can be traded ?

You can trade any amount from £100 or equivalent upwards.

How will I know the status of a trade or payment?

We confirm by email when you have agreed a trade. We confirm by email when we have received your payment to fund the trade. We confirm by email when we have sent your purchased currency to your nominated account. You can log into your account 24 hours per day, 7 days per week to review the status of your trade. You can contact us anytime to request a status.

Can I trade on-line?

Yes, Currency UK has developed a unique online trading system which is easy to use yet very powerful. This system is not available through any other currency broker or bank and is unique.

Can I trade via telephone?

Yes, some of our clients don't like to trade online and prefer to call or email us.

Can I fix a rate for the future?

Yes, there is no need to be exposed to future currency fluctuations. You can fix a rate for all major currencies up to one year. When you fix a rate for the future, we require you to put down a 10% deposit to secure the future rate. We have to do this in case the exchange rate moves against us and a client defaults on the trade. Surprisingly, future exchange rates can sometimes be cheaper than the current exchange rate. It is always worth checking the future rate of exchange.

Can you predict future exchange rates for me?

No and please don't trust anyone that says they can. Anyone who could accurately predict the currency exchange rates would have a limitless supply of money and would be living on their own island somewhere. Currency exchange rates are acknowledged as the most difficult rates to predict within the financial markets. Treat them with respect and reduce your exposure to currency fluctuations where ever possible by fixing a rate for the future.

How do I pay for my purchased currency?

The best way to pay for your purchased currency is through electronic bank wire. Contact your bank and ask them to transfer the required amount to Currency UK
bank account held at Barclays Bank in London. Our bank account details can be found by logging onto our system. If you are based in the UK, your bank can provide the FASTER PAYMENT SYSTEM and this normally takes less than two hours. If you are based outside of the UK, your bank can provide a SWIFT payment.

How do I receive my purchased currency?

Currency UK will transfer your purchased currency to your nominated bank account anywhere in the world using the fastest electronic bank wire method available for the receiving country. Outgoing payments are cleared the same day in the UK and same or next day in the US and Europe. Allow 1-2 days for payments to clear outside of the UK, Europe and the US. However, we are always seeking to improve our service to clients and recently we have cleared payments to China the same day so don't be surprised if your payment arrives earlier than expected.

 Financial Pages in Spain

Though Financial Pages in Spain is a website and Blog for British and Irish expats and property owners in Spain, we can also offer trading in Worldwide currencies through our preferred supplier Currency UK 

YOUR link Currency UK

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

Spain – The Sun still Shines and Lifestyle is Healthy

Spain is great  for holidays, working, living & retirement

The beaches are clean, the Mediterranean is still blue, the food is fresh, lots of cheap flights, great deals on hotels and apartments but forget all that the headlines are bad! UK Press always give SPAIN a hard time

Personal Experience 

We bought our first house in Spain on 7^th June 2002; it was memorable for another reason. It was the World Cup in Japan and South Korea, England played Argentina and won 1 – 0 thanks to a penalty by David Beckham.

I thought I’d write down a few reasons why we bought and let you, the reader, decide whether some, all or none of the factors still apply. This is random in no particular order;

• The climate is great and the sun shines all year round
• It’s two and half hours from home
• The flights are cheap if your dates are flexible
• We love the lifestyle, street markets, restaurants, entertainment, the beach and I could go on
• House prices are cheap compared with the UK
• A second home is for the long term, especially retirement
• The exchange rate is more favourable than it has been
• We needed and easily got a 50% mortgage
• We found someone reliable to look after the place when we are not there, giving peace of mind
• The family think it’s a great idea

I could go on but I think those 10 reasons cover most of why we bought in Spain.

The fundamentals haven’t changed and there are bargains to bought. There is now also plenty of evidence that people like the concept of Rent before you Buy.

So here are three ideas

• Rent before you buy in Spain

• Always get Professional Advice

• BEAT the BANK get better rates for foreign exchange

Viva Espana

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

PS

From the ‘Guardian’ in 2013

Spanish have the HIGHEST healthy life expectancy in Europe

Read the article

Moving to Spain

Some Key Issues

This is not intended to be a definitive list but I come across so many problems amongst UK nationals in Spain which can be put down to poor or even no planning. Even though there are costs, to get professional advice is almost always cheaper in the long run.

1.    Research

In the internet age there are huge numbers of resource waiting to be read. However, I always ask you to consider who is giving you the information. Beware of vested interests!

The more independent information you can gather, the better. The archive to my blog or my website are based on my own experiences but I encourage you to look at other resources. Financial Pages in Spain

2.    Know your area before you move

If you’ve been somewhere on holiday, and loved it, do you really know it? From my experience many people move on that basis and only then begin to know the place. It’s part of your initial research really.

I found the British Embassy in Madrid very helpful and follow them on Twitter (@ukinspain)

3.    Consider ‘Rent before you buy’

My Estate Agency friends and contacts will tell you I’m wrong because there are so many bargains to be had! I still think this caution is good advice and I’ve written about it before Rent before you buy in Spain

If you do buy, the research and knowing your area are even more important.

4.    Take health very seriously

Spain has one of the healthiest lifestyles in Europe and generally has excellent medical facilities. You must remember that whilst a European Health Insurance Card (EHIC) covers you as a tourist, once you settle in Spain, you need to register locally. This procedure can be different according to area so you need local information about health services and facilities

5.    Work out your finances including tax

I apologise if this seems obvious, but based on my INBOX, it doesn’t happen often enough!

Choosing a Bank is often an early decision. It can be a problem if you choose the wrong one. Personally, I prefer Internet Banking but it doesn’t suit everyone. Whether you can speak Spanish is another key issue, as the local service you get can vary. Another reason to ask around and see which one gets the most positive comments. There is no ‘best’ or even ‘worst’ bank but local knowledge is, in my opinion, key.

Getting Professional Advice for which there is no substitute is also very important. I often refer people to advisers that I have checked out or my contacts have recommended. After 11 years experience, in Spain, I’ve learned only to recommend the very best advisers.

Tax is vital and often misunderstood. Some people have said to me (in summary) ‘I thought it would be the same as in England’, that’s so, so wrong. From my own experience the starting point is that it’s always different from the UK! Especially in the early days and vitally if your Spanish is poor, you need a Fiscal Representative, mainly to help with the endless paperwork. It maybe a service your solicitor could provide but if you need specialist tax advice please Email me.

6.    Get independent legal advice

If you were buying a house in the UK, chances are you’d choose your own Conveyancing Solicitor or one recommended by a friend. That should apply in Spain too, but buyers seem happy to accept the recommendation of the builder – he’s not independent or even on your side – he’s the builder’s solicitor

Your solicitor, knowing your situation, is also the best person to advise on a Spanish Will which you do need

If you don’t know a solicitor, please ask around or I will recommend one if I know a proven one in your area. Certainly in your early days in Spain, you need an English-speaking legal adviser. Email me for a recommendation.

7.    Put your UK affairs in order

In many respects it’s the mirror image of what you need to do in Spain. I would however suggest in particular that you tell the tax authorities. If you don’t then HM Revenue & Customs (HMRC) will chase you for years to come. Timing your departure can also be beneficial in having a tax-free year, if applied correctly. Email for more information.

The Department of Work & Pensions need to know of the change in circumstances whether or not you are retired and should be informed. You should also tell your local authority and GP.

8.    Don’t become isolated

Even if you get to know many British expats, learning Spanish can really help your life in many respects. I’ve always found the Spanish very tolerant even if you only try to speak their language.

Courses are widely available and always of value

There is much more information on many subjects in my BLOG ACHIVE but the following are especially recommended;

La Torre Fx – Foreign Exchange

Offering better rates and service than the banks, internet facility available 24 hours per day.

UK Savings

If you live in Spain, should your savings be in the UK. It’s worth considering.

Spain – The sun still shines and the lifestyle is healthy

Serious reasons to move to Spain but my light hearted review

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

Spain – The Sun still Shines

Someone in the UK said to me ‘Not sure I’m going to Spain this year, due to the Economic mess’

The beaches are clean, the Mediterranean is still blue, the food is cheaper than last year, lots of cheap flights, great deals on hotels and apartments but forget all that the headlines are bad!

Spain is still a great place for holidays, working, living and retirement!

We bought our first house in Spain on 7^th June 2002; it was memorable for another reason. It was the World Cup in Japan and South Korea, England played Argentina and won 1 – 0 thanks to a penalty by David Beckham.

We forgot to have our 10 year party!

I thought I’d write down a few reasons why we bought and let you, the reader, decide whether some, all or none of the factors still apply. This is random in no particular order;

• The climate is great and the sun shines all year round
• It’s two and half hours from home
• The flights are cheap if your dates are flexible
• We love the lifestyle, street markets, restaurants, entertainment, the beach and I could go on
• House prices are cheap compared with the UK
• A second home is for the long term, especially retirement
• The exchange rate is favourable
• We needed and easily got a 50% mortgage
• We found someone reliable to look after the place when we are not there, giving peace of mind
• The family think it’s a great idea

I could go on but I think those 10 reasons cover most of why we bought in Spain.

The fundamentals haven’t changed, there are bargains to be bought BUT without question the biggest factor affecting the property market is a LACK OF CONFIDENCE.

So here are three ideas

• Rent before you buy in Spain

http://expatsfrombritain.blogspot.co.uk/2012/02/rent-before-you-buy-in-spain.html

• Always get Professional Advice

http://expatsfrombritain.blogspot.co.uk/2012/01/getting-professional-advice.html

• You can get better rates for foreign exchange

http://expatsfrombritain.blogspot.co.uk/2012/05/unrivalled-foreign-exchange-la-torre-fx.html

Viva Espana

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com