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Tax guide for Non-resident owners of Spanish Property

All non-residents with Spanish property are obliged to submit quarterly and/or annual returns.

This article will cover:

  1. My Spanish property is non-rented / a holiday home, what taxes should I pay?
  2. I receive rental income on my Spanish property, what taxes should I pay?
  3. How does a joint ownership tax return work?
  4. What information do I need to supply for you to prepare my tax returns ?
  5. What is the ‘valor catastral’ of my property?
  6. What expenses can I claim on my tax return?
1. My Spanish property is non-rented / a holiday home, what taxes should I pay?

You will need to file an annual income tax return to pay the deemed income tax on your non-rented property.

This is income tax on the “imaginary” rental income that you have on the property, and is calculated in reference to the rateable value (valor catastral) of the property.

The deadline is 31st December following the end of each tax year. For example, if you purchased a property in 2019, your first tax return will be due by 31st December 2020.

We can calculate your tax liability based on the rateable value and file your return on your behalf as part of our service.

2. I received rental income on my Spanish property, what taxes should I pay?

If your property is a rented out, you are required to make a tax declaration for each quarter in which you have rental income.

For the tax year 2020, the tax rate is 19% for residents of the EU, Norway and Iceland, with all rental expenses (including mortgage interest) being deductible for tax purposes.

For residents of other countries, the tax rate is 24% with the rental income received being fully taxable with no deductions.

If you are unsure whether or not you need to file a quarterly tax return, you can send an email to admin@spainaccountants.com where we will be happy to assist.

3. How does a joint ownership tax return work?

If you jointly buy a property in Spain, both you and your co-owner will have to file a tax return separately.

Only if the property in question is jointly owned by a married couple in which both spouses are non-residents, a single tax return may be filed.

4. What information do I need to supply for you to prepare my tax returns ?

We would require the personal details of each property owner and also the basic details of your property, including the date and cost of purchase and the valor catastral.

Please feel free to contact us to request the client information form for full details.

5. What is the ‘valor catastral’ of my property?

The valor catastral is equivalent to rateable value.

You will find this value on your latest rates (IBI) bill; for recently purchased properties, the lawyer/ agency who dealt with the sale may also be able to provide you with this information.

Note that this is not same as the purchase price or market value of your property. You can read more on the valor catastral here.

6. What expenses can I claim on my tax return?

As mentioned above, only residents of the EU, Norway and Iceland, can deduct rental expenses for tax purposes. Here are some examples of allowable property expenses:

  • Agency fees
  • Accountancy fees
  • Community fees
  • Utilities 
  • Repairs
  • Maintenance charges 
  • Property tax
  • Mortgage interest

For residents of other countries, there are no deductions permitted for expenses .

Need help with filing your non-resident income tax returns?

Our current charges, before 20% VAT, for each return (quarterly or annual) are as follows:

Single property owner 75 Euros
Reduced rate for joint ownership 95 Euros

This includes:

  • Drawing up your draft tax calculation and submitting to you for approval.
  • Online submission of the return and order for the payment of the tax due directly from your Spanish bank account.

Please note that the reduced rate for joint ownership is for those who are married in which both spouses are non-residents. If this is not the case, then you will be charged to file two separate single tax returns.

If you are interested in our services, please contact us and we will send you all the relevant details required to file your tax returns.

What is the Valor Catastral of my Spanish property?

This article covers:

  1. What is the valor catastral of my Spanish property? and what is used for?
  2. Where can I find the valor catastral figure?
  3. What if I don’t have the valor catastral of my property?
1. What is the valor catastral of my Spanish property? and what is it used for?

The valor catastral is the rateable value of your Spanish property. This is not linked to the market value or purchase cost of your Spanish property.

For non-resident property owners, it is used to calculate the “imaginary” rental income that you have on the property, and therefore used to calculate the deemed annual income tax due.

The taxable amount is, in general, 1.1% of the rateable value of your property.

2. Where can I find the valor catastral figure?

You can find your valor catastral on your latest rates bill or receipt (IBI), it will usually be displayed as a figure next to:

  • valor catastral
  • VC
  • V.CAT
  • V

For recently purchased properties, the lawyer/ agency who dealt with the sale may also be able to provide you with this information.

3. What if I cannot find the valor catastral of my property? / I don’t have a valor catastral yet

If you do not have your latest rates bill, you could try contacting your local Town Hall to obtain your valor catastral.

In the cases where our clients are unable to obtain the valor catastral, or their property is newly built and the value catastral has not yet been determined, we would use 50% of the purchase price, as stipulated by law, to calculate your tax due.

Need help with filing your non-resident income tax returns?

We have a basic tax guide for non-resident Spanish property owners that you may find useful.

If you would like us to file your tax returns on your behalf, our current charges, before 20% VAT, for each return (quarterly or annual) are as follows:

Single property owner 75 Euros
Reduced rate for joint ownership 95 Euros

This includes:

  • Drawing up your draft tax calculation and submitting to you for approval.
  • Online submission of the return and order for the payment of the tax due directly from your Spanish bank account.

Please note that the reduced rate for joint ownership is for those who are married in which both spouses are non-residents. Otherwise, you will be charged to file two separate single tax returns.

Please do not hesitate contact us if you have any questions or need further assistance, we will be happy to assist.

Spanish VAT for foreign companies

Foreign companies wishing to offer their services or goods here in Spain are generally required to register for Spanish VAT here: known as IVA (Impuesto sobre el Valor Añadido).

Note that there is no registration threshold in Spain and you must register prior to starting your business activity.

This article covers:

  1. How do I register for VAT in Spain as a foreign company? What documentation is required?
  2. How long does it take to get a Spanish VAT number?
  3. How often do I need to file a Spanish VAT return? What are the deadlines?
  4. How do I pay VAT in Spain? 
  5. What if I don’t have a Spanish bank account?
  6. What is the VAT rate in Spain?
  7. I need an intra-community VAT number.

The VAT registration process is relatively straightforward. On presentation of all of the required documents at a local tax office in Spain, your company’s Spanish tax/ VAT number is issued immediately.

1. How do I register for VAT in Spain as a foreign company? What documentation is required?

We offer a VAT registration service to obtain a non-resident Spanish VAT code (NIF) for you. This involves registering the company with the Spanish Tax Office.

You will need the following:

A certificate produced by the Company Registry in the country where your company was incorporated.  This must state your company’s registered address and the current directors of the company.

A Power of Attorney document –  the draft provided by us, to be signed by your company director before a Notary. This allows us to obtain your Spanish tax code on your behalf and be the tax representatives of your company in Spain.

All documents should be legalised in your country with the Hague Apostille and translated into Spanish by a sworn translator.

We will provide the Power of Attorney documents in both Spanish and English so in the event that you can find a local Spanish-speaking Notary, there will be no translation necessary for these.

We can also provide a sworn Spanish translation service at this end for a reasonable charge. We offer this service for several source languages including English and French.

2. How long does it take to get a Spanish VAT number?

On receipt of the above documentation from you, we will normally obtain your Spanish tax number within 5-7 working days.

3. How often do I need to file a Spanish VAT return? What are the deadlines?

Autonomos and Spanish businesses registered for VAT will need to submit tax returns on a quarterly basis. However, if the business’ total sales in the previous financial year was over 6 million Euros then it is compulsory to submit monthly VAT returns.

A Modelo 303 form should be submitted by the 15th of the following month after the quarter period for positive returns, and by the 20th for negative/zero returns.

For Q4 VAT returns, these shoul be submitted by January 25th of the following year for positive returns, and January 30th for negative returns.

All VAT registered businesses will also have to complete Annual VAT returns – Modelo 390.

4. How do I pay VAT in Spain?

The Spanish tax office will only accept payments from Spanish bank accounts. There are two main methods to pay the tax due:

1. By providing the IBAN of your Spanish bank account – this is the simplest way to pay your tax due as the Tax Office will charge your bank account on the due date.

It is important that you leave at least 5 days before the deadline for the payment to process, and to have enough funds in the account to meet the payment; insufficient funds will mean the tax remains unpaid and possible penalty fees.

2. Alternatively, you can pay the tax due through your Spanish bank and obtain an NRC code (Número de Referencia Completo). This code is important as it acts as reference, linking your payment to the tax return.

Most Spanish online banking systems will allow you to pay tax this way. Once you receive the code, you can then supply this to us instead of your Spanish IBAN, and we will file your return online using our digital certificate.

5. What if I don’t have a Spanish bank account?

If you are a foreign company registered for VAT and do not have a Spanish bank account, we can pay the VAT due on your behalf at an additional service charge.

We will invoice you for the tax due prior to filing your return. Therefore you must make the full payment to us before the deadline so that we can pay the tax due on your behalf.

6. What is the VAT rate in Spain?

Standard rate: 21%

Reduced rates: 10% and 4%

Read more on rates and allowances here.

7. I need an intra-community VAT number

In Spain, this is a separate registration process and you will need to submit a Modelo 036 application online.

Your VAT number will need to be validated on the VIES system – the official database for checking the validity of VAT numbers issued by EU member states.

For online traders, such as those who sell goods on Amazon, registering on the VIES may be required in order to have full functionality of your seller account.

Our services

VAT Registration

Our current charge for the VAT registration of your company is 500 Euros.

This includes the following:

  • Drawing up the draft Power of Attorney and tax representation documents;
  • Obtaining a tax code (NIF) for your company;
  • Registering your company’s business activity with the Spanish Tax Office (Form 036).

VAT Tax Returns

We can submit the Modelo 303 tax return on your behalf. Our current charge per quarter is 160 Euros, on the basis that you send us your VAT data quarterly in spreadsheet format. As part of our service we will work together with you to optimise a format to present this data.

VIES Registration

We can help you submit the Modelo 036 form to register your business on the VIES. Please contact us for more details.

Make an enquiry

If you are interested in any of our services or require further information, please send us an enquiry here and we will be happy to assist.

Amazon Sellers: Activating your Spanish VAT number as an intra-community operator

You may have received this notification to get your Spanish VAT number registered on the VIES by Amazon:

“Your Amazon seller account contains a local VAT registration number(s) that is not validated or listed in the VAT Information Exchange System of the EU commission ([VIES]).”

Although you have already registered for a Spanish VAT number, Amazon may require your VAT number to be validated on the VIES (VAT Information Exchange system) in order for your Amazon account to have full functionality.

All non-activated intra-community VAT registration numbers will fail Amazon’s validation check.

How do I validate my Spanish VAT number?

This is a separate registration process and you will need to submit a Modelo 036 application online. This form can be submitted by those who have a digital certificate issued by the Spanish Tax Office.

Unfortunately approval times may be very slow and we are experiencing six months or more for processing.


Need our assistance?

We can help you submit the Modelo 036 form to register your business on the VIES. Please contact us and we will be happy to assist.

Battling against the Spanish Tax Office. Part 2- appeals.

Following my recent blog post on the persecutory attitude of the the Spanish Tax Office, known colloquially in Spain as Hacienda, here’s a brief guide on how to fight them. In our experience we have found that if you keep up the fight, you will win- even if you need to take the matter to the Tax Tribunal.

You know things are getting serious when you receive the dreaded letter from Hacienda stating that, in their opinion you owe them further tax, called Propuesta de Liquidacion Provisional. If after replying to Hacienda within 10 days they reject your case, you have one month to lodge an appeal, known as a Recurso.

During this month, the tax debt to them will be frozen. At the end of this time, if the Tax Office does not accept your appeal then they will write to you informing you of this. You have a right to further appeal, but you must pay the tax due, either all at once or by requesting payment by instalments (aplazamiento de deuda) limited to 1 year for individuals or 6 months for companies. Non-payment of tax will lead to late payment surcharges and eventually seizure of assets, normally in the form of a direct charge to your bank account. In Spain your bank has no right to refuse or even question such charges from Hacienda.

Normally by this stage, Hacienda will have sent you a further letter issuing you with a penalty for your original infraction. This is typically 50% of the tax due to them, which is honestly draconian. You have the right to respond and appeal using the same procedure as for the tax due, however the difference here is that the penalty is frozen until you have exhausted all available levels of appeal.

The next level of appeal, and the final one available online without having to use specialised tax lawyers, is the Tribunal Economico-Administrativo. The important thing about this Tribunal is that they are independent from Hacienda. Whereas we have seen that the initial appeal to Hacienda may be rejected because the inspector involved doesn’t want to criticise his buddies, the Tribunal is supposed to be entirely independent. And we have seen this to be the case in practice, where the Tribunal makes a fair ruling in favour of the client who has done nothing wrong.

We have won the majority of our appeals to the Tribunal, including an appeal against the 50% penalty mentioned above, where our claim included the assertion that such penalties are in contravention of EU law.

Unfortunately due to the massive workload and backlog, the Tribunal can take up to around 4 years to make their decision. Until a decision is made in your favour, the State has your extra tax payment in their bank account and will happily make use of it. If your appeal at the Tribunal is successful, the tax will be returned to you with nothing more than a little interest. And of course, no apology from Hacienda.

In one case where we won the Tribunal appeal, we unfortunately find that over one year later Hacienda has still not paid back the overpayment of tax due, and we have had to lodge a communication with them to remind them to repay the money.

So it’s a tough fight, but it must be fought because over the last years Hacienda appears to have become more and more an organ of intimidation and ever more desperate to increase their funds.

Make an enquiry

If you are interested in any of our services or require further information, please send us an enquiry here and we will be happy to assist.

Autonomos update- coronavirus

Yesterday the Cabinet of Ministers approved the following new measures to help autonomos cope with the financial difficulties caused by COVID-19.

  1. The possibility to defer the April Social Security payment, with a late payment interest of just 0.5 %. Deferment must be applied for by 10th April.
  2. A moratory on the Social Security payments for May, June and July. These can be paid six months late without any surcharge or interest.

The above can be applied for on the Social Security online system, accessed by personal digital certificate.

There are also guidelines on all of the new measures on the Social Security website.

As always, you can find further information and professional assistance on our website.

Autonomos: Coronavirus

We hope that all is well with you, and that you and your family are keeping well through these very difficult times.

As part of the fiscal measures introduced by the Spanish government to help alleviate the financial problems caused by COVID-19, autonomos who are unable to pay the tax due from their 2020 Q1 tax declarations then you can defer payment of the tax for up to six months, with the first three months being interest free.

The option to defer payment is via the usual online form on the Agencia Tributaria website www.aeat.es under the section Aplazamiento de Deudas, selecting Presentar Solicitud.

The filing deadlines are for 2020 Q1 are 20th April for negative/ zero returns and 15th April where tax is due.

Renta 2020: Coronavirus

We hope that all is well with you, and that you and your family are keeping well through these very difficult times.

The fiscal measures introduced by the Spanish government to help its population cope with COVID-19 are certainly not as helpful as they could be. The timetable for presenting the Renta in 2020 (for the tax year 2019) and paying any tax due are unchanged from previous years. The Agencia Tributaria advise that the online filing system for the Renta will open on 1st April and the filing deadline is 30th June (or 25th June where tax is payable).

Those of you who filed your Renta last year saw the chaos created by the introduction of a new online filing registration system which meant that many foreign residents needed to go to the Tax Office to obtain a Digital Certificate. For those of you that obtained a Digital Certificate (which has a validity of 4 years), you should still be able to use this to obtain your online filing reference number for this year’s Renta. 

If you do not yet have a Digital Certificate then you may still be able to register for online filing this year with your current documentation such as Tarjeta de Residencia/ Tarjeta Ciudadano EU.  Last year the Tax Office system did not accept this is many cases, and it was necessary to obtain a Digital Certificate. For this, it would be necessary to physically visit an office of the Agencia Tributaria system, and all offices remain closed until further notice due to COVID-19.

As always, you can find further information and professional assistance on our website.

Battling against the Spanish Tax Office- it shouldn’t have to be like this ! Part 1.

Over the last few years, we have more and more often found ourselves on the front line of a battle against the Spanish tax authorities, the Agencia Tributaria or Hacienda as it is commonly known. Each battle is to defend our clients, in most cases Spanish resident sole traders and low/ medium-net-worth individuals who have decided to settled in Spain, against what is no less than persecution by the Spanish Tax Authorities.

The story typically goes something like this: client receives an enquiry letter from Hacienda asking for further documentation on a specific matter e.g. proof that foreign tax has already in paid on their pension. Although our clients come from a broad range of countries, we find that in the majority of cases it is UK pensions that are targeted, and I suspect that this is Brexit related- after all, if an international double tax credit is claimed in Spain for UK tax paid, then the Spanish tax authorities need to claim this back from the UK tax authorities, which will not be so straightforward after Brexit.

The client is given one month to reply to Hacienda, in person at their Tax Office or online. In this example they need to provide proof that UK tax been paid on their pension. Now this is itself is interesting. The Spanish tax authorities have the right to demand information freely from the UK tax authorities on any individual resident in Spain, and the UK responds. In a recent case, Hacienda’s letter to the client gave full details of the pension received by the client in the year- amount and name of the paying company.

So that begs the question- if Hacienda have access to details of the pension then surely they also can find out how much UK tax was paid without having to ask the client ? The answers is of course they can, but they choose not to. It’s step one in the trap to ensnare the unsuspecting client !

Let’s imagine that in this case the client chooses not to ask for our assistance and replies directly to Hacienda. They obtain from the UK tax authorities the tax certificates which cover the tax year in question- now as the UK tax year ends 5th April and the Spanish tax year ends 31st December, there will be two UK tax years to provide. The client then files their reply online with their Digital Certificate or delivers their response in person to their nearest Spanish Tax Office.

A month or so later, the client receives their next letter from Hacienda. Similar to the first letter, it is long, mostly consisting of seemingly incomprehensible or irrelevant references to Tax Law. However if you know what to the look for- it is stating that the Tax Office has decided to go ahead and issue a provisional tax assessment (Propuesta de Liquidación Provisional), on the basis that the client has not given an adequate response.

There follows a recalculation of the client’s tax due, which assumes that they paid zero UK tax on their pension. The extra Spanish tax “due” is calculated and the last page is a payment slip. The amount payable is the tax due plus a late payment surcharge. The client, unless they appeal, has around a month to make the payment or face further surcharges.

Before we go on, let’s break this down. Hacienda has sent the client a letter saying that their response has been inadequate, and on this basis judging the client to be guilty. They do not detail what is missing, and what they would like to have seen. A simple letter or email to the client requesting specific further information is what I would expect in a civilised country. It is a courtesy afforded to us by the French tax authorities, who are usually very helpful and flexible in dealings with our French resident clients.

But it is not the way that Spanish bureaucracy works. Hacienda does not reply by email. It does not attempt to resolve a situation at an early stage by effective communication with the client. Instead, it sends out long letters which prolong the process and create more bureaucracy, which I suppose perpetuates its own raison d’être.

The sinister side is that, in the case of our client, what Hacienda wants is for the client to give up and pay the extra tax “due”, faced with paying further surcharges if they do not. If this client does so, they will have paid tax twice on their pension and would need to go back to the UK tax authorities to request a refund. Would the UK Tax Office respond positively, given that legally it is Spain’s responsibility and not theirs to issue the tax credit ?

So that’s step two of the trap. Before we go on, let’s ask ourselves- what DID Hacienda want to see as proof that the client had paid UK tax on their pension ?

Firstly, the client’s UK tax certificates should have been translated to Spanish by a sworn translator (a traducción jurada). Even though a Tax Inspector with no knowledge of English and Google translate could quickly work out how much tax has been paid by the client, the attitude of Hacienda is such that any documents not in Spanish are summarily rejected with no reason except that they are “inadequate”.

Now let’s compare this to the French Tax Office. The French, who are supposedly stubborn and proud about the maintenance of their own language, to the detriment of other languages. Well not so from a tax point of view. When we register our foreign company clients for VAT in France, the Tax Office happily accept company documents in any other language (from Danish to Slovak) requesting only a brief casual translation of a few key points.

Secondly, Hacienda will not deem to waste any of their own time reconciling the figure in the client’s Spanish 31st December tax return with the combination of the two UK tax years. The client should have provided a document, for instance spreadsheet, showing the exact calculation. Completely in Spanish of course.

Did Hacienda detail in their original letter what they expected from the client ? Of course not !

We have learnt from our clients’ tough stories what Hacienda do expect. In cases like this when then client asks for our assistance to reply to the initial Hacienda enquiry, we always attach a sworn translation and reconciliation of the figures in Spanish to our response.

So if the client is in the right and the proof is sent to the Hacienda in the format which they demand, can the client expect a letter of acceptance from their Tax Office ? Sadly, the answer to this is often “no”. So step 3 in the trap- Hacienda play dumb.

Hacienda’s reply could take several forms. Firstly, they could deny having received any reply from the client to their initial letter. Yes, we have seen this before- even when we filed the response online and there is documented confirmation of filing.

Secondly, they might issue a vaguely worded letter claiming that the client did not send them sufficient proof that they had paid UK tax on their pension- with no specific details.

And thirdly (and again we have seen this more than once) they might try to use some kind of Kafkaesque response e.g. the client should not have paid UK tax originally on their pension, so it can therefore not be claimed back in Spain. All of which is wrong according to Tax law and conventions.

If the client does receive this dreaded letter of rejection, then they have the right to appeal and that is what I will deal with in my next blog post.

By now the reader will have a better idea of what this Hacienda monster is like !

For further details and assistance please visit our website spainaccountants.com or contact us by e-mail at info@spainaccountants.com .

VIES registration in Spain- finally good news !

After our previous gloomy posts on the difficulty in getting Spanish registered businesses onto the EU Intracommunity VAT register (VIES), we have some good news !

Recent clients for whom we have requested VIES registration have been approved very quickly- within a month at the most. This includes both foreign companies with no permanent establishment in Spain, and Spanish-resident self-employed workers (autonomos). With these clients, no physical office inspection or letter of enquiry was issued which was the case previously.

It looks like finally the Agencia Tributaria, the Spanish tax authorities, have started to think logically ! It´s a rare case in recent years of them moving a step forwards rather than backwards.

For further details and assistance please visit our website spainaccountants.com or contact us by e-mail at returns@spainaccountants.com .