Brexit: changes in tax for non-resident property owners in Spain

We have now entered the final quarter of 2020 and the end of the Brexit transition period is fast approaching. From the 1st of January 2021, the UK will no longer benefit from being an EU member state, and UK-resident owners of property in Spain will be affected with increased tax implications.

In Spain, tax rates are determined by the taxpayer’s residence—for EU/EEA residents the general tax rate of 19% is applicable, however, once the Brexit transition period ends, British property owners will enter the higher, non-EU resident tax bracket of 24%.

Unfortunately, the jump in tax rate is not the only impact Brexit will have on tax on Spanish property owners as they will also lose the benefit of deducting expenses from rental income. Any expenditure related to running the rental property will no longer be claimable and the tax due will be calculated directly on the total income earned.

Even if the Spanish property is not let out, the deemed rental income calculated on the annual non-resident’s tax return will also be taxed at the non-EU resident rate of 24%.

The Spanish tax office has posted further information on the consequences of Brexit on Non-resident income tax, click here for more details.

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@europeaccountants.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.