Category: Uncategorized

Obligation to declare

All non-residents with Spanish property which is not rented out for every quarter during the year, are obliged to submit annual tax declarations. The deadline is 31st December following the end of each tax year.

For example, if you purchased a property in 2022, your first tax return will be due by 31st December 2023.

What are the repercussions if I do not declare ?

When you eventually sell your property as a non-resident, 3% of the sales value is automatically withheld from you. Because in many cases this will be more than the actual capital gains tax due, you could be due a substantial refund.

The refund process is slow and the authorities may make a detailed review of the tax history of your property. If you have not submitted annual tax declarations, this could lead to delays in issuing the refund.

In addition, you may be subject to Tax Office fines for late- or non-submission of the annual tax returns.

How is the annual tax calculated ?

Deemed income tax for non-rented properties

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 tax rate for non residents is 19% for residents of EU, Norway and Iceland and 24% for residents of other countries. The taxable amount is, in general, 1.1% of the rateable value of your property.

So for instance, if your property has a rateable value is 50,000 Euros then the annual tax payable for the tax year 2020 is 105 Euros for EU, Norway and Iceland residents and 132 Euros for others.

How does the situation change if I rent out my property ?

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

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.

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

In the case of joint ownership, do we need to submit more than one tax declaration ?

Yes, each joint owner of the property is required to submit a separate return.

Do I need to be registered for Spanish tax in order to submit tax declarations ?

Yes, property owners do need to obtain a Spanish tax code (NIF).

When you purchased your property, you will have been assigned a foreigners’ ID number (NIE). The NIF will be the same number, but it is necessary to physically go into the Tax Office to register.

In the majority of cases, property owners will already be registered for tax. We will carry out an initial online check on the Tax Office database to verify this.

What are your charges to submit my tax declaration ?

Our current charges (2023 rates) for all clients, before 21% VAT, for each declaration (quarterly or annual) are as follows:

Single property owner: 79 Euros

Reduced rate for joint ownership: 100 Euros

This includes:

1. Drawing up your draft tax calculation and submitting to you for approval.
2. Online submission of the declaration 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 declarations.

What information do I need to supply for you to prepare my tax declarations ?

1. NIE of each owner of your property;
2. The full address the property;
3. The date and cost of purchase;
4. The rateable value (valor catastral). This will be 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.
5. Name, nationality, date and place of birth, and current home address of each owner of the property.

If you have rental income in any quarter, please provide a schedule of the income and expenditure for the quarter. Expenditure is deductible for tax purposes for residents of the EU.

The IBAN of your Spanish bank account, for the purposes of direct debit payment of the tax due.

If you have any further questions, please do not hesitate to contact us on admin@europeaccountants.com . You will also find informative articles on non-residents’ tax on our blog and website www.spainaccountants.com .

1. Go to the FNMT website at the following link: https://www.sede.fnmt.gob.es/certificados/persona-fisica/obtener-certificado-software/solicitar-certificado

2. Click on Configuración previa. To request the certificate it is necessary to install the software indicated in this section.

3. Download and install FNMT Configurator by clicking on “Área de Descarga de Configurador FNMT”, at the bottom of the page. Select the option according to your operating system, download and install it. The software will run when the browser requires it.

4. Go back to https://www.sede.fnmt.gob.es/certificados/persona-fisica/obtener-certificado-software/solicitar-certificado and enter the personal details requested (NIE/NIF, first surname, e-mail).

5. Click on “Pulse aquí para consultar y aceptar las condiciones de expedición del certificado”, scroll down to the bottom, check the box “Acepto las condiciones de expedición”, then click on “Enviar petición”.

6. Write down or print the application code (código de solicitud) provided by the web. You must take this along to the Tax Office appointment.

7. Make an appointment to visit your local Agencia Tributaria:

https://www2.agenciatributaria.gob.es/wlpl/TOCP-MUTE/Identificacion

Enter your NIE;

Enter your first name, surname.

Click on “Siguiente”.

Select the button “Otras gestiones”; Identificación Electronica; Certificado Electronico FNMT.

Click on “Siguiente”.

In “Dónde ir” Enter your postcode or province;

Select a date and time for the appointment and click on “Confirmar Cita”

Enter your phone number and email twice and click on “Confirmar”.

8. When you go along to the appointment, take your passport and NIE (and a copy of both just in case), and the application code obtained in (6) above.

Check in and get a ticket from the machine. If the machine asks you to choose a procedure it will be something like “Acreditación Certificado Digital FNMT Personas Físicas”. The Tax Office employee will activate your digital certificate.

9. Approximately 1 hour later you can download your Digital Certificate. Go to https://www.sede.fnmt.gob.es/certificados/persona-fisica/obtener-certificado-software/descargar-certificado and enter the details requested (NIE/NIF, surname, and Código de Solicitud).

10. Before downloading your Digital Certificate, you must accept the conditions of use of the certificate by clicking on “Pulse aquí para consultar y aceptar las condiciones de uso del certificado”, scroll down to the bottom, check the box “Acepto los términos y condiciones de uso”, then click on “Descargar Certificado”.

11. The key generator application will ask you to enter a password and will ask you if you want to make a backup (recommended). Once the copy is made (only if you have marked “Si”), the certificate will be installed.

12. If in the process of downloading the certificate you did not make a backup because you checked “No”, it is recommended that you access the certificate store of your browser and make a backup (export). You will need this if you need to recover your certificate at any time or use it on another computer. If you do not have this, the only alternative will be to request a new certificate.

If you have any further questions, please do not hesitate to contact us on admin@europeaccountants.com or to visit our website www.spainaccountants.com .

Spain’s famously difficult bureaucracy still exists, but if you have a Digital Certificate your stress levels will be cut down a lot by not having to deal with those bureaucrats face to face !

With a Digital Certificate, many of the formal proceedings that you need to carry out with the Tax Office, Social Security office and local authorities can now be done online, without the necessity to go into their office.

For an individual resident in Spain, it is quite an easy process to obtain a standard 2 year Digital Certificate issue by the official emitter, FNMT. The Tax Office, Agencia Tributaria, acts as an agent for the FNMT and you can book an appointment online to go there to accredit your identity. Normally you won’t need to wait too long for an appointment but it could be longer during busy periods such as just before the annual residents’ tax declaration (Renta) is due in June. So it is best to plan in advance if you can.

We have prepared a detailed guide on how to obtain a Digital Certificate for Spanish residents. Please contact us at admin@europeaccountants.com and we will be delighted to send you one free of charge,

For non-resident companies who have business in Spain without a permanent establishment (for instance VATable sales in Spain) then it is also very useful to be able to obtain a Spanish Digital Certificate. We will be covering this in further detail very soon in our next blog post.

For further information and assistance, feel free to drop by at our web page www.spainaccountants.com .

The fixed Social Security contribution system applied in Spain drew much criticism and rightly so. Contributions were fixed regardless of actual income. To pay 250+ Euros a month for a new autónomo who was starting a small business and looking for customers was an incentive not to register and operate their business unofficially. A few years ago the tarifa plana system was introduced which allowed a lower monthly contribution for the first couple of years, which was very welcome to new businesses. But after this initial period, the autónomo was required to pay rate which are very high in relation to most European countries, particularly given the low rates of pay in Spain, and the system in place was still a disincentive for potential new entrepreneurs to start their own business.

From 1st January 2023, the system has been totally reformed and now the monthly Social Security contribution increases in relation to income (non-linear).

The monthly contribution falls in the following range:

Lowest earners (taxable income 670 Euros per month): contribution 230 Euros per month in 2023 falling to 200 Euros in 2025.

Highest earners (taxable income more than 6,000 Euros per month): contribution 500 Euros per month rising to 590 Euros per month in 2025.

The figure of income used for these purposes is the autónomo’s net profit after adding back their Social Security contributions, less a general deduction of 7%.

Previous incentives for newly registered autonomos are still in place but more limited. The monthly contribution is now 80 Euros per month on commencement and lasts for the first year only. After that, the autónomo must switch to the regular contribution regime, unless their income is less than the national minimum wage (SMI), in which case they can make reduced contributions for the second year.

So obviously this is not going to be a very popular reform because pretty much everyone will end up paying more than before !

For more information and assistance in registering as an autónomo and ongoing tax compliance, please visit our website.

The Spanish Tax Office (Agencia Tributaria) online filing system for the annual residents’ income tax returns (Renta) for the tax year 2021 is due to open on 6th April.

In order to file, you need to obtain a reference number for online filing, which can be done by clicking on this link on the Agencia Tributaria website. You can access this with a Digital Certificate if you have one or by supplying the details on your residence card.

Last year we found with several clients that the system, due to programming errors, was not recognising details from their residence cards. If this is the case for you please let us know and we will suggest ways for you to resolve the situation such as giving you instructions to obtain a Digital Certificate.

Residents of Spain are taxable on their worldwide income, according to the provisions of the tax treaty between Spain and the country in which the income arises. If any of your income is taxable in both Spain and the country of source, then you can claim the corresponding international double tax credit in your Renta.

As Agencia Tributaria inspections, especially for foreign residents, are getting more common nowadays, you should ensure that you keep documental proof of foreign income and foreign tax paid for 5 years.

The very last possible date of filing is 30th June, but if you have tax due then you should file your Renta by 23rd June so you can pay the tax by direct debit and not have to go in person to your bank.

If you need help in preparing and filing your Renta for the tax year 2021 then we will be happy to assist you. Our website is europeaccountants.com/spain and our contact page here.

In our last article we looked at the difficulties of forming a limited company in Spain and suggested an alternative to individual business owners who are just starting off in business in Spain.

Non-resident companies who are considering opening a Spanish office face similar administrative and bureaucratic hurdles. If you would like to form a Spanish subsidiary of your company, the requirements are even more stringent. You will need to obtain a Spanish tax number (NIF) for the parent company in order to complete the company incorporation. A company director will need to be physically present in Spain for some days to visit a bank to open and activate the company bank account and attend the Notary signing. After all is completed, your local accountant (gestor) will deliver the paperwork to the Tax Office and Mercantile Registry. After around a month, the company incorporation will be complete.

As well as filing company tax returns (Modelo 200), Spanish companies are required to file annual statutory accounts. Thankfully these can now be filed online with the D2 software, but the Mercantile Registries (each region of Spain has it’s own Registry) can be very picky and reject accounts for technical reasons which should really be controlled in the initial filing. It’s classic Spanish bureaucracy and leads to a lot of extra work and some stress for your accountant who has to deal with it and having to explain to you who are rightly asking “why” ?!

We no longer offer a full Spanish company formation service for non-resident companies but would like to suggest an alternative which achieves exactly the same aims. This is the registration of your company for tax and VAT in Spain. You can find further details on our website. The procedure is much more simple and does not require you to physically come to Spain. A Spanish bank account is recommended so that you can pay your tax due directly, however we do offer a tax payment service for those clients that require it.

If your company opens an office, shop or warehouse in Spain it will have what is known as a Permanent Establishment and will then be required to file annual Spanish company tax returns (Modelo 200). There is no further tax registration required for this and you will file these returns under the same tax number (NIF) that you were originally registered for.

As always, feel free to contact us if you have any queries and we will get back to you as soon as possible.

Forming a company in Spain is more complex than in many other European countries. This is mainly because Spain still uses the Notarial system for legalisation of private and public transactions, including purchasing a property.

Therefore, in order to form a limited company (sociedad limitada) in Spain, it is necessary for the shareholders and directors of the company to go to a Spanish Notary to sign the Deed of Constitution. This is only one of the steps necessary to complete the company formation, which includes submitting forms to the Tax Office and finally lodging all of these forms and the company Deed at the Mercantile Registry, who take around a month to finally register the company. So at the end of the day, this process ends up being long, frustrating and also costly for the client. For this reason, in recent years we have not offered full Spanish company formation to our clients.

Recently the authorities have introduced a new online One Stop Shop (CIRCE) for procedures which include company formation. Our experience of forming a company through this system has not been good, due to the fact that a Notary visit is difficult for a Notary, who is a typical Spanish public servant with not much will or necessity to adapt or be flexible, to be part of this online procedure. So we are not recommending the CIRCE system for company formation in Spain.

For an individual, whether they are resident or not in Spain, who would like to form a Spanish limited company, there is a simple alternative, which is a registering as self-employed, autonomo. From a tax point of view, the director may not be at a disadvantage using this route. Company tax is Spain is currently 25%. A non-resident individual operating as autonomo pays either 19% (EU residents) or 24% (non-EU residents) on their Spanish profits, so there is a clear tax saving there, subject to any unmitigated international double taxation.

For residents, the company director-shareholder is going to subject to Spanish income tax on dividends and salaries taken from a company. You can find the latest rates on our website. There is also no dividend double tax credit which means that there is double taxation if the profits are paid out via dividends. Sure, for higher company profits the income tax bands go to a lot higher than the 25% company tax rate. But remember that any money that the director draws from the company for their personal use as a salary will also be taxed at income tax rates.

So really we would be recommending Spanish company formation for residents in the circumstance where the company profits are guaranteed to be, say, at least 50,000 Euros a year, and/or there are going to be multiple shareholders involved in the business. If you are an individual business person just starting off in Spain, when it is very possible that you may make a trading loss or small profit in your first years, it would be much better for you to register as autonomo. It is always possible to move to a full company at a later date once your business and earnings are established.

Note that whether you operate in Spain via a limited company or as autonomo , you will be required to pay monthly Social Security contributions which are a fixed rate and do not depend on the actual profit that your business makes. This also applies to you if you are non resident and will never gain any benefit from the Spanish Social Security system !

In all cases you will be need to open a Spanish company bank account, because the Tax and Social Security offices only accept direct debit payments from Spanish bank accounts.

You can find full details about registering as an autonomo and how we can help you on our website. Registration is online via the CIRCE system and is normally complete within a 2-3 working days.

As always, feel free to contact us if you have any queries and we will get back to you as soon as possible.