Are you tax compliant in Spain?
FISCAL REPRESENTATION ANNUAL SERVICE PACKAGE (Annual tax declaration + Emergency assistance) Are you tax compliant in Spain? Did you know that if you fail to pay the annual taxes to the government, you risk facing expensive penalties?
Annual Tax Declaration is NOT the IBI
In the first place, we would like- if we may- to take this opportunity to kindly inform you about the Annual tax return for non-residents with properties in Spain, as we have detected that this issue is still creating some confusion among our new clients.
First, if you own a property in Spain, it is automatically considered as a type of income and consequently, all owners named on the Title Deed must submit an annual declaration of the property owned, despite the fact that you might be a non-Tax resident, or you might not have any regular income in Spain.
Second, bear in mind that you will be liable to pay two totally different kinds of taxes: The IBI (“Impuesto Sobre Bienes Inmuebles” in Spanish) or local rate tax, and the Non-resident tax or rental tax (in some cases a combination of the two). So, what is the difference between the two? The IBI is a council tax that must be paid by every homeowner, usually by standing order-direct debit around September-October each year. Subsequently, the IBI is collected annually and paid directly to the TOWN HALL or the SUMA offices, depending on the case. It is based on the cadastral value of your property.
On the other hand, the Non-Resident Income Tax is paid to the Tax Revenue Office, and the deadline is December 31st.
A) Is it necessary to pay income tax in Spain even if the owner doesn’t live at the property?
Yes. Non-Resident income tax in Spain, is payable by non-resident property owners who do not rent out their property (and subsequently do not pay rental income tax), irrespective of whether you use the dwelling sporadically as a second residence or holiday house. The non-resident tax declaration covers the previous year, so in 2020, you will have to pay for the previous tax fiscal year, that is 2019.
B) What happens if the tax is not paid before the deadline of 31st December? How will the Tax office find out?
First, if you are considering for example to sell your property, you might not be able to claim the refund of the 3% retention back from the tax Revenue office.
Second, you might be caught out through one of the Tax Authority’s anti-tax fraud campaigns, and as a result, you might have to pay late payment interest as well as sanctions between 5% to 20% of the tax involved. In fact, we have detected that the Spanish Tax Revenue is increasingly cross-referencing information, reviewing those cases where non-tax Residents are avoiding paying the taxes. This includes monitoring electricity consumption, bank accounts and comparing your details as logged on the Land Registry with utility usage. As a result, in the worst scenario, a disciplinary letter could be sent to your Spanish address. Failing to respond to the notification might imply that your bank account might be ultimately embargoed.
Please see below a real disciplinary letter received by one client who neglected the annual payment of the Government tax, imposing a fine for late payment (we have deleted the personal details due to confidential data protection).
C) What paperwork would be required in order to prepare the tax form?
Please find below the list of documents required:
1. Photocopy in colour of your NIE and passport
2. Your address in Spain and abroad
3. Copy of your latest IBI receipt4. Copy of the title deed (at least the first 4-6 pages)
These documents are required in order to calculate the current cadastral value of your property and consequently how much tax you should be paying, making sure that your Spanish property taxes are up-to-date.
D) As a non-resident, I am liable to pay taxes if I rent the property? What will be the paperwork required in this case?
YES. We ought to kindly inform you that in those cases where you rent out your property in Spain, you must also pay rental tax in Spain. For your information, this tax is collected quarterly: that is on the 20th of April, 20th of July, 20th of October and 20th of January of each year.
The rental tax would comprise the standard annual government tax as well.
Regarding the paperwork, you would simply need to provide us with a detailed breakdown of all the rent incomes obtained for the current tax period.
Therefore, we ought to stress the point about the importance of being tax compliance, because the risk that the Spanish Tax Office might formally require you for payment plus a penalty fee for late payment is totally real.
In conclusion, we strongly recommend that either if you are a tax resident or non-resident, you should hire a fiscal representative as soon as possible in order to represent you to the Spanish Tax authority. A reliable and cost-effective fiscal representative, – like our Law Firm, – will make sure your non-resident taxes are paid on time, and also, we will be delighted to answer any queries you might have throughout the year as well. Remember that it is your responsibility to ensure your tax is paid preventing any future unpleasant surprises from the Spanish tax authorities. In fact, for what ends up being only a small annual fee a regulated qualified lawyer is always well worthwhile Do not wait for the taxman to knock on your door with a penalty proceeding against you!
2. Emergency assistance
In the second place, apart from the management of the annual taxes, we are delighted to include in our annual package emergency assistance, which basically consists that as our personal client, you would have complete peace of mind that should any urgency or unexpected problem arise (i.e. problems with the Utility companies, a letter from the SUMA office, an insurance claim), we will always be there to help you at any given time, and no matter the nature of the situation might be. We are trained to handle your situation, which will help ensure that your request is properly dealt with.
3. Legal services
After this preliminary introduction, please find below the proposed list of services to be provided annually:
I. ANNUAL TAX DECLARATION
1.- To check the required paperwork of your property
2.- To calculate the annual tax and to fill out the required tax forms
3.- To submit the tax form within the deadline
4. Transparent prices: Fixed fees
At BZN Lex, we dislike hourly rates as much as you do. Subsequently, wherever we can, we will offer you fixed fees. That means we will not charge you when we pick up the phone or send an email.
We are consistent in long-term relationships with our clients and we measure the value of your choice largely by whether you come back.
We would like- if we may- to kindly inform you that, just for this new year, we are glad to offer the whole package of services to our clients, (services nº I and II), all for an annual reasonable fixed fee of just 100 € for two tax applications (+ VAT). This would be the fee for the standard fiscal representation service. (Price offer valid until June 2023). Therefore, in case you might be renting the property, please contact us for an individualized quotation.
How to contact us
Finally, for any other additional services, such as a home, car, life insurance, Spanish wills, etc. we are glad to inform you that in case you might hire our services for the fiscal representation, we will be most delighted to give you a very special and competitive price.
In short, always put your trust in a trustworthy independent regulated Solicitor, like our Firm, who will always be by your side. If you kindly check our testimonials section of our new website, https://www.bestsolicitorsinspain.com you will find plenty of testimonials from real clients who put their trust in our Firm. Fortunately, they are all now all extremely grateful to our Firm for the excellent work and protection offered, which fills us with a lot of professional pride. You can also read the recent reviews given by numerous clients on google as well. (we can send you the link if required).
We hope this preliminary information is useful for you. Should have any questions or enquiries about the nature of the services or the stages involved, please do not hesitate to contact us and we will be glad to clarify immediately.
Thank you very much for your attention, and we look forward to helping you.
Mr Oscar Ricor
“NON-PRACTISING ENGLISH SOLICITOR IN ENGLAND AND WALES”, under the “Solicitors Regulation Authority” (SRA) SRA number 519196 and practising Spanish Solicitor.