What taxes do you in pay in Spain?
Suma & Taxes in Spain
So, you´ve decided to move to Spain? One of the pleasant surprises awaiting you happens every year when you go to pay your tax in Spain! (Please note, Spanish Homes.Online are not lawyers or accountants. We simply work with the best in the business to ensure deals for our clients. Any advice is just that- You must speak directly to one of our approve professionals before knowing your obligations for sure. Also, rules change, these are the regulations as of October 2018).
You first job is to get the very best deal on buying a property on Spain- If you are dealing with Spanish Homes.online, you know that already. Congratulations on saving thousands of euro.
As a happy homeowner in Spain, you are liable for Spanish tax.
There are 2 yearly taxes which all Spanish property owners in Spain must pay… They are:
1. Real Estate Tax (SUMA tax)
2. Individual Income Tax. (even if you pay income tax at home)
1. Council Tax / Real Estate Tax /SUMA
We understand why we pay tax, especially local tax. Council tax in Spain, (IBI or Suma) is a local tax which the local town hall (in reality the council) imposes on all property owners. That is you and me.
This will cover rubbish collection, street lightening, maintenance of the beaches, anything that benefits the local community in other words.
Each home in the particular municipality is included in a census and a value is assigned to each property. For example in Villamartin, all two bedroom townhouse might have a valuation of 100,000 euro (land value or cadastral value) meaning a yearly tax of 400 to the council. Yes, I did say that you can pay 400 euro per year in Spanish council tax-
The tax cost is based on a sliding tax scale established by the area. Taken into consideration is: the land value, the size of the property, including all the relevant components like the house itself, pool, garage, any extensions etc. If you have extended the property. Or built a pool without permission- you are in trouble. The councils are using drones to catch people trying to add value to their homes without paying the additional tax. We don’t get it, council tax in Spain is so cheap- why not just register and pay the fair amount?? Anyway, if you or worse still the previous owner of your resale Spanish property, took a shortcut here and the Council has not been informed… you should be aware you can be fined, and you probably will be. If you use one of our recognised legal professionals before you buy, you will not have to worry. Contact us today to see how you can have your legal work done for FREE, if you buy through us!
Certainly the situation must be sorted out before you sell your Spanish property and as already stated the local councils in Spain are not ignoring these breeches any longer. If you need help with updating the legality of your property in Spain, get in touch! (even if for some strange reason you didn’t buy through us, we´ll try to help!)
The notification for your SUMA bill or IBI bill is mailed out directly to the property for the previous calendar year. Please make sure the council has the correct address. This tax is usually paid by early October of the following year. If you know how, you can simply set it up to be paid direct from your bank account- If you´re on direct debit, you needn’t do a single thing, maybe go to the beach. If you have not set up a direct debit, we can help- its pretty easy though. The notification you receive by mail, has a slip at the bottom of the page and this should then be taken to be paid at any of the participating “friendly” Spanish banks. (We advise you just to get us to do it, saves so much stress).
If you already own a Spanish property and you have not been paying this SUMA or IBI bill, we absolutely urge you to contact us to get up to date. The only reason you have not been pauing iis becuase your Spanish property agent did not understand the rules or they already had their commissions and no longer care!
Be careful…. as at some stage be ready to see an embargo (lien) on your car, or your bank account, or your house. Death and Spanish taxes…. Can’t be avoided, but considering the value for money we get from our local Spanish tax- its a joy to pay it!!
2. Income Tax /Individual income tax and Non-Resident tax
Now, the other bit. You can live in Spain and not be a resident, or live abroad and be a Spanish resident. People often quote the 183 day rule but if like most of us, you have family here in Spain ( wives, husbands, kids especially)- you attend work here, have a business here, cars dogs and pet boa all live here and you ( I can’t think of any other way to say it) LIVE here, you must declare income tax in Spain. It might be a Zero debt but either way it must be declared- your worldwide income will be recorded by the Spanish Government. Calculation and if required payment of the Spanish Individual Income Tax can be a complicated business. You need to employ a really good accountant- please don’t try to save money here- Its insane.
Officially in Spain individuals are deemed as resident, once they meet any of these conditions…
they spend more than 183 days per calendar year in Spain
their main place of business is indirectly or directly located in Spain
They clearly are living here without a business and speand less than 183 days in Spain.
Ex pat residents are taxed on worldwide income, rental income, pension form the UK or whatever.
Non-Resident tax or just NRT, is the commonly used term for the tax on Non-resident, non Spanish, property owners in Spain. Its just a small tax, less than 100 euro per year and we can set up a direct debit for you so you never even think about it. This is not a tax on rental income in Spain, in fact many people do not realise that they have to pay NRT tax individually each and every year, regardless of whether or not their property in Spain is rented out for a profit.
If the Spanish property is owned by a married couple or various different people, (families, trusts etc) each person listed on the escritura (Title Deeds) is defined as an independent taxpayer. Each one pays the tax but again it’s not much- A couple might pay 150 for the year- you’ll save that one two runs to the local market.
Once the property in Spain is only used by the owner and not rented out, the tax is based on an estimated income of the property´s cadastral value as we discussed above. This particular return has to be presented and paid by 31st Dec each year, for the previous calendar year.
3. Property Tax or Wealth Tax.
We loved the idea of paying “wealth tax” back in the day- it suggested we were wealthy. For those of you who remember the famous Wealth tax, this was abolished in 2009. The government missed it more than we did so then reintroduced it temporarily for the years 2012 and 2013. Good news, it’s been abandoned again. Nothing to see here!
Being tax compliant in Spain makes sense and the government will reward you for keeping up to date with perks of various kinds. Tax in Spain is not high in our opinion, certainly compared to what most of our clients are paying back home. One of our buyers recently said that the cost of his house in Spain was less than his local council tax in Manchester- We hope he was exaggerating!
Spanish Homes Online can provide fiscal advice, tax and legal assistance and representation with all of these taxes. Please contact us and we´ll help as best we can.