# Spanish rules and regulations question



## mike kelly (Aug 12, 2009)

Hello,

I have been reading with interest posts relating to increased red tape in Spain and am wondering if it could apply to me:

From 2002 until 2008 I worked in Spain. During this time I paid taxes and filled in the Declaracion de la Renta. Since 2008 I live in Switzerland where I work and am fiscally resident. I own a flat in Spain which is mortgaged and is still being paid off. 
I also have a bank account in Spain (required to pay the mortgage). I don't pay any tax in Spain now and have no income there.

Is it possible that I am breaking any law or regulation? One day I hope to sell the flat and don't wish to have any problems.


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## Overandout (Nov 10, 2012)

mike kelly said:


> Hello,
> 
> I have been reading with interest posts relating to increased red tape in Spain and am wondering if it could apply to me:
> 
> ...


A very interesting topic to me this one as very soon I will be in a very similar situation.

One question for you; you say that you have no income in Spain, so is your flat empty?

If it is rented then you DO have an income as far as I understand. I was always under the impression that whether you lived in Spain or not, you should declare the income gained from a property. I may be wrong though ( I hope I am actually!)


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## CapnBilly (Jun 7, 2011)

Overandout said:


> A very interesting topic to me this one as very soon I will be in a very similar situation.
> 
> One question for you; you say that you have no income in Spain, so is your flat empty?
> 
> If it is rented then you DO have an income as far as I understand. I was always under the impression that whether you lived in Spain or not, you should declare the income gained from a property. I may be wrong though ( I hope I am actually!)


Fraud not. You have to pay tax on the rental income at 24.75% If you are an EU citizen, then you can deduct allowable expenditure ( costs, mortgage interest) etc. if you are not an EU citizen, then there are no allowances. If you do have rental income which is declarable in Switzerland, then you may be able to offset any tax you pay under any double taxation agreement in force.

If you have no income then you have to pay a property tax each year (by 31st December) on the deemed income. It's icalculated as 2% of your cadastral value. (1.1% if the valuation was after 1993). The tax is 24.75% of the deemed income.

In addition, when you sell the property you will have to pay capital gains tax.


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## mike kelly (Aug 12, 2009)

CapnBilly said:


> Fraud not. You have to pay tax on the rental income at 24.75% If you are an EU citizen, then you can deduct allowable expenditure ( costs, mortgage interest) etc. if you are not an EU citizen, then there are no allowances. If you do have rental income which is declarable in Switzerland, then you may be able to offset any tax you pay under any double taxation agreement in force.
> 
> If you have no income then you have to pay a property tax each year (by 31st December) on the deemed income. It's icalculated as 2% of your cadastral value. (1.1% if the valuation was after 1993). The tax is 24.75% of the deemed income.
> 
> In addition, when you sell the property you will have to pay capital gains tax.


Thanks. The flat is empty and there is no rental income. I do pay council tax (IBI). Is his what you are talking about or is there another tax?

Capital gains tax is paid on the profit made when selling the flat, correct? This assumes the selling price would be higher than the purchase price, I can only hope this will be true!

I am an EU citizen.


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## CapnBilly (Jun 7, 2011)

mike kelly said:


> Thanks. The flat is empty and there is no rental income. I do pay council tax (IBI). Is his what you are talking about or is there another tax?
> 
> Capital gains tax is paid on the profit made when selling the flat, correct? This assumes the selling price would be higher than the purchase price, I can only hope this will be true!
> 
> I am an EU citizen.


No, it's in addition to the IBI. 

You need to complete a Form 210.

http://www.agenciatributaria.es/AEAT.internet/Modelos_formularios/modelo_210_anterior.shtmlhttp://www.agenciatributaria.es/AEAT.internet/Modelos_formularios/modelo_210_anterior.shtml


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## snikpoh (Nov 19, 2007)

Yep, I agree.

The key phrase is 'deemed income'. In other words, even if you are not renting out the flat, you have to pay tax as though you were!


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## mike kelly (Aug 12, 2009)

Thanks, I will look into this.


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## mike kelly (Aug 12, 2009)

Effectively then, this is a tax on holiday homes, correct? I wonder how many people with property in Spain have ever heard of this, let alone pay it?


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## CapnBilly (Jun 7, 2011)

mike kelly said:


> Effectively then, this is a tax on holiday homes, correct? I wonder how many people with property in Spain have ever heard of this, let alone pay it?


Absolutely correct. It never ceases to amaze me how many people haven't heard of it. They've been clamping down on it recently, and sending out letters chasing people up.


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## Calas felices (Nov 29, 2007)

Most people seem to find out when they want to sell. Mind you that's not too bad as they can only back date it four years.


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## mike kelly (Aug 12, 2009)

Calas felices said:


> Most people seem to find out when they want to sell. Mind you that's not too bad as they can only back date it four years.


Thanks, very useful piece of information. I have to check the cadastral value of my flat, but, in general, is this tax higher or lower than the IBI council tax?


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## snikpoh (Nov 19, 2007)

mike kelly said:


> Thanks, very useful piece of information. I have to check the cadastral value of my flat, but, in general, is this tax higher or lower than the IBI council tax?


The IBI is based on the cadastral value of your property. 

Because properties have not been revalued for so many years (30 or more in some places), the cadastral value is multiplied by a 'fudge factor' to come up with a 'realistic' value used for IBI (contribucion) - and for other taxes.


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## Overandout (Nov 10, 2012)

snikpoh said:


> The IBI is based on the cadastral value of your property.
> 
> Because properties have not been revalued for so many years (30 or more in some places), the cadastral value is multiplied by a 'fudge factor' to come up with a 'realistic' value used for IBI (contribucion) - and for other taxes.



Are you sure about that?

We received a notification last year that the cadastral value of our flat had been reviewed. It was a rise of approx 100%.


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## snikpoh (Nov 19, 2007)

Overandout said:


> Are you sure about that?
> 
> We received a notification last year that the cadastral value of our flat had been reviewed. It was a rise of approx 100%.


Yep.

Some areas may have started revaluing (and of course new properties will, by definition, be up-to-date). But most haven't the time or money to do it (or inclination).


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