# Tax on overseas rental income



## Muggers (May 15, 2014)

I am considering becoming tax resident in Spain and need some information about how overseas rental income is taxed in Spain. Any help will be most appreciated.

My property is located in Germany and the income from it will already have been assessed for tax by the German authorities. Under German law, I am able to claim all the allowances against tax that would apply if I were tax resident there, so I will have claimed personal allowances, mortgage interest relief and depreciation etc. My income from rents is less than the German tax threshold (after allowances) so I will pay no tax in Germany.

If I then bring my income to Spain, and declare it, how will the Spanish tax authorities assess it?
Are they interested only in the amount that I transfer into Spain or do they calculate tax based on the gross income before allowances have been applied? If the latter, will I be able to take advantage of Spanish tax allowances such as personal allowance, mortgage interest relief etc?

I realise this is a complex situation, but perhaps someone is in a similar position and can offer some insight?


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## xabiaxica (Jun 23, 2009)

Muggers said:


> I am considering becoming tax resident in Spain and need some information about how overseas rental income is taxed in Spain. Any help will be most appreciated.
> 
> My property is located in Germany and the income from it will already have been assessed for tax by the German authorities. Under German law, I am able to claim all the allowances against tax that would apply if I were tax resident there, so I will have claimed personal allowances, mortgage interest relief and depreciation etc. My income from rents is less than the German tax threshold (after allowances) so I will pay no tax in Germany.
> 
> ...



you really need professional advice, but I don't see how you can decide whether or not to become tax resident - either you are, or you aren't


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## Chopera (Apr 22, 2013)

xabiachica said:


> you really need professional advice, but I don't see how you can decide whether or not to become tax resident - either you are, or you aren't


I guess they are really deciding whether to spend more than 6 months each year in Spain or not.


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## xabiaxica (Jun 23, 2009)

Chopera said:


> I guess they are really deciding whether to spend more than 6 months each year in Spain or not.


ahh now that makes sense


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## Muggers (May 15, 2014)

I am trying to decide on tax residency. I intend to buy a house in Spain where I will spend either more or less than 183 days, depending on how tax will be applied to my income. I am aware of the rules for tax on property for non resident owners, but I need to find out what will happen if I become resident.
In this sense, I believe I have the choice to become tax resident or not.


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## StewartL (Sep 5, 2013)

Hi Muggers

I have only been in Spain now 2 months so have not gone through the process so would be interested to see what others who have made declarations say on the matter.

From my searches I believe that some deductions are permissible.

Taxation of rental properties in Spain
"Spanish tax residents who rent out a property other than their home

If you have a property you rent out in Spain and live in Spain yourself you will have to declare the income on your Spanish tax return (declaracion de la renta de las personas fisicas) every year, in the May-June period following the year of the rental i.e. in arrears.

The tax treatment is generous:

- there are deducible expenses allowed (e.g. utilities, advertising and legal costs, rates, and even interest and amortisation of the property)
- there is a 60% deduction if the property is rented out as a dwelling (as opposed to a business)

If the property is abroad then the same rules apply - deductions are allowed as above. If the property has already been taxed in the country where it is situated and this tax is more than the tax you would pay in Spain, it has in the past been common to leave it off your Spanish tax return, as no tax would be due. The has been the traditional approach for UK property, due to the complications introduced by the different tax year ends in the UK and Spain. However, in the light of the new overseas asset reporting requirements introduced in 2012, it may be advisable in future to include the income and the tax paid on your return, even if no tax results."

In addition as a tax resident you are entitled to personal income tax allowance. The current single person allowance is 5151 Euros. For a couple if the rental income is only going into one persons' account then you can take married couples allowance which is 8551 Euros. Not a generous as double the single allowance but better than just have the single person allowance. (Spanish taxation of married couples) However with only 40% of the rental income being subject to tax this hopefully will take your rental income like ours out paying any Spanish tax.


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## Muggers (May 15, 2014)

Thanks Stewart,
I will look at the links carefully.
Under cover of an anonymous forum I dont mind revealing that the gross rental income is about €18000 and I have a pension of €5000. From what you say, you are out of paying tax. Would you mind saying if my income compare with yours? Or is that too cheeky? I am married, by the way, and my wife has no independent income


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## StewartL (Sep 5, 2013)

Hi Muggers
Our gross rental income is 14,000 Euros and we have some interest on savings but not that much. No pensions as I still have quite some years before I can draw them.


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## Muggers (May 15, 2014)

Hi Stewart,
The reason behind my questions is that I am trying to find out if my income is realistic to live on until I get my state pension from the UK. Thats why I am trying to get an idea of how much I will pay in tax.
We are happy to lead a simple life style, dont smoke and wont be running a car. We wont have rent to pay either.Are you able to get by on the income you mention?
Muggers


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## StewartL (Sep 5, 2013)

Yes we have a reasonable standard of living on the income we have plus using some of our savings per year which is sustainable until the pension kicks in.


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## Muggers (May 15, 2014)

Stewart,
Just one more question. Well, two actually and then I will leave you in peace.
Do you have housing costs and are you paying for health care? 
Muggers.


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## StewartL (Sep 5, 2013)

Yes we are paying rent in Gran Canaria. No car as most places in easy walking distance and the public transport is excellent if we need to go further afield. 

My health care is covered for a year, my partner for two years by UK NHS. As they expire we will start paying health care.


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## Muggers (May 15, 2014)

StewartL said:


> Yes we are paying rent in Gran Canaria. No car as most places in easy walking distance and the public transport is excellent if we need to go further afield.
> 
> My health care is covered for a year, my partner for two years by UK NHS. As they expire we will start paying health care.


Your replies have been informative and helpful to me. Good luck for the future.
Muggers.


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