Business and Finance

If you live in Spain for more than 183 days per calendar year you are considered a tax resident, regardless of whether you have a Residencia (Spanish Residents Card). These days do not have to be consecutive. You do not become resident for tax purposes until the morning of the 184th day. This means that you must not only declare your income in Spain but also worldwide, the same as a Spanish Resident. If you are a non resident and spend less than 183 days per calendar year in Spain, you are not obliged to declare your worldwide income. But you are liable for tax on any income arising in Spain. This could include income from letting your Spanish property.

With the new EU taxation of Savings Directive coming in to being in 1st July 2005 information on Bank accounts between EU members will automatically be exchanged with each other about the beneficial ownership of accounts, the end to banking secrecy, so beware!

As a non resident you are obliged to pay income tax on the letting value of your property, even if you do not letting it out. The letting value of the property is calculated at 2% of the fiscal value and you pay 25% tax on this value every year. Spanish residents are exempt from this tax.

If you are non resident and decide to sell your property you will pay 35% on the nett gain after selling the property, as opposed to a resident who will pay 15% on the nett gain. As a Spanish resident you are allowed to offset the cost of purchasing a new property against any capital gains from selling the old one. Non residents cannot roll over the gain into a new home. Also at the public notary a non resident will have 5% of the sale price retained by the buyers on account of the Capital gains tax. This retention was implemented to avoid tax loss from non residents whom may sell and return to their country of Domicile. After your tax liability is assessed a refund may be available. There is in Place a ten year countback as of Dec 31 1996 there if you have owned the property since before Dec 31 1986 then you are not liable to Capital gains tax. There are also rules in Place regarding deductions for every year before 1994. You are well advised to a Spanish Lawyer regarding this matter.

Wealth tax in Spain (patrimonio) is a tax based on assets; this may include cars, boats, property, Bank accounts, stocks etc. Non residents only pay wealth tax for assets in Spain. Residents pay wealth tax on worldwide assets, but are exempt from paying on property if it has a value of less than €108,182.

If you are resident in Spain you will be liable for income, capitals gains and succession duty (inheritance tax) on your worldwide assets. This is in addition to other incidental tax liabilities such as IVA (VAT) and gift taxes. It is worth noting that gift tax and inheritance tax in Spain are payable by the receiver of the gift or inheritance.

Depending on your situation, country of residence and future plans, Spanish residency may be the answer, always contact a Spanish lawyer who can assist you in these matters.