Spanish Taxes – What Property Owners Need to Know..Finance:Property-tax
For many years Spain was home to blatant and widespread tax evasion. Local residents and foreign residents alike rarely paid the taxes they were assessed, and it was viewed as an accepted practice across the country.
This is not longer the case, and now Spain rigorously enforces its taxation laws. It’s no longer so easy to avoid paying taxes and the penalties for non-payment are quite large. However, despite the increase in tax law enforcement, Spain’s overall taxation rate still remains relatively low compared to the EU average.
Three Tiers Of Taxing Authority
Spain’s basic tax structure is divided into three tiers:
• The central government
• Regional governments
• Local governments or municipalities
Each tier levies their own set of taxes, most of which apply to foreign residents as well as native residents. The tax system in Spain is quite complex so it’s advisable to seek expert advice about the specifics of your situation.
Taxes Applicable To Everyone
In most cases Spanish taxes apply to all residents of Spain, including foreigners. Here are some of the most important ones that you need to know about:
• Income Tax – applied to worldwide earnings of residents, defined as anyone who lives in Spain more than 182 days in a year. Spain has agreements with all European and Scandinavian countries that prevent double taxation of citizens of those countries.
• Wealth Tax – applied to capital assets, including property. Non-residents who own property in Spain only need to declare their assets and property actually located in Spain.
• Inheritance & Gift Tax – applied to all of a resident’s eligible assets worldwide.
• Motor Vehicle Tax – applied to anyone who owns a vehicle in Spain. It’s typically paid annually to the local municipality.
Taxes Applicable To Property Owners
Spain also assesses a number of taxes that apply directly to property owners. The most common assessments include:
• Impuesto sobre Bienes Inmuebles (IBI) – this translates roughly to property tax. It is applied by local municipalities so the rates vary from place to place. Rates may also differ depending on the type of property, such as rural or urban.
• Capital Gains Tax – applied to the profits made when property or other assets are sold.
• Basura – this translates to rubbish collection tax; it is applied by local municipalities and paid annually by all property owners.
• Value Added Tax – applied to the increased value of a property when it is sold. This tax is usually paid by the seller, but sometimes the buyer contributes a portion of it as part of the sales agreement.
Summary
It is in your best interest to consult an expert regarding Spanish taxes. A tax professional can help guide you through the complex maze of Spanish tax law and look for ways to minimize your tax bill.
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