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Tuesday, 25 January 2011 00:00

More control over non-residents

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By the end of last month, December 2010, the Spanish Government approved some changes concerning the non-resident law:

1. CITIZENS FROM OTHER EUROPEAN UNION COUNTRIES can deduct the appropriate expenses required to rent the properties they have in Spain, but it is essential that those who want to enjoy such deductions will have to present an official certificate of tax residence, translated to Spanish so they can prove they are EU residents.

2. IMPUTED INCOMES from real estate properties must be filed during the following year. Imputed incomes are those which arise when a property is empty, or when it has been used by the taxpayer for his own use.

3. THERE IS A 20 DAY-DELAY AFTER EACH QUARTER TO SUBMIT THE TAX STATEMENT. During the first 20 days of April, July, October and January, you must submit the statement concerning the income obtained from your rented properties during the previous quarter. The tax rate will be 24% of net income for EU citizens and 24% of gross income for citizens outside the EU.

4. DEDUCTIBLE EXPENSES. Only expenses related to the property rented will be deductible, always in proportion to the days the property was rented. For example, if you are paying community fees throughout the year but your property is only rented for 5 months, you are only entitled to deduct 5 months of such expenses and not the whole year.

5. MORE CONTROL will be executed over the rented properties and tax authorities from different countries will exchange relevant information regarding these issues.

6. CADASTRAL REFERENCE. It is necessary to include the cadastral reference number of the property in the tax statement. This is a number that you can see in the IBI receipt (IBI, Local Property Tax).

7. Income from a rented property cannot be set off against any other income. This means that if you own two properties and one of them suffers losses while the other one produces some gains, the gains from the last one can not cover the losses from the first one.

8. Tax statements must be submitted where the property is located, i.e., in Spain.

9. FOREIGN COMPANIES with properties in Spain must submit their tax statements. It is important to know that the Spanish Tax Authorities are entitled to seize properties if corresponding taxes are not paid. OFF SHORE companies that have properties in Spain should pay special attention.

10. If a property is owned by a married couple, both spouses must have their Spanish tax identification number (NIF) and both must submit their tax statements.

11. If a non-resident owner has rented a property only for some months in a year, the income obtained from such months should be included in the tax statement, as well as the part of the year during which the property has been unoccupied or lived in by the owner (imputed rent, the money that one saves on rent by living in one’s own accommodation).

12. Information to be included in the tax statement is the following:
- Owner’s NIF (if more than one owner, all owners’ NIFs)
- Tax number assigned by the residence country to non-resident taxpayer.
- Address, e-mail, postcode, province or region.
- Telephone number, mobile telephone number and fax number
- Cadastral reference number (it appears on the IBI receipt paid every year).

CONCLUSION: There will be more control over incomes obtained by non-residents from their properties in Spain, but it is possible to deduct expenses of rented properties.

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