A subject that generates a lot of interest among non-resident property owners in Spain is their tax obligations in respect of their properties. Depending on the use they give it, be it for (own use or lease, they will have different tax obligations.
Thus, in the event that the property is only enjoyed and used by the non-resident owner, he will be obliged to present Form 210 annually for the supposed benefit-in-kind of having said property at his disposal. This benefit-in-kind is calculated based on the cadastral value of the property, and generally 2% of said value is applied as tax basis. 1.1% can also be applied in the case of those properties that are located in municipalities that have revised or modified the cadastral values in the last ten years. The tax rate applied is 19% for Residents of the European Union, Iceland and Norway, and 24% for other taxpayers. This tax is declared from January 1st to December 31st of the following year.
In the event that the property is rented out, the non-resident has the obligation to submit a Form 210 quarterly declaring the rental income. In the case of residents of the European Union, Iceland and Norway, the expenses provided for in the Income Tax Law can be deducted for the calculation of the tax base (profit). All others will have to declare gross income without the possibility of deducting expenses. This has meant, in the case of the British, an increase in their tax burden, since Brexit they are no longer residents of a EU country. The tax rate is the same as in the previous case, 19% for Residents of the European Union, Iceland and Norway, and 24% for other taxpayers.
A tax obligation also occurs when a capital gain is obtained as a result of the sale of a property. Said capital gain is calculated by the difference between the transfer value and the acquisition value of the property. In general, the acquisition value will be made up of the purchase price, plus the expenses and taxes inherent to the acquisition. The transfer value is determined by the sales price less the expenses and taxes inherent to the transfer that have been paid by the vendor. For his part, the buyer of the property, whether or not he is a tax resident in Spain, is obliged to withhold and pay, within a month, to the Tax Authorities 3% of the purchase price for and on behalf of the vendor.
For the vendor, this withholding tax is an on account payment towards his capital gains tax due to the sale. The tax rate is 19% and the submission period is three months from the month following the sale. In the event that there had been a loss or that the withholding tax applied was higher than the capital gains tax payable, the refund of the withholding tax can be requested.