Spain’s Costa del Sol has long been a sought-after destination for property investment, drawing people from across the globe with its laidback lifestyle, stunning coastlines, and affordable cost of living. Whether you’re dreaming of a Mediterranean holiday retreat, a rental investment, or a permanent residence, buying a property in the south of Spain can be a life-changing decision.
However, as a non-resident property owner, it’s essential to understand the tax responsibilities that come with home ownership in Spain. In this guide, we’ll take you through the different types of non-resident taxes you can expect to pay and offer valuable insights to help you through the process!
- Non-Resident Income Tax (IRNR):
If you own a property in Spain but don’t rent it out, you’ll still need to pay the Non-Resident Imputed Income Tax. This tax is calculated based on the potential rental income your property could generate, irrespective of whether you use it for personal purposes or leave it vacant. To submit this tax, you’ll need to use the Spanish Tax Form Modelo 210 and send it to the Agencia Tributaria, the national tax authority in Spain.
Calculating your tax return:
The formula to calculate the tax liability is the Cadastral value x Imputed percentage x Tax rate.
To find out the cadastral value of your property, you can check your local tax receipt (IBI or SUMA) or contact your local town hall. Alternatively, you can also visit www.sedecatastro.gob.es with your valid Spanish digital certificate or NIE number and the ‘numero de soporte.’ Cadastral values typically range from €30,000 to €200,000, and the imputed percentage varies between 1.1% and 2%, depending on which municipality the property is located in.
For residents of the EU, Iceland, Norway, and Liechtenstein, the tax rate is 19%, while non-EU residents are subject to a 24% rate. It’s essential to remember that if you jointly own a property in Spain, each owner must file a Modelo 210 individually, with the imputed tax being divided based on their respective shares in the property.
- Rental Income Tax:
If you decide to rent out your Spanish property as a non-resident, you’ll be required to pay taxes on both the property itself and the income it generates for you. This means that quarterly tax returns must be submitted within the first 20 days of April, July, October, and January for the previous quarter.
The tax calculation varies depending on how the property is used during each quarter:
- If it’s rented every day: Rental income generated minus deductible expenses* x Tax rate.
- Rental/Private Use or Empty: Imputed income for private/empty days + rental income (income generated for rented days minus deductible expenses*) x Tax rate.
*Please note: Only residents of the EU, Iceland, Norway, and Liechtenstein can deduct related expenses, which can include taxes, rates, local surcharges (e.g., Property Tax Bill – IBI, Rubbish Collection Bill – Basura), personal third-party services (e.g., administration, surveillance, porter services), costs for drawing up a lease, legal defence costs, insurance premiums, and amounts for services or supplies (e.g., electric, gas, water, community fees, etc.).
The number of rental days determines the proportion of expenses that can be deducted. If multiple individuals jointly own a property, each must file a Modelo 210, and the tax will be split based on their respective shares in the property.
- Capital Gains Tax:
Capital Gains Tax applies to profits earned from selling assets, such as property or land. Non-resident individuals or companies selling assets within Spain and earning capital gains from the transactions are subject to this tax. Declaration of this tax is also done through the Modelo 210 form.
Calculating Capital Gains Tax:
To calculate the taxable capital gain, deduct the sales price from the purchase price. Allowable expenses directly related to the acquisition and sale of the property, such as legal fees, taxes, and improvement costs, can be deducted to reduce the overall tax liability. The current flat rate for capital gains tax for non-residents is 19%.
When it comes to filing your Modelo 210, you will need to seek the services of an accountant or gestor, or use the services of an online provider, which are often cheaper and allow you to file your Modelo 210 anywhere, anytime!
Why choose Winkworth for your Costa del Sol property search
With our specialization in buying and selling properties along the stunning coast, including Sotogrande, Estepona, Guadalmina, San Pedro de Alcantara, Nueva Andalucia, Puerto Banus, and Marbella, Winkworth offers a comprehensive range of options to cater to your needs.
Our team are well-equipped with the winning combination of local knowledge and experience to provide you with the best options when it comes to buying or selling on the Costa del Sol. Whether you’re seeking your dream home or looking for an investment opportunity, we’ll guide you through the entire process, making it smooth, stress-free, and enjoyable.
To embark on your property journey on the Costa del Sol, give us a call at +34 952 880 941 or +34 600 115 728, or drop us an email at info@winkworth.es. Our dedicated team is ready to assist you with any questions and get you started on the path to finding your perfect property or making a successful sale. At Winkworth Spain, we take pride in delivering exceptional service and making your real estate dreams a reality. Get in touch with us today, and let’s begin this exciting journey together!