GENERAL CONSIDERATIONS

If you are a non-resident in Spain and you own a real estate property in Spanish territory, you will be subject to the following TAXES:

• Income Tax for Individuals (Impuesto sobre la Renta de las Personas  Fisicas).
• Wealth Tax (Impuesto sobre el Patrimonio),
• Local tax known as IBI (Impuesto sobre Bienes Inmuebles).

1.1 REPRESENTATIVE  

The Tax Office (Administracion Tributaria) does not oblige you to appoint a representative. However, should you wish to  voluntarily designate one, you should inform the relevant Tax Office where the property is located. The name of the tax office in Spanish is the "Delegaciòn or Administraciòn de la Agencia Estatal Tributaria (A.E.A.T)".

1.2 TAX IDENTIFICATION NUMBER (NIE)

In Spain, each person is assigned a tax  identification number which must be used in all tax declarations and in any  communications sent to the Tax Administration Office (Administraciòn Tributaria).

In general, for Spanish nationals, the Fiscal  Identity Number (NIF) is the number on the National Identity Card (DNI) and, for foreigners, the NIE is their personal Identification Number for tax purposes  (NIE). Applications for these forms of identification are dealt with by the local Police Station (Direcciòn General de la  Policia).

1.3  INCOME TAX FOR INDIVIDUALS

When a property belongs to a married couple  or it is jointly owned by several people, each person is independent and liable,  and must therefore submit separate tax declarations.

Depending on what the property is to be used for, the income liable for taxes are the following:

2  INCOME TAX RETURN ON URBAN PROPERTY FOR PRIVATE USE (PERSONAL USE).

The return to be declared will be the  quantity which results from applying the following percentages to the rateable  value of the property, which appears on the Local Property Tax (IBI) receipt:

Return: 2 per cent.

In the case of properties with rateable taxes  which have been revised or modified after 1st January 1994 the tax rate is 1.1 per cent.

If there is no rateable taxes yet, the tax base will be 50% of your declared value in your title deed; the rate will be then 1.1 per cent

This return is understood to be due once a year, on 31st December.

A proportional part of this tax will be  declared if the owner has not owned the property for the entire year or if the  property has been rented

• Declaration form: 210, using the general section 210-A and allocating 02 as type of income or the new 214 form.
• Declaration period: from 1st May until 20th June (form 210). Refer to paragraph 8
• Where to submit the  declarations:  Delegaciòn de la Agencia Estatal de Administraciòn Tributaria corresponding to where the property is located.
• Tax rate: 25%.

3  RETURNS ON RENTED PROPERTIES.

The return to be declared will be the total  amount received from the tenant, without deducting any expenses .

This return is understood to be due either on  the date stipulated by the landlord in agreement with the tenant or on the date that the payment is actually received if it is paid before the date stipulated by the landlord. Taxes on each amount of income are paid separately, therefore, there will be as many declarations as there are amounts of income.

However, declarations can be made  collectively in order to include several amounts of income due from the same person or from several persons which occur in each quarter. In the case of the  collective declaration containing returns from different persons, the person  submitting the declaration must be a representative or one of the persons  defined as jointly liable by the Regulatory Tax Law (rent payer,  management company or agent) Apagador o gestor.

Declaration model: In accordance with what has been previously stated, two possibilities can be accepted

• Model 210:, Ordinary declaration, using the general  section 210A and entering 01 as the type of income
• Model 215: Collective declaration: It is also necessary  to enter 01 as the type of income.
• Declaration  period: the period for submitting an ordinary declaration (model 210) will be one month from the date of the accrued income. The period for submitting collective declarations (model 215), relating to a quarter, will be within the first twenty days of the months of April, July, October or January, depending on whether they correspond to the first, second, third or fourth quarter, respectively.
• Where to submit the  declarations: The  "Delegaciòn de la Agencia Estatal de Administraciòn Tributaria" corresponding to where the property is located.
• Tax type: 25 %

CAPITAL GAINS ARISING FROM THE SALE OF PROPERTY.

Capital gains obtained as a result of a  property sale is a taxable income. The capital gain is understood to occur at the moment of the change in assets.

In general, the increase will be determined  by the difference between the transfer and the purchase values.

The purchase value consists of the purchase  price for which the property being transferred was acquired, to which the total expenses and taxes inherent to the purchase will be added (only legal invoices), excluding interest, which would have been paid by the person carrying out the  transfer. According to the year of purchase, this value will be adjusted by applying an annual deflation rate (coeficientes de actualización) which are established annually by the Law of the National Budget (la Ley de Presupuestos Generales del Estado).

The transfer value will be the true amount for which the property transfer was made, taking into account deductions because  of expenses and taxes inherent to the transfer paid by the seller (only legal invoices) .

The amount subject to taxation will be the difference between the transfer value and the purchase value.

5  THE 5 PER CENT WITHHOLDING  TAX

The person purchasing the property, whether  resident or non‑resident, is obliged to deduct and pay 5% of the agreed  consideration to the Treasury. This deduction is an advance payment of the tax which corresponds to the CAPITAL GAINS arising from the sale. However, the purchaser will give the non-resident seller a copy of the 211 form (with which the deduction was paid), so that the latter can deduct the said withholding tax  from the amount to be paid as per his/her Income tax return. If the deducted  quantity is greater than the amount to be paid, the excess amount will be fully  refunded by the tax office.

However, if the period of time between the date of the purchase of the property or of the latest improvements carried out  on it and 31st December 1996 is greater than 10 years, there will not be  any capital gain nor any obligation to submit a declaration and, therefore, nor  will there be any obligation to deduct and pay the aforementioned 5% withholding  tax.

If the deduction is not paid, the property will remain liable to the payment of the tax.

6  INCOME TAX (Capital gains): THE TYPE  OF FORM, THE PAYING PERIOD AND THE PLACE FOR PRESENTING THE  DECLARATION.

• Form: 212

When the property being transferred is jointly owned by a married couple and both spouses are non-resident, it is  possible to submit a single declaration.

• Period: three months beginning from the end of the period which the person who purchased the property has to pay the deduction  (this period is, in turn, one month after the date of  sale).
• Place: in the Tax Office ADelegaciòn or Administraciòn de la  Agencia Tributaria corresponding to the place where the property is located.
• Tax rate: 35%.

7  TAX REIMBURSEMENT

In the case of decreases in the value of estate or if the deduction is greater than the amount which must be paid, there is entitlement to a refund of the excess amount. In order to initiate the refund procedure, form 212 must be submitted to the appropriate Delegaciòn or Administraciòn. The refund will be made by bank transfer to the account  indicated on the declaration. This bank account must be in the name of the owner  or of the legal representative of the owner and in the latter case supporting  documents must be provided to affirm that the representative is authorised to receive the money.

In the case of not having a Spanish bank account, the payment can be made by cheque as long as a written application is made to the "Delegado de la AEAT". A 212 declaration "for the non-resident transferer" (para El transmitente no residente) must be enclosed along with the 211 form which was used to make the payment.