Whether the non-resident owner of the property is a natural person or a company, the taxable base is made up of the gross amount of income earned through the collection of rents. There are no permissible deductions on account of expenses incurred in collecting the rent or with renting the property. That base will then be taxed at 25%.
EXAMPLE: A non-resident rents his villa for twelve months for the sum of E6.000. The taxable base will be € 6.000, which taxed at 25%, gives a tax liability of € 1.500.
NON LET PROPERTY - THE PECULIARITIES
It is evident that a property which is not let nor sublet may be occupied by the owner, left empty or given to a friend to use on a gratuitous basis etc. In neither of the above cases does the owner earn any income from the property. Thus in such cases the law in Spain has defined an imputed income or fictitious income which is calculated by multiplying the Catastral Value (an official valuation of the property for the purposes of calculating certain taxes. Found on your Annual Real Estate tax receipt, IBI for short and is usually considerably lower than the market value) of the property by 2% as a general rule or by 1, 1 % in the exceptions as described below. The taxable base is made up between the difference between this imputed income defined by the statute and certain deductible expenses. This imputed income is not produced where the property is Non-urban.
The multiplicand of 1, 1 % is applicable in the two following cases:
a.Where the Catastral value of the property has been revised or modified since 1-1-1994
b.Where the property does not have a Catastral Value or this had not been modified at the time when the imputed income tax is due. In the latter case, the value of the base to be multiplied by 1, 1 % is arrived at by multiplying the real value of the property, i.e. that declared on your title deed or the market value which ever is the highest, by 50%. This second possibility is applicable as from 1-1-1997
CREATING A RIGHT OF USE OF THE PROPERTY
Where there exist rights of use of the property given to another, it is the beneficiary of those rights of use who will be taxed and not the non-resident owner. The user will be imputed income in the amount resulting from multiplying the total value of the property by 2%. In order to evidence the absence of rental income in the owners tax return, it will be sufficient to produce the covenant granting the right of use of the property to another.
PROPERTY LET ON A GRATUITOUS BASIS
Where the property is let gratuitously either to a friend or otherwise, or is let for a rent considerably lower than the market rent, the Spanish Tax Authorities may apply the presumption that the person letting the property has obtained a rent equivalent to normal rental prices charged for properties with similar characteristics. The owner will have the burden of proof of demonstrating that the property was let gratuitously. Where such is proved, the non resident owner will be imputed income on the basis that the property had not been let, i.e. at 2% or 1,1% of the Catastral Value whichever is applicable.
PROPERTY LET TO A RELATIVE
Where property is let to a relative, the rent charged for the purposes of calculating the taxable income may not be less than 2% of the Catastral Value. Where the property is let to a relative on a gratuitous basis and the owner is unable to prove such, the rent may be assessed by the Tax Authorities at the market rent which may not be less than 2% of the Catastral Value but may be more.
CHANGES IN THE USE OF THE PROPERTY THROUGHOUT THE YEAR
Where the use of the property changes over the year, the taxable base is arrived at by applying the rules of calculation in respect of each of the circumstances of use. Thus if the property is rented for part of the year and left empty, given to another to use on a gratuitous basis or a right of use created for other parts of that same year, the taxable base will be arrived by applying the rules as described above to each of those situations for the periods involved. |