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Taxation (Other)

Spain - Taxation (Other)


Those who are moving to Spain need to be aware that taxes may vary from one region to another and it is worth checking with the local taxation department of the regional council in order to determine any liabilities that you may face.

VAT (Impuesto sobre el valor anadido) is applied on three levels. The general level is 18% which is applied to all products and services which are considered to be non-essential. A reduced rate (IVA reducido) is applied at a rate of 8% on items such as hairdressing and funeral services, dental services and optical services. The third level is known as a super reduced rate and is applied at a rate of 4% on items such as essential foods.

There are several different types of property taxes in Spain. As in the UK there is a council tax (Impuesto sobre bienes inmeubles) which is charged annually and is based on the value of a property. The value of the property is determined by the local town hall and the tax rate normally falls between 0.4 and 1.1% of the value. Both the estimated value and the amount to be charged are listed on the bill sent to the homeowner. This tax bill is normally issued automatically but if one is not received then the responsibility rests with the owner of the property to make the request for the bill. Most people pay this charge by direct debit.

Those who are not officially residents of Spain may be liable for the non-resident property tax (impuesto sobre la renta de no residentes). This is applied to all those who own a property and who do not make an income from renting it out and there is no other source of income in Spain which can be taxed. This tax is also based on the value of the property and this will also be listed on the bill. 2% of the cadastral value of the property is then broken down and owners are charged 24% of this amount. If a property is rented out then the owner will be liable only for income tax on the amount earned.

If you are resident in Spain and inherit property or assets – no matter where they are in the world – then you are liable for inheritance tax in Spain. Those who are non-residents will be liable for inheritance tax on property and assets which are located in Spain. Any tax bill must be paid before the assets can be distributed to the beneficiaries. There are different rates applied in different communities but the amount to be paid will differ according to the amount being inherited, the wealth of the beneficiary and the relationship between the beneficiary and the deceased. It should be noted that a common-law spouse is not recognized in Spain and will be considered to be a non-relative for the purposes of inheritance tax calculations. When the tax bill is paid it should be done at the provincial office within the deadline set.

Gift tax is payable on a gift from a donor and this will take into account the area of residence, the amount and any existing wealth which is owned by the beneficiary. This tax needs to be paid within 30 days of the date of the gift being made. There is no longer any wealth tax in existence in Spain.

Capital gains tax in Spain is not a simple system. This is paid by residents on all assets that they own worldwide and by non-residents only on the assets that they own within Spain. The rate charged is 18% but for most residents their main home will be exempt. The tax office will also need to take into account the date on which the property was acquired. Those who are over the age of 65 or who have lived in the house for more than three years may qualify for an exemption. Those who do not qualify for an exemption this way may qualify if they buy a new house within 2 years of the sale of the last one. Residents may also be liable for a tax known as ‘plusvalia’ which is applied by the local authorities. This is based on the increase in value of land, rather than the buildings that are on it. The rate applied will depend upon the local area and the length of time that the property has been owned. This is often deductible from the main capital gains tax. As there are many rules and exemptions the services of an accountant is recommended to be sure that nothing has been missed.


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