In Spain the ownership of a property implies complying with two main tax liabilities. On the one hand, a municipal tax ("Impuesto sobre Bienes Inmuebles", so-called IBI), has to be paid annually and it is calculated and managed by the District Council of the town where the building is and it can be paid by direct debit.
On the other hand, the income tax of non-resident person must be calculated and paid. This legal obligation is payable annually and it is based on the presume income generated by the property. In case of non-rented properties, the tax base is generally either 2% or 1.1% of its cadastral value and the tax rate is 19% (in the case of EU, Iceland and Norway residents) or 24% (in the case of all other non-resident citizens). For instance, a building with a cadastral value of €100,000 entails the payment of an amount between €209 and €380 a year for a EU resident citizen. It is a relatively low amount, which should preferably be settled punctually to avoid problems derived from payment default as it may cause trouble and added expense in fines or surcharges on late payments.
And in the case of rented property?
You can be the owner of a rented property abroad. In Spain, and specially in Catalonia, there are numerous firms which manage tourist apartments and which can handle reservations, check-ins and check-outs of tenants, the cleaning and dealing with any small incidents that can arise from the use of the dwelling. These firms usually charge fees according to the income received, which is not normally over 25%-30% of the income.
But are taxes payable on rented properties? Of course! If the property has been rented for all or part of the year, the return obtained has to be calculated. The return to be declared is the entire income obtained; in the case of the EU, Iceland and Norway residents, said income can be reduced in the necessary expenses in order to obtain the income (maintenance expenses, repairs, insurance, administration costs, etc.).
The final cost is 19% (in the case of EU, Iceland and Norway residents) or 24% (in the case of all other non-resident citizens) of the returns declared (gross or net, depending on the owner’s place of residence).
For example, in the case of a property which generates an annual net return of €6,000, the tax cost would be €1,140 in the case of residents in a country of the European Union.
It is important to be supported by professionals to manage the tax payments resulting from the ownership or the rent of a property.
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