Monday, 1st June 2020

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Income Tax on Rent Revenues

Income Tax on Rent Revenues

Non-residents who obtain incomes by means of the rental of a property in Spain must file the Non-resident Income Tax Return. Article by Limit Consulting.

It is common belief that non-resident have no tax obligations in Spain because they “pay their tax for their worldwide income back home”.

Whereas it is quite true that one has to pay tax for worldwide incomes in the country in which one resides, in some cases, such as when the income derives from a property located in other country, the liability incurs in that country but it may then be deducted from the tax liability in one’s own country of residence.

There are treaties to avoid double taxation between all countries in the EU. In practice, if you have a property in Spain and pay your worldwide tax in another EU country you first will have to declare and pay for your income in Spain and later report this payment in your usual annual tax return so that it may be deducted from it.

In Spain, non resident owners of properties must file their tax for rental income quarterly, that is in April, July, Oct and January in respect of business in the previous three months. The tax has to be filed individually by every co-owner of the property. This includes husband and wife if the property is owned by a married couple.

How much tax?
The Amount of tax is a percentage of the balance after deducting allowable expenses. In 2016 the tax rate percentage is 19%. You can estimate your tax liability using the online tool on the Limit Consulting webpage. The tool also allows you to submit your figures to us if you choose to use our services.



What expenses can I offset against my rental incomes?

  1. Ordinary and necessary. You can deduct any expense that is necessary to generate the income. Notice: If the property is offered for rental only during part of the year and the rest of the year is given to other use, some expenses such as the utility bills may be attributed to the rental only in the proportion that it has been used to that end.
  2. There must be a proper invoice as a documented proof backing the expense, containing all the required information. Notice: However genuine the expense may be the tax authorities in Spain will not allow it unless it is properly documented on an invoice.

Examples of common expenses.
Purchase of necessary utensils, furniture, etc…
Maintenance and repairs.
Services and Utilities: water, electric, cleaning, etc… as long as they are paid by the owner.
Legal fees: accountant, lawyer,
Town hall fees and community charges such as IBI, waste-collection, street-lighting,…
Depreciation of durable goods

If the total of expenses exceeds the income, the remainder can be left carried forward to other years, with a maximum of 5 years. 

Limit Consulting can file your tax for this quarter

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