|Tax and Wills in Spain|
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The tax system in Spain has recently been made a lot more 'user friendly' and the many of the rates have been reduced, especially for low incomes, however, it is still extremely complicated. However, it is not a problem most residents hire the services of a 'Gestor' for a small fee per annum, who will ensure that all relevant taxes and fees are paid.
It is vital to be aware that when you stay in Spain for 183 days or more in one calendar year, you automatically become legally liable for Spanish income tax, whether you are a formal resident or not.
If you take out 'residency', you will become liable on your 'total worldwide earnings', but however there are double taxation relief regulations which prevent you being taxed both in your country of origin and Spain. (Pensioners will not have to pay tax on any income which has already been taxed in their country of origin).
Any income earned in Spain is also liable to be taxed even if you are not a resident and spend less than 183 days in Spain, such as income from work or rental income on property in Spain .
All foreigners with financial dealings in Spain must apply for an NIE (Número de Identificación de Estranjero) tax and identification number at the police station. You will need the NIE to open a Spanish bank account, arrange credit terms, use the National Health Service and for all tax matters.
There is a 7% tax on resale and new properties. For staged payments on a project build, the tax is paid on each staged payment.
As a non-resident owner of property in Spain, you are liable for Spanish taxes. Taxes are classed as either Municipal or State. Municipal taxes include: Tax for the collection of rubbish (Recogida Domiciliaria de Basura). This is often included in your Community Fees.
Municipal taxes are paid annually to the Town Hall. These vary depending on the area in which you purchase your property. Each Town Hall has its own period for voluntary payment, favouring prompt payers with certain discounts.
Wealth Tax - this is paid annually on the 31st of December and is calculated by percentage value of the property.
In the first case, the income on which the tax is applied is a legal income and is presumed to have been yielded to the benefit to the owner of the property. This is calculated at 2% of the cadastral value of the property. The tax paid is 25% of this amount.
This supposed or legal rent is only paid on dwellings, not on plots or commercial premises. If the property is let to a third party, the rate is 25% on the net rent, as declared by the landlord.
All property purchases in Spain (with previous owners) are subject to 7% VAT (IVA) and 1% stamp duty and commercial properties and plots of land are subject to a higher rate of 16% and 1% stamp duty and a local tax.
Residents and non-residents alike are liable for property tax 'Impuesto Sobre Bienes Inmuebles' (IBA) which is similar to UK rates, which go towards local public services. The tax is calculated on the rateable value of your of your property. Property income tax is a flat 25% for non-residents and at the standard rate for residents.
If you own a second home, 2% of the value of your second home will be added to your total tax burden and if not a resident this tax will be paid on your first home.
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