Tax on home-owners in Spain
It is very important to differentiate between the residents and non-residents. If you remain in Spain for more than 182 days in a year, you become a Spanish resident, either you want it or not. As a resident you must declare all of your earnings and all your assets in Spain. You submit your residence application at Policia Nacional. You get confirmation of your application on the same day that you file your application. As a Spanish resident you must pay the following taxes:
Property sales tax
If you sell your property at a profit, the revenue is taxable at the rate of 20-24%. The tax on the first 6000Euros is 20%. Then the tax goes higher up to 22% on revenues of up to 50000Euros. Any amount above this will be taxed at the rate of 24%.
Spain is not a tax haven, despite the fact that taxes are very low there, as compared to Denmark. As a Spanish resident you pay a progressive tax, as it is in Denmark, all your income from anywhere in the world constitute a single tax base. Usual income tax rate are 20-47%. The biggest difference between Denmark and Spain is that in Spain low incomes, might sometimes be taxed at rate near to zero. Even for higher income brackets the maximum tax rate is quite low.
Municipal property tax (IBI)
Everybody is obliged to pay this tax. This tax must be paid every year before 31st of December using Form 210, to the municipality where your property is located. The amount is calculated based on open evaluation, which is called “Valor Catastral” in Spanish. Usually property tax is one percent of this amount.
Termination of income tax
Your income tax (related to property sales) can be deferred or even terminated if you decide to buy a new property, which must cost at least as much as the price of the sold property. It is also a requirement that you must have lived at least for three years in your old property.
Plusvalia – Value Added Tax on property
Plusvalia is a special tax levied on sales of property, which is calculated on the basis of growth of land prices, in your locality. The tax is calculated on the basis of increase in value of land from the date of its last trade. This tax is meagre and is always charged to the account of the seller.
Property tax was cancelled during 2008-2010, but was reinstated in Andalusia in 2011. This tax must be paid on clean assets, whose value exceeds 700,000Euros per year per taxpayer. The rate of taxation is 0.2-2.5% of the value of the asset.
Tax on rental income
Being a Spanish resident you refuse your income from rental, by adding it to your tax declaration, and hence this income becomes a part of the overall income. If you rent your property in Spanish, but you are not a resident, the deduction equals 50%. This means that 50% of your rental income is taxable in Spain.
Advantages of being a resident
√ People older than 65, when selling their permanent residential property, are completely free from paying income tax. The only condition is that the given property must had been you permanent place of residence for at least three years. If you sell your old property to buy a new one, which at least costs the same as the value of the sold one, you are not liable to pay income tax.
√ As a retiree you have access to the Spanish “Seguridad Social”, hence free medical care.
√ As a resident you have the right to vote in local elections.