Wealth Tax
if you are not resident in Spain, then you must pay Wealth Tax,
(Patrimonio) on all your assets situated in Spain. Assets include your house, bank account
and other assets with a defined value (eg stocks and shares).
How The Wealth Tax is Calculated
The value of your house is the official estimate that appears in your
receipt for LOCAL RATES, and it is called VALOR CATASTRAL. If you are not yet registered
as a rate payer, then the value used will be the value declared in the Escritura.
Wealth Tax has to be paid each year but it is allowed (about 0.2%) of
the total value of your assets. Your have to bear in mind that 3% more, in respect of
furniture, will be added to the assets value. However, this must be paid in order to
prevent any problems when the time comes for you to sell your property.
LOCAL RATES ("Impuesto de Bienes inmuebles, IBI")
The Impuesto de Bienes inmuebles must be paid every year, in one
payment between the 15th September and the 15th November, in each year.
This is payable in addition to any community charges and depends on
the situateion, qulaity, size and age of the property.
You as owner, must make this payment even if you have received no
rates tax demand. It is your responsibility to find out what the exact amount is and pay
it within the allocated time period. If you make a late payment, you must pay 10% more
between the 15th and 30th November, and 20% penalty after the 30th November. If your
property is part of Comunidad de Propietarios it may be that the rates charged on your
unit may form part of your annual charge to the community of owners and you should enquire
specifically about this. Since getting the information, and paying, can create
difficulties for you, you can avoid these problems by going either to your gestoria
(property manager) or your bank for help (Direct Debit).
If you arrange to have your bank pay this tax, you should also
arrange to have the former owner of the property co-sign the agreement, at the time of
your purchase. Payment by the bank will involve filling out a form authorising that the
tax demands be sent to your bank rather than to you. You must report the acquisition of
your property to the Delegacion de Hacienda for assessment of this tax. If you buy an
existing house or apartment, the assessment will often be lower than for a new one.
Non-payment of the rates can result in legal proceedings, leading to
an embargo of you goods or sale by public auction of your property, so do make sure this
will be taken care of each year. The average Contribution Urbana tax is equal to 1/2% of
the value than assessed by the Tax office, with the official valuation being somewhat less
than the actual cost (or market value).
CAPITAL GAINS TAX
In accordance with Royal Decree of 7th June 1996, when the vendor is
a foreign person the purchaser mus withhold 5% of the purchase price and deliver this to
the Spanish Tax Office, to ensure that the vendor pays his Capital Gains Tax. If the
vendor is a company non-resident in Spain, the purchaser will need to withhold this 5%
unless the company has owned the property for more than 20 years.
I would like to remind you that you only have 30 days, after the
Title deed has been signed to deliver to the Spanish Tax Office the 5% of the purchase
price. The 5% retention is not applicable when the seller has owned for more than 10
years.
As you already know, the Capital Gains Tax is the Tax that you have
to pay on the profit obtained when you sell the property. It is 35% of the difference
between the purchase price and the selling price. The purchase price is calculated in
accordance with inflation and all the fees that have been paid when you bought the
property and land registry fees are all deductible from the profit and reduced by a
further 11.11% per year of ownership (to count after the second year of ownership). After
the property has been owned by the vendor for 10 years or more, any gains will be tax fee.
When selling properties bought on or after 1st January 1997, the
taxable gain is the difference between the purchase price and the selling price (reduced
by any qualifying expenses and taxes in connection with the purchase and/or sale) and
reduced by a percentage to be published every year in the Spanish Budget. In both cases,
non-resident vendors will pay tax at the rate of 35%.
The Spanish Authorities reserve the right to review the selling
price. If they believe that the consideration has been under-declared by more than 20% or
2 million Pesetas, the difference between the official tax valuation and the declared
price will be considered a gift. The vendor will be assessed additional capital gains tax
of 35% on the difference and the purchaser will be liable to inheritance and gift tax.
if the amount that you have to pay for the Capital Gains Tax is less
than 5% of the purchase price, you can always apply for you a refund. In the case that it
is necessary to do so, you are required to give the name and the number of your bank
account in Spain, so that the Spanish Tax Office can reimburse you the money. You have to
bear in mind that the Spanish Tax Office will take no less than seven months to return the
money to your account.
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