NON RESIDENT TAXATION IN SPAIN

INTRODUCTION

My main aim in writing this report is to clarify the issues about non resident taxation in Spain and more exactly in ‘la Comunidad Valenciana’.

1.- GENERAL CONSIDERATIONS

If you are classified as a non-resident in Spain for tax purposes but you own urban real estate in this country then you are obliged to pay non-resident income tax and a local property tax.

Furthermore, Wealth Tax has been temporarily re-established for the 2011 and 2012 financial years but it wouldn’t be apply for this case.

An individual is resident in Spanish territory when any one of the following circumstances applies:    

1.- They have stayed longer than 183 days in Spanish territory over the calendar year. In order to determine the permanence in Spanish territory, occasional absences are included, except if the taxpayer accredits their residency in another country. In the case of countries or territories labelled as tax havens, the Tax Administration can demand proof of stay in that tax haven over a period of 183 days within the calendar year.
2.- They situate the main base or centre of their activities or economic activities, directly or indirectly, in Spain.
3.- They have dependent not legally separated spouse and/or underage children who are usually resident in Spain. This latter situation accepts evidence to the contrary.

Individuals of Spanish nationality who accredit their new fiscal residence in a country or territory labelled as a tax haven will not lose their status as taxpayers for Individual Income Tax. This rule is of application during the tax period in which the change of residence occurs and for the next four tax periods.

Otherwise, where none of the previous situations applies, an individual is considered as non-resident in Spain.

Non-resident status can be accredited by presenting a certificate of residency in another country issued by the tax authorities of that country. The period of validity of these certificates is one year.

However, the certificate's validity shall be indefinite if the entity subject to tax is a foreign country, one of its political or administrative subdivisions or local entities.

1.1. REPRESENTATIVE

Except in cases of residents in countries or territories with which an effective exchange of tax information does not exist, there is no obligation to appoint an agent to act before the Tax Authorities. Nevertheless, should you choose to do so, you may appoint whoever you wish, and should communicate this appointment to the Branch or Administration of the Tax Agency corresponding to the location of the property.

1.2. TAX IDENTIFICATION NUMBER (NUMERO DE IDENTIFICACIÓN FISCAL - NIF)

In Spain everybody is assigned a Tax Identification Number, which must appear on all tax returns and in all communications with the Tax Authorities.

In general, for people with Spanish nationality, the NIF is the number of their National Identity Card (DNI) and, in the case of foreign nationals, the NIF is the Foreign Nationals' Identification Number (NIE). This identification is processed by the Police General Directorate. However, those foreign citizens who do not have a NIE, either temporarily or permanently, since they are not required to have one, should request a NIF be assigned to them by the tax authorities in order to complete tax operations.

2. THE TAXES

2.1. NON RESIDENT INCOME TAX

When the property belongs to a married couple, or to more than one person, each person is an independent taxpayer, and must file an individual tax return (Non residents income tax)

Depending on the use of the property, the taxes to which it is liable are:

The amount to declare will be that resulting from applying the following percentages to the assessed value of the property (Rateable Value) as shown on the Property Tax bill (IBI):

1.- In general, 2%
2.- In the case of properties where the assessed value has been revised or modified since 1 January 1994, the percentage will be 1.1%.

This yield is calculated once per year, on 31 December.

If you have not been the owner of the property during the whole year, or if it has been rented for any period, only the proportional part of this amount is declared.

In case the Property Tax bill doesn’t exist or the rateable value was unknown, the above percentages will be applied over the 50% of deed value.

Tax rate:

Year income accrued	2011	2012-2013
Tax rate	24%	24,75%

EXAMPLE

DEED VALUE	200.000,00
DV/2	100.000,00
2,00%	2.000,00
24,75%	495,00

Sheet 210:

Filing deadline: during the whole calendar year following the accrual date

Means of filing:

- on paper, generated by printing a form completed on the Tax Agency website.

- Electronically, via the Internet.

Direct debit payment of the tax debt: In the case of electronic filing, payment can be made by direct debit until 23 December

2.2. LOCAL PROPERTY TAX (IBI)

This is a tax charged by local Councils and paid by property owners.

All property within the Council's area is included on a tax register and is assigned a value (Rateable Value).

The amount of tax to be paid is calculated by applying the tax rate set by the Council to this Rateable Value.

A bill is sent out for payment of this tax every year for every property on the tax register.

Usually, Councils accept payment of the tax by direct debit from a bank account, which facilitates payment within the time period set and thus avoids any possible surcharges.

The payment deadline depends on the Council, although it is normally around the months of September, October or November each year

2.3. INHERITANCE TAX

There has been a lot of controversy recently about this tax when it is applied over other European citizens not resident in Spain. Their main grievances are that they have neither reduction nor allowance in this tax like any other Spanish citizen; as a result The European Commission has demanded the Spanish Regional Governments to remove this unfairness. In the Valencia’s Government’s case the allowance rise 99%.

Anyway, it is important to remember that inheritance tax have to be paid for whatever not resident heir.

There is an obligation to appoint an agent to act before the Tax Authorities. Nevertheless, you may appoint whoever you wish, and should communicate this appointment to the Branch or Administration of the Tax Agency corresponding to the location of the property.

TAX MAP

Real state purchase value = Total inheritance

+ Purchase value * % shared ownership

-Debts concerning inheritance

+Furnishing= 3% over (Purchase value-Debts)

=Base Taxable

-Reductions (no apply)

= Net Base Taxable

+ Net Base Taxable * Tax rate= Tax Fee

-Allowances (no apply)

=Net Tax Fee

+Net Tax Fee * Relationship rate = Total among to be paid

Tax rate Cdad. Valenciana

Base liquidable (Hasta Euros)	Cuota íntegra (Euros)	Resto B. Liquidable (Hasta  Euros)	Tipo aplicable (Porcentaje)
-	-	7.993,46	7,65%
7.993,46	611,50	7.668,91	8,50%
15.662,38	1.263,36	7.831,19	9,35%
23.493,56	1.995,58	7.831,19	10,20%
31.324,75	2.794,36	7.831,19	11,05%
39.155,94	3.659,70	7.831,19	11,90%
46.987,13	4.591,61	7.831,19	12,75%
54.818,31	5.590,09	7.831,19	13,60%
62.649,50	6.655,13	7.831,19	14,45%
70.480,69	7.786,74	7.831,19	15,30%
78.311,88	8.984,91	39.095,84	16,15%
117.407,71	15.298,89	39.095,84	18,70%
156.503,55	22.609,81	78.191,67	21,25%
234.695,23	39.225,54	156.263,15	25,50%
390.958,37	79.072,64	390.958,37	29,75%
781.916,75	195.382,76	en adelante	34,00%

Relationship rate

GRUPOS DEL ART. 20
Patrimonio preexistente en millones de euros	I y II	III	IV
De 0 a 390.657,87	1,0000	1,5882	2,0000
De 390.657,87 a 1.965.309,58	1,0500	1,6676	2,1000
De 1.965.309,58 a 3.936.629,28	1,1000	1,7471	2,2000
De más de 3.936.629,28	1,2000	1,9059	2,4000

When it comes to a couple without any legal relationship, the rate will be GRUPO IV

Clasificación a efectos fiscales de los grupos de parentesco

Los posibles familiares y potenciales causahabientes de un causante se agrupan en las siguientes cuatro categorías:

 Grupo I: Descendientes menores de 21 años, ya sean legítimos, adoptados o reconocidos.

 Grupo II: Descendientes mayores de 21 años, cónyuges, ascendientes, adoptantes y colaterales de 1º grado (hermanos).

 Grupo III: Colaterales de 2º grado (tíos, sobrinos directos y primos hermanos) y

3º grado (primos segundos y más alejados), así como ascendientes y descendientes por afinidad (padrastros por ejemplo).

 Grupo IV: los que carecen de vínculo.