Spanish Taxmen Hunt Foreign Homeowners
April 24th, 2006
A bill to catch foreigners avoiding tax went before the Spanish parliament early this month and even before new legislation comes in, the crackdown has begun.
A large number of Britons who let properties have not been telling the Spanish taxman and, after years of turning a blind eye, the authorities are now on the hunt for extra revenue from the half a million Brits with homes in Spain.
Britons who own Spanish homes but are non resident in the country should pay two sets of annual taxes. There is a wealth tax, based on a property’s value, and levied on a sliding scale, generally in tranches of €170 and starting at 0.2%. In addition, there is a notional annual income tax that should be paid even if a property is not rented out, which is based on a percentage of rateable value.
Frank Porral, a Madrid tax specialist for Rastrollo Porral Abogados, says most areas have set the level of this tax at 1.1% of the rateable value, with the taxpayer charged 25% of that figure.
If a property is rented out, a further tax of 25% on actual income should be paid, which can be offset against the notional tax, with income declared within 30 days of the rental period.
While this may sound like an impenetrable maze of confusion, Mr Porral says in fact there is one simple form that covers all the taxes, but unfortunately most Britons are unaware of its existence and it only comes in Spanish.
He said: “The problem is the majority of people rent out properties through third parties and don’t realise that their information about rental income can end up in the hands of the tax authorities.
“If the agent then doesn’t inform them, then they can expect a letter from the taxman telling them to pay up and imposing a penalty.
“The Spanish authorities should help people though and print the simple form in different languages. People could even file it on the internet, if only they could understand what they were filling in.”
As part of the tax drive the Spanish authorities have started targeting letting agents and firms that sell apartments off plan claiming guaranteed rental income.
British residents renting out properties in Spain should also be paying tax on income to the British taxman and with the Spanish crackdown starting, there is also the possibility dodgers may be reported to HM Revenue & Customs.
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