From 1st January 2008 the wealth tax disappeared, both for residents and non residents, although it has been re-established with temporary effects for the years 2011 to 2017. It is a tax over assets in Spain, and there is a minimum exemption (for 2016 the first 700.000 euros are not taxed). The habitual home of Spanish tax residents is also exempt from being declared.
Foreign residents with income, arising from inside or outside Spain, are liable to declare it yearly within the period 1st May to 30th June of the following year, through Form 100.
There are some limits below for which it is not necessary to submit the declaration. Those limits are subjects to changes, for this reason is convenient to check it yearly.
It is a complicated tax refund where you have to declare separately each category of income classified by its source:
- Income from work - wages, pensions, …
- Income from investments - interest, dividends, …
- Income from property: property owner´s imputed income tax, rental incomes, …
- Professional income : income coming from economic activities.
- Gains and losses: capital gains
Each category has its own regulation to calculate the taxable base and, some of them, its particular tax rate.
Except for the capital gains, the tax is the result of applying the percentage of the tax scale to the taxable base. The scale could change yearly and final tax could also be different depending on the particular regulation of each autonomous region. In consequence it is important to check it every year (as a general reference the tax scale could be from 18% up to 45%).
Regarding capital gains, the tax rate is 19 % for income or profit up to 6.000,00 euros, 21 % from 6.000,00 euros up to 50.000,00 euros, and 23% above that. ( for 2015: 19,50 % - 21,50 % - 23,50 % ).
The Income Tax Law regulates different allowances and deductions that could also change depending on the year and the autonomous region, the most important (figures for 2016):
- The personal minimum exemption ( depending on age, from 5.550,00 euros up to 8.100,00 euros – older than 75 - ).
- The family minimum exemption ( depending on the family members, starts at 2.400,00 euros for the first child ).
- Others: disability conditions, elderly parents and grand-parents over 65 living in the family unit, one-parent families, … ).
- Spouses joint declaration ( 3.400,00 euros ).
- The wage earner´s deduction ( valid for salaries and pensions, from 2.000 euros, depending on the amount received ).
- No imputed income tax on principal residence ( the habitual one )
- Special deductions for annuities, depending on the age at which the payment starts ( the amount exempt could be from 60 % up to the 92 % ).
- Mortgage interest & capital deduction ( habitual home bought before 01-01-2013 ).
- Exemption of capital gains arising from the sale of the habitual home made for people aged over 65.
- Foreign tax deduction
In order to avoid the double taxation, depending on the country where you come from, there are different forms to be filled out, copies of which must to be submitted both in the Spanish Tax Agency and in the foreign one.
Inheritance will & tax
If a will, Spanish or foreign, is not made, the Spanish estate will be distributed applying the rules of Spanish law, which may mean you can freely dispose of only one-third of your assets in Spain (children are compulsory heirs of the rest two-thirds). If a foreign will is made, it is not absolutely necessary to make a Spanish one to dispose of assets in Spain, but it is convenient in order to save time and money to the heirs.
Since 2015, Inheritance taxes over Spanish estate will not depend any more on whether the deceased, or the heir, is, or not, resident. The regional rules will be also applied for residents in the European Union, so better tax breaks can be found, even the exemption.
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 (Catastro) and is assigned a value (Rateable Value – Valor catastral ). 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.
ASSETS ABROAD DECLARATION
NEW OUTSIDE ASSETS REPORTING LAW FOR SPANISH RESIDENTS
Ley 7/2012, on 29th October for the prevention and fight against fraud
Through the anti-fraud law, Ley 7/2012, on 29th October, the Spanish Government introduced the new obligation for Spanish tax residents to report assets located outside Spain.
WHO IS REQUIRED TO REPORT:
Both individuals and legal entities living in Spain for more than 183 days in the previous calendar year.
It is obliged to report assets, not only by the owner but also a beneficiary, an authorized signatory, or any one with the authority to dispose of the asset. This includes assets held in a trust.
TERM AND PROCEDURE:
From February 1st 2012 , anyone who is tax resident in Spain is liable to submit yearly the new 720 official tax form.
The reporting must be done each year, from 1st January to 31st March. Exceptionally, for 2012, the deadline was extended to 30th April 2013, and reports might be submitted from 1st February.
It will be mandatory to file it online with an electronic certificate. If you do not have the facility yourself, an accountant can do it for you.
ASSETS OUTSIDE SPAIN CATEGORIES & INFORMATION TO BE REPORTED:
ACCOUNTS HELD WITH FINANCIAL INSTITUTIONS (all types of bank accounts and deposits, including credit accounts, in all currencies, regardless of whether you have the right to withdraw the funds or not).
It is obliged to report: the bank account identification, the country where the financial institution is located, the end of year value and the average balance over the last three months of the year. It is mandatory to include the date the account was opened and, if closed, that date too.
POLICIES, ANNUITY INCOME, INCOMES GENERATED FROM LOANS, RIGHTS OR OTHER ASSETS TO FOREIGN ENTITIES.
It is obliged to report: the entity full identification and the end of year value.
FIXED ASSETS/PROPERTY AND RIGHTS OVER SUCH PROPERTY
It is obliged to report: the asset location, the cost and date of acquisition, and the current value as per the wealth tax rules. If the asset has been sold during the year, it is also obliged to provide the sale price.
- Assets in a particular category if the value of the total assets in that category amounts to over € 50.000,00.
- After filing of the first report, when the set of assets in each particular category increased by less than € 20.000,00 of the declared value on the last report, it will not be obliged to report this category until the value exceeds this limit.
- If no asset category exceeds this limit, there is no obligation to submit any report until it is exceeded.
- In any case, independent of the referred limits, when a previously declared asset is sold ( property, shares ... ) or a previously declared bank account is closed, it is obliged to report its value at the date of disposal.
PENALTIES AND FINES:
Any unreported asset, even accidental, may be treated as an “unjustified increase in wealth” and taxed as general income at the scale rates ( which could be up to 52% ).
In addition to the above, the failure to report the asset would result in a fine with penalties of up 150 % of the tax payable plus late payment interest for the last four years.
Besides this, you would have to be fined for non-compliance, which is € 5.000,00 for each reportable asset, with a minimum fine of € 10.000,00.
The entitlement of the Tax Agency to look back over past years to assess the unpaid tax on the unreported asset, never expires.
If the tax defrauded exceeds € 120.000,00 it would be considered a criminal offence.
Currently, there is a great deal of exchange of information between countries, that will increase in the following years, so it is very likely that the Tax Agency will find out the unreported assets, or any mistake on the report, with the heavy consequences exposed.
As Spanish tax experts, we are fully qualified to advise you on this matter.