Taxation

Legislation introduced in 1991 (effective 1st January 1992) reinforced the requirement for non-residents having an economic interest in Spain to appoint a Fiscal Representative, resident in Spain, to assist in the administration of the non-resident’s tax affairs in Spain. Failure to comply with the legislation for any reason whatsoever would lead to fines, or even an embargo on the assets belonging either to an individual or legal entity.

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An individual is considered to be non-resident if he does not remain on Spanish territory for more than 183 days in the calendar year and if the principal centre or base of his economic interests lies outside Spain.

The purpose of the appointment of the Fiscal Representative is to aid the Spanish Tax Authority in the collection of taxes from non-residents. It is important to note that failure to appoint a Fiscal Representative could leave the non-resident liable to a fine of between Pt 25,000 and Pt 2,000,000.

SPANISH TAX AGENCY WILL CHECK RENTALS

Spain operates a system of self assessment for the collection of taxes. The representative is required to acquire the forms, complete them, and pay the taxes due, all within a required period of time. Any Tax Return sent to Hacienda (the Spanish Tax Authority), without the Fiscal Representative’s signature will obviously alert Hacienda to the fact that no Fiscal Representative has been appointed.

CAPITAL GAINS TAX FOR NON-RESIDENTS IS 35 PER CENT

Thousands of foreign investors or simply holiday home owners in Spain have sold their sunshine property for high profits in today’s real estate boom. These profits are subject to Spanish capital gains tax, a fact not often mentioned by estate agents. The non-resident faces a nasty bite of 35 per cent. To make sure that the tax is paid, Spanish law requires that five per cent of the total purchase price is paid directly to the tax agency when the seller is a non-resident. This means that only 95 per cent of the price is paid to the seller’s account. The other five per cent goes directly to the tax man as a deposit against the capital gains tax liability. If the tax turns out to be less than this deposit, the balance can be reclaimed.
Spain operates a system of self assessment for the collection of taxes. The representative is required to acquire the forms, complete them, and pay the taxes due, all within a required period of time. Any Tax Return sent to Hacienda (the Spanish Tax Authority), without the Fiscal Representative’s signature will obviously alert Hacienda to the fact that no Fiscal Representative has been appointed.

The requirement that a Fiscal Representative be appointed was relaxed at the end of 1993 in cases where the only asset in Spain is a dwelling. However, despite this, failure to use a Fiscal Representative can have several consequences:

(i) All communications from the tax office will be sent to your Spanish address and any delay in receiving that correspondence could have adverse effects.

(ii) Spanish tax forms are complicated and there may be an additional language problem if you are not fluent in the Spanish language.

(iii) Legislation and practice in Spain changes frequently and failure to file returns correctly could incur fines and embargoes.

The taxes payable are not new but a considerable number of non-residents have in the past not paid these taxes, largely due to ignorance of the taxes and the difficulty of obtaining information in Spain. Briefly, the taxes payable annually to Hacienda in relation to property are as follows:

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The taxes payable are not new but a considerable number of non-residents have in the past not paid these taxes, largely due to ignorance of the taxes and the difficulty of obtaining information in Spain. Briefly, the taxes payable annually to Hacienda in relation to property are as follows:

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