Being a property owner in Spain attracts risks and responsibilities, suggests Jonathan Eshkeri of E&G Solicitors in Spain.
1) Get a Spanish will
If you own property in Spain it makes sense for you to have a Spanish will. Having a Spanish will in place will greatly ease the administration of your estate upon your death, a job that the beneficiaries, perhaps your loved ones, will have to deal with. By making a Spanish will in relation to your Spanish assets, as opposed to any English or other will governing the succession of everything that you own, you will remove any cross-border uncertainty and unnecessary delays.
2) Don't forget your IBI
IBI is a local charge in Spain that is similar to council tax in the UK. The letters I.B.I. stand for Impuesto sobre Bienes Inmuebles, literally an immovable property tax, or real estate tax. Whereas the tax is payable by the person who owns the property on 1st January each year, the invoice is usually issued during June, July or August.
If you do not make payment of your IBI then the town hall may charge penalties and register a charge against your property in respect of the debt you owe. Set up a direct debit from your Spanish bank account in order to avoid missing payments.
3) Community fees
If you own a property in Spain that is part of a development, for example, an apartment, then you will be obliged to pay community fees, which are service charges by another name. Community fees are paid by all property owners within the development towards the maintenance of the communal areas such as swimming pools and gardens.
Communities with a large number of debtors or late payers have the right to increase the community fees for the members who do pay regularly. You should ensure that your adviser considers the minutes of the most recent annual general meeting of the community in order to get a clear picture of the community’s finances, as well as a good idea of any other issues that are affecting the development.
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If you do not pay your community fees it is possible that the community could take legal action to recover the debt, which could result in a charge being registered against your Spanish property. On a day-to-day level, you may be refused access to communal facilities. As with other regular payments, set up a direct debit to avoid falling behind.
4) Don't ignore non-resident's income tax
As the owner of a property in Spain, but a non-resident of Spain, you will be liable to pay non-resident’s income tax. If you let the property on a holiday let basis, then you will be required to submit quarterly returns declaring the income received and the expenses you have incurred in each quarter. You can expect to pay a quarterly tax on the chargeable amount, which will be the net income earned during each quarter. If you let your property on a long term basis, so for a year or more for example, then tax on the net income will be payable annually, not quarterly.
If you do not let your property at all, or if you do not let it during one or more quarters, you will need to submit an annual return and pay an annual tax that is calculated on the basis of the rateable value of the property. That tax payable will usually be relatively low, usually based on a chargeable amount equalling 1.1 percent of the “valor catastral” (similar to a rateable value).
Whether or not you let your property, tax is payable on the chargeable amount at the rate of 19% for that resident in the EU and at 24% for all others.
5) Beware of rental rules
If you intend to let your property in Spain on the open market, as well as the tax implications, you need to be aware of the local rules. The rules on holiday lets vary in Spain, depending upon the location of the property. In certain regions, you will be required to obtain a licence to be able to let your property legally. In other areas, you will be required to comply with certain administrative rules. In any event, the consequences for non-compliance with the rules could be a hefty fine, so the key if you intend to let your property will be to make sure that you are aware of the rules before you purchase it.