Spanish Property tax advice

T

tvmania

Guest
Hi ...

My wife & I are currently in the process of buying a property in Spain, mainly as a holiday home. We are looking for some advice on what is the most tax efficient way to purchase the property, considering inheritance tax, mortgage, etc. We would be in a position to use up equity in a rental property here or to apply for a mortgage with a Spanish bank (taking over developers mortgage!).

Any advice would be appreciated. Also, if anyone can recommend a tax / financial consultant who would be in a position to offer such advice.
 
You are in the process of buying but are only checking out the tax issues now? Seems a risky way to do things to me. You really need somebody with knowledge and experience of the tax systems in both jurisdictions to do give you comprehensive tax planning advice.
 
If you are buying a new property in Spain, depending on the area, you are probably paying more than you need to pay. In many areas, resale property can be bought at a good mark-down against similar new stuff. In many cases, you can also get the furniture thrown in for nothing or for a nominal sum.

Also remember that extras like light fittings, aircon, etc may have to be supplied by yourself post-completion. It all adds up.

I know that this is slightly off post, but its is important to be aware that buying new is not always the best option.
 

You are liable (list not exhaustive) to Irish income tax on Spanish rent, Irish CGT on disposal of Spanish property (with maybe a credit for CGT paid in Spain), Spanish income tax on rent or if no rent then Spanish Income tax on deemed rent, Spanish wealth tax (based on the value of the property), Spanish CGT on disposal of property.

I know some people working in that field so if you want their details send me a PM. In the interest of disclosure they are friends of mine so i may be a bit biased towards them.

Whatever you do get professional advice!!!
 
Related to the OPs question... Does anyone know anything about an upcoming vacancy tax that is being proposed for property in Spain? I am not sure if it is only going to be in certain areas (Catalunya and the Pays Basque maybe) or if it is going to be widespread. Also, not too sure how they could implement it or how they are even going to define what a vacant property is? I have heard it mentioned quite a lot recently but have yet to see anything concrete, so would appreciate it if anyone knows more about this.
 
Thank you for replies folks! I am aware of most of the tax requirements involved as listed above by Newby & have already accounted for them.

However, in relation to inheritance tax, I was wondering if it is more tax efficient to take a mortgage out with a Spanish bank & for both partners to put their names down on the title deeds. Also, if taking a mortgage out with a Spanish bank, what would the advantages / disadvantages of taking over the developers mortgage?

Lastly, if we decide to use up equity (interest only mortgage) in a rental property here in Ireland to fund the Spanish property, would we be able to offset all of the interest paid on the mortgage against rental income received from the rental property or only part off it?

We will be seeking professional advice on the above but would like to get general feedback from folks who have already experienced purchasing in Spain.
 
Hi Afuera
You pay a deemed rental tax irrespective of whether you are renting it out or not. I have a place in Madrid and was only made aware of it last year.

You can check international taxes etc on www.propertytaxinternational.com.




 
Keentoinvest said:
Hi Afuera
You pay a deemed rental tax irrespective of whether you are renting it out or not. I have a place in Madrid and was only made aware of it last year.

You can check international taxes etc on [broken link removed]
Click to expand...

Thanks for the link Keentoinvest. The property market is a big election issue in Spain so I have heard politicans recently comment about freeing up vacant properties. The tax you mention may be an attempt to do that as the Spaniards are reluctant to rent property out because of the strong tenancy rights. My Spanish is still not good enough to pick up whether they are making further restrictions with regard to this matter though or if this tax had already been implemented. Looks like there is already something there to try and cover it.
 
I dont think its designed to free up property rather add to the the tax coffers. Its a wise move that revenue here should have caught on to by now.

On a good note non residents were penalised on capital gains tax of 35% on the sale of a spanish property up until this year wheras residents just paid 15%. This is changing which is good news for non residents with spanish property
 
Keentoinvest said:
I dont think its designed to free up property rather add to the the tax coffers. Its a wise move that revenue here should have caught on to by now.
Click to expand...

I think we may be talking about a different tax after all... These new proposals are primarily targeting the large number of vacant properties and some of the suggestions are actually quite radical. Besides charging a daily rate for unoccupancy there are suggestions of forcing property to be rented out if it has been vacant for over two years.

I found this article on it which gives a brief description of the proposal (sorry, it's in Spanish only). It appears that it's only going to be in Catalunya and the Basque region though, so you may not have to deal with this issue in Madrid.
http://www.20minutos.es/noticia/193880/0/canon/viviendas/catalunya/


Keentoinvest said:
On a good note non residents were penalised on capital gains tax of 35% on the sale of a spanish property up until this year wheras residents just paid 15%. This is changing which is good news for non residents with spanish property
Click to expand...

Thankfully these changes were pushed through by orders from Brussels. I hope that some of the new changes being proposed aren't going to come in as a stealth tax to non residents to replace it however.
 
Keentoinvest said:
On a good note non residents were penalised on capital gains tax of 35% on the sale of a spanish property up until this year wheras residents just paid 15%. This is changing which is good news for non residents with spanish property
Click to expand...

In fact, the new CGT rates are now in force, since Jan 1st. 18% for everybody, so a further 2% to pay here.

Retention by the seller's lawyer to cover CGT liabilities has also dropped, from 6% of selling price to 3%.
 

No.

Assuming you never lived it as a home...

Bought at €100K with €90K mortgage.
Now worth €140K

If you increase mortgage to €140K then I'm afraid you can only offset the interest on the first €100K against tax (€100K being house value when entered into rental market)
 
tax on spanish rental income is 25% of gross income with no deductions. Return required every 3 months.
 
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