Not declaring your income? You may want to reconsider......

[Marks]

Interesting conversation with my accountant today. All the electricity supply companies now have to complete Modelo 155 which shows for every property they supply:

Catastral number
Address
Contract number
Contract name
Electricity consumption
Potencia contracted
Bill payers name

This information is cross-referenced by the tax office to resident and non-resident tax returns. Second homes & foreign owned homes with a certain level of consumption will be considered as rented and it will be the owner's responsibility to prove the house is not rented. One of his clients has already been hit with a tax demand for undeclared rental income.

Non resident property owners who have not submitted an non resident tax return will also be scrutinised.

If you are not complying expect a a letter from the tax office soon.

[Cas & Irene]

All the electricity supply companies now have to complete Modelo 155 which shows for every property they supply .....

That must be an enormous job, to check all those holiday homes ( a million ++?) by consumption.
I don´t think that they can the " reverse burden of proof apply" (I hope that this is good English!), only on a base of a electricity bill.

But this information in combination with a website or rental site info etc, yes you have a problem!

[CSE]

Wrote this earlier:
viewtopic.php?t=23559
Then it was poo-pood by one.
Spain is cracking down on tax evasion no two ways about it.

[kevsboredagain]

One of his clients has already been hit with a tax demand for undeclared rental income.

As this person was already the client of an accountant, it would imply that he/she was likely already paying taxes on rental income (a big assumption here) Does this mean they are going after people who are already paying the correct taxes and demanding even more based on some automated collection of data?

A bit worrying. My house uses electricity all year. The pool pump runs, some lights are automatic outside and this year I've had the builders in for several weeks. Even although the house was uninhabitable over winter, I hope I don't get unfairly targeted. I already pay a much higher rate than an EU or Spanish resident. Enough is enough.

[Marks]

That must be an enormous job, to check all those holiday homes ( a million ++?) by consumption.

A big job but relatively easy for the tax office to write software that produces exception reports and the electricity companies to write software that pulls the data.

Spain is cracking down on tax evasion no two ways about it.

Absolutely. Ignore it your peril. More and more difficult to hide.

Maybe one day all those "builders" and "plumbers" and "taxi drivers" swanning around in the foreign registered, uninsured, untaxed cars and vans will disappear to where they came from.

[CSE]

I already pay a much higher rate than an EU or Spanish resident. Enough is enough.

Of what?

[Marks]

As this person was already the client of an accountant, it would imply that he/she was likely already paying taxes on rental income (a big assumption here)

Not declaring rental income therefore not paying tax.

[Casscat]

Do I assume you can challenge it if its unfair? Like Kev, my place eats electricity like no tomorrow even when there's no one in residence - the pool pump is a voracious consumer and the water is pumped electrically uphill from the reserve to the property and to the water deposits (I do not have mains water). I have security lighting tripping on and off, and my maintenance guy uses appliances galore in the upkeep of house and grounds. Add to that friends and family staying there gratis, plus yours truly whenever she can grab a few days, and there is a pattern of usage which has nothing to do with rental income. I don't actually get paying guests outside of high season by and large

[CSE]

Do I assume you can challenge it if its unfair?

For fear of sounding like a broken record. This is where a gestoria comes into play. They file taxes and sort these sort of things out for you. Again some on here also poo-poo the idea of using one.

[Marks]

Do I assume you can challenge it if its unfair? Like Kev, my place eats electricity like no tomorrow even when there's no one in residence - the pool pump is a voracious consumer and the water is pumped electrically uphill from the reserve to the property and to the water deposits (I do not have mains water). I have security lighting tripping on and off, and my maintenance guy uses appliances galore in the upkeep of house and grounds. Add to that friends and family staying there gratis, plus yours truly whenever she can grab a few days, and there is a pattern of usage which has nothing to do with rental income. I don't actually get paying guests outside of high season by and large

If you declare rental income it is highly unlikely you would be investigated. The tax office are looking for those properties/owners not declaring.

Agree with Ian & Irene - a gestor is the way to go.

[kevsboredagain]

I already pay a much higher rate than an EU or Spanish resident. Enough is enough.

Of what?

Of unnecessary bureaucracy, different taxes depending on where you reside and draconian measures to try and make people comply.

Here's a comparison:

In France as non resident: Fill on 1 box myself each year. Pay 20% with 50% allowed for expenses. Most owners pay tax. It's simple.

In Spain:
Require gestor/accountant to complete complex tax return every quarter with details of every individual rental. Tax rates and rules completely different depending whether with you reside in Spain, an EU country or outside the EU. The requirements for filing are so confusing that many accountants/gestors are not willing handling non residents. Charge an additional rental tax for all the days which are not rented in the year. Employ heavy handed tactics to ensure people comply. Many owners don't pay tax because it's not simple to do so.

[CSE]

Thanks for the explanation.
If you live in an EU country Spain taxes you the same way. As France recently found out:
viewtopic.php?t=23486

Yes the gestoria bit is a pain, but as everyone else uses one in Spain it is not an exception. When running a business in most counties one has pay for an accountant.

[Marks]

I pay 70€ a year for my resident tax return, including rental income, to be completed and submitted on my behalf. Being resident I can submit rental income annually rather that quarterly.

The fee includes free advice throughout the year. IMHO money well spent.

[Nightowl]

We declare our Uk and Spanish income in the UK already and have done for the past 8 or so years we have been renting. Our UK accountant does our tax returns and we do a separate set of accounts for each London rental and the spanish one.

Up until about 3 or 4 years ago, UK and overseas income from holiday lets could be bundled up in the same UK tax return.

In the first couple of years as far as UK tax law was concerned, the spanish one made a loss. When the tax laws changed a few years back, and losses on overseas rentals were no longer allowed to be offset against profits on UK ones, the spanish one had to be declared separately, so after that, we have only been able to offset any (small) profits made in future years against the losses of the previous years and those accounts still have a small loss brought forward.

The running costs of the one in spain are high because we pay someone else to do the changeovers. We also use it ourselves as do family and friends and in the main fam and friends don't pay for its use.

We have always taken income for our UK rentals in both £ and in euro (in the past few years because the euro rate was more beneficial, we took mainly euro, and payments for both the UK and the spanish rental were taken via our spanish account - this is fine, because I can identify what was for which house as that account always shows the name of the payer - I also have taken income in Euro via Paypal.

Our UK accountant tells us that the UK and Spain have a double tax treaty and that if we have paid tax in one country, the other country can claim back any difference in taxes that they would have charged there, but we won't pay tax twice (only the difference if spain would have charged us more).

When we first bought the house here, we were told by the gestor we used at the time, that whether or not you actually rent a house you own in spain out, you will be deemed to be renting it and you will pay a wealth tax on the deemed rental so we have always paid that. We have a different tax person in spain now and she completes a tax form for us in the same way but she has never asked us to give a summary of bookings dates and money received for rentals.

She says that the tax regime in spain is very complicated and almost impossible to work with, with ever changing rules and regulations and differing requirements for paperwork, depending on who you are dealing with. This year though, she said that she does advise us to give a breakdown of dates and income and she will declare that.

Luckily this is likely to be our last year of renting our house out in spain as we are moving there ourselves but we will have the problem in reverse as I think we will probably have to declare residency and be taxed on our UK income (we will be going back to doing tenancy rentals on the properties that we now rent in the UK as holiday lets).

I am happy enough to pay whatever tax is required by whichever country is taxing us but we are having trouble getting any kind of idea (even from our accountant in spain) about what the level of tax is likely to be in spain, given that we will also be declaring that UK income in the UK and will be taxed on it there. We need to try and get an idea of our budget when we live in spain - we know what our likely income from the UK rentals is likely to be and we know what the tax is likely to be in the UK, but does anyone here have any idea what the additional tax on that income might be in spain?

We won't be renting the spanish house, we will be living in that one.

I'm also slightly concerned that our spanish bank records show a lot of euro income, over the past 8 years or so, which is actually derived from our UK rental business and we have paid the tax due on that in the UK, so I don't want the spanish tax authorties making a raid on our spanish account because they assume it relates to our spanish house - it seems that they tend to take the money and then rely on the individual to prove that the tax has been paid. We CAN prove the tax has been paid in the UK and that it related mainly to UK rentals but I know how slowly the wheels move in spain so I'm worried about a situation where the tax authorities have removed sums from our account that we don't actually owe and how we'd get by in the meantime whilst we try to prove that the tax has been paid in the UK.

Our situation is similar to that of many people I'm sure, and I do understand why people avoid getting themselves caught up in the spanish tax system; it's just so unclear and heavy handed. We know people here in spain who work in various jobs (and declare tax) and they say that the system just makes assumptions that your situation is NEVER going to change - ie, once employed, you'll ALWAYS be employed and if that changes, the wheels just don't move fast enough to reflect the changes.

Those of you on LMH who are resident in spain and registered for tax, what is your experience of things? Do you feel you are taxed as expected or is it a minefield???

mind, you, as a side note, in the UK, our accountant charges us ove £1,000 every year to submit our tax returns and sign them off, despite the fact that I do 90% of the work, sorting receipts, categorising expenses and putting it all on an excel sheet and working out our profits/loss on each property.

Our spanish accountant charges 90 euro each.

Swings and roundabouts, I guess...

[Casscat]

I have a guy in Ireland sorting out my Spanish tax. I haven't had a bill from him yet but I think he charges €250 per annum.

Yesterday's UK Budget announced that online tax filing would be rolled out from next year allowing 10m people to have their own online tax account rising to 50m by 2020. The account will detail everything HMRC already knows about you, and you will then be able to amend, add or subtract as appropriate. Sounds eminently sensible.

Nightowl, as I understand it you have to declare your Spanish income in both Spain and the UK while you are UK resident. The Spanish rules for offsetting expenses against rental income are very different to the UK rules and even if you have no tax liability in the UK you are likely to still have one in Spain.