Registering your property

[Marks]

Morning all

New to the forum and this is my first post so please be gentle with me Great forum, lots of good info and ideas.

Have been renting out our apartment for three years now with good occupancy rates and have always declared our rental income to the UK Revenue.

There has been a lot of coverage in the local press here in the Costa Blanca about the need to register holiday rental properties with the Valencian Tourist Authority. Has anyone done this? If so, how do you go about doing so?

Thanks in advance.

[ashtondav]

I don't think there is any legal requirement to register if you are a private owner and not a company.

By the way you should be declaring your rental income in Spain as well, and paying Spanish tax on it. Be careful if you are not as they are cracking down on such behaviour. See the last few paragraphs of. http://www.spanishpropertyinsight.com/b ... mpdown.htm

You can offset any spanish tax against UK tax owing. You have to pay spanish tax quarterly and it is very easy to download the various forms. If you have never declared the rental income in Spain I would start now!

[Marks]

Thanks for the reply. Everything I read says that any owner who rents out his/her property should register. Being UK resident means I pay tax in the UK on my worldwide income, or so my accountant tells me.

[ashtondav]

No!

Please take advice in spain. You have to declare and pay spanish tax on rental income if you own a property in Spain, you also have to declare it in the UK and offset any tax already paid in Spain. This is 100% correct.

For goodness sake do not register or do anything official if you are not declaring rental income. I have given you a link, please use it as this issue could cause you problems.

Your accountant is right in what he says: as a UK resident you pay tax on all your world wide income in the UK. This is exactly the same if you were Spanish tax resident - you would pay tax on all your worldwide income in Spain. This has nothing whatever to do with Spainsh law on tax. I would take advice or google around.

[Alan Knighting]

Ashtondav is quite right when he says:-

Please take advice in Spain. You have to declare and pay Spanish tax on rental income if you own a property in Spain, you also have to declare it in the UK and offset any tax already paid in Spain. This is 100% correct.

It is not a matter of whether or not you are resident in Spain for tax purposes; it’s a matter of the income arising in Spain. The Double Taxation Treaty which exists between the UK and Spain means that you will not pay tax twice on the same income but it must still be declared in both countries.

Fluffy

[Marks]

Thanks for the replies. Have an appointment with a Spanish accountant when next in Spain.

Interestingly I posted a similar question another forum and was laughed at - the consensus there was that no-one paid tax on their rental income and that I was mad to even consider doing so

[Alan Knighting]

Interestingly I posted a similar question another forum and was laughed at - the consensus there was that no-one paid tax on their rental income and that I was mad to even consider doing so

When they are wriggling on the tax man’s hook it will your turn to laugh.

If it wasn’t for the “spivs� the Costa’s would be wonderful places to live.

Fluffy

[Banksie]

I complete a UK Tax return each year and the Tax office in the UK have been more than helpful. I have a UK mortgage to fund my Spanish flat and I offset the interest paid on the mortgage (along with rates, community etc) against any rental income . I deduct 'personal use' weeks. My level of rental income to outgoings means I will probably never be liable to pay any tax for income received. Each year, I carry forward my loss from the previous year so, once my mortgage is paid then the accumlated losses are used to offset against future income. I imagine that I'll stop getting rental income because I'll be either dead or living in Spain before any tax payments are due. I used an accountant to do the first years return and then used this a model for subsequent years.

The local Tax office has warned me that I may be questioned about running an operation that has never made a profit - the simple answer to that is - If I don't rent my flat and get the annual income it provides then I would have to fund all the routine expenditure - community, rates, imputed tax . Seems sensible

With regards to Spanish taxes, my account (also my fiscal rep) declares 'Non-resident property owners imputed income tax' on my behalf and I declare this on my Uk tax return to offset against any UK tax due - which there isn't. (And, YES, the Spanish Tax folk take this whether you rent or not )

I've never declared my income to the Spanish authorities as all income received is in the UK. I have assumed the 'Imputed Tax paid' is sufficient. This Tax is (I think) calculated as 25% of 2% of the Cadastral value of my apartment - with fees about 500 euros a year. And now.....you've got me worried

[ashtondav]

I've never declared my income to the Spanish authorities as all income received is in the UK. I have assumed the 'Imputed Tax paid' is sufficient.

I am sorry but you are breaking the Spanish law and committing fraud in Spain. You are liable to back taxes, fines, property seizure or more. You should be declaring ALL rental income from your property in Spain, whether or not you declare it in the UK.

Furthermore you are allowed NO deductions and have to pay 25% tax on the gross rent. You would be making a loss as you have a mortgage and other costs. It is almost criminal that this is never mentioned to Brits buying with a mortgage. It can never pay - legally.

On your UK tax form there is a box to state what tax you have paid abroad and this is allowed against UK tax on the same property.

You are in serious trouble if you are detected by the spanish authorities. That is very unlikely, so you may be lucky. I do know that the spanish are looking at rental websites and tracking owners and reconciling with tax returns, electricity consumption and flights by owners. If your rentals are mainly to family and friends with little or no advertising then again the risk is minimised.

You may be well advised to have a chat with a spanish lawyer or tax advisor, or just google around. I can assure you I am correct on this.

I must admit that when i told my lawyer i needed to declare the income (i have had tax problems here) he did giggle. Luckily i don't have a mortgage so i cover my costs even though paying all the tax.

Be warned though. As with 'black money' the tax offices are cracking down - BIG TIME.

[Banksie]

Thanks Ashtondav for the heads up. I'll enquire with my solicitor/fiscal rep.

Is there not a Tax employee out there in 'Lay my hat' who could comment on the legalities rather than us have to google for information?

Anyway, like I say I only rent out my flat as it offsets some of the running costs.

It's a nice to have income but, if I have to complete forms every 3 months to give 25% of my UK income to the Spanish tax authorities then I'll stop renting. That will mean 20 or so weeks less of income to Spain from IVA taxes paid by my guests. They lose out really.

As I've said, I will never make a profit because the costs of buying and running the flat will always out weigh the income. If I have to pay the 25% tax in Spain, off setting it in the UK means little except to increase my losses - and the UK tax office have hinted that this will be investigated.

Owners like myself - of which there are no doubt thousands in Spain, contribute a lot of income to Spain in IVA tax through our guests. The Spanish are in danger of 'killing the goose' if people are put off renting.

And re. the tax office looking for renters and their web sites, this site is a ready made collection for them to sift -

[ashtondav]

These are the taxes anyone who has a property in Spain is liable for:

Tax On Rental Income
Rental income is subject to 25% of gross rents without any deductions. Yes, you will make a loss if you pay a mortgage. Has to be declared and paid every quarter.

Wealth Tax
Spanish Wealth tax is levied on Spanish Assets of non-residents without any exempt amount.

Spanish residents enjoy a nil band of more than Euro 100,000!

So, any value of Spanish property will be subject to at least .2% and up to 2.5% wealth tax (although this latter rate kicks in at over Euro 10 million.). Paid once a year, May/June.

Capital Gains Tax (CGT) This is a shock for most non-residents, as the rate for Spanish residents is only 15%! For non-residents its 35% and the worse news is that under Spanish tax law the purchaser must withhold 5% of the purchase price and pay it to the tax authorities on account of this tax. Although CGT in the UK can be 40% you have a tax free allowance of about £8,800 each and taper relief kicks in so you only pay tax on 25% of the gain after 10 years.

You then have to make a repayment claim, if this is higher than the actual gain.

Inheritance Tax (IHT)
This tax is levied based on the relationship of the beneficiary to the deceased.

For a Spouse, there is an exempt amount of just Euro 16,000 and then tax at progressive rates from 7.65%- 34%. You should note that this has to be paid pretty quickly. You can't for example wait for a property to be sold. For unmarried beneficiaries such as girlfriends and friends, there is NO EXEMPT amount and rates up to 81.6%!

[Banksie]

Thanks Ashtondav. Yes you are correct on all you have said. What I can't understand is, when I bought, my agent and lawyer set up all the standing orders for IBI, SUMA, Wealth tax and the Property owners imputed income tax ( the one that's taken just in case you are renting - 25% of 2% of property value). This rental tax was not mentioned

I did a lot of searching about my obligations at the time and never came across this requirement. I genuinely thought I was above board.

Since this thread kicked off, I have looked again and now find the detail you have raised. One bit of info seems to imply that you can offset the 'Imputed tax' paid against actual rental income.

My concern is that, if my lawyer will do a 3 monthly return in addition to my annual tax submissions, that it may cost more to administer the property than I'd get in rent - at that point I would just stop renting.

What is clear, as you've pointed out, is that there are a lot people coming onto the market who need to rent to meet buying costs, if they get embroiled in the realities of taxes, then they might find themselves unable to maintain mortgate payments. The Developers and Estate agents have a lot to answer for.

I am in Spain in January and will contact my laywer. My bank (Solbank) have also been supportive over the last 3 years so I will ask them for help.

Thanks for the info (ignorance is bliss - isn't it!)

Banksie