If you own a property in Torrevieja or Orihuela Costa but your tax residence is fixed in another country, you must comply with the Spanish tax authorities. Furthermore, many foreign owners mistakenly believe they only have to pay the annual property tax (IBI) managed by the town hall (Suma). However, the Tax Agency obligatorily requires the declaration of the non resident income tax spain (IRNR). This rule applies whether you rent out the property or keep it empty for your personal use.
Therefore, we explain below how this tax works to keep your tax situation fully regularised.
Case 1: The property is empty (Imputed income)
Even if you do not make money from the house and only use it during your holidays, the Tax Agency considers that you obtain a benefit. In fact, they calculate this benefit from the simple fact of owning real estate. In this case, you must submit an annual declaration based on the cadastral value of the property. Additionally, the percentage to be paid varies substantially depending on your country of residence. For example, the rates are different if you reside in a European Union country or outside it, as is the case with UK citizens after Brexit.
Case 2: The property is rented out (Real estate capital returns)
If you exploit the house through long-term or holiday rentals, the tax situation changes completely. Consequently, you must follow these specific guidelines:
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Mandatory declaration: First of all, you must periodically declare the gross income you have obtained from the tenants.
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Deduction of expenses: In addition, residents of the European Union have the right to deduct maintenance expenses, electricity bills, and insurance. On the contrary, British and non-EU citizens are prohibited from applying these deductions. As a result, they must pay taxes on 100% of the income received.
Tax planning and peace of mind for foreign owners
Owning a property in Spain should be an investment to enjoy. As a matter of fact, it should never become a source of worry with the public administration. Thus, the best strategy for non-resident owners is to carry out proper tax planning before the end of the current financial year.
The tax department at Orihuela Solicitors is responsible for analyzing your particular situation. Likewise, we calculate the exact quotas according to your country of residence and manage your periodic declarations. In this way, your heritage on the Costa Blanca is always protected and up to date.
