March 5th, 2015
Every non- Spanish
resident owner of a property in Spain has to file during each calendar year (in
respect of the immediately previous calendar year), a tax return in Spain
(Form- Modelo 210). It is a simple matter, involves a relatively modest cost;
and (generally) a fairly modest amount of tax to pay, based on the property’s
rateable (Catastral) value.
Although it is
obligatory for these tax returns to be made, the follow-up by the Spanish Tax
Authority against those who have failed to declare in the past has been fairly
limited in practice; and the consequences not disturbingly significant.
But this is changing.
Inheriting a Spanish Property Puts The New Owner ‘On The Radar’
Very simply (and quite
unsurprisingly) technological advances in the manner of operation of the
Spanish Authorities- and therefore improvements in communication between them-
are occurring at a rapid pace.
It is therefore naïve
in the extreme to assume that dealing with a Spanish asset through one Spanish
Authority does not trigger awareness in others.
completion of Spanish property purchases and inheritances now, those acquiring
the property are immediately notified of the awareness of the change of
ownership by the corresponding tax authorities. (A helpful ‘pointer’!)
Failure to File Non-Spanish Residents’ Returns
1. A significant issue
(which we are now seeing occurring automatically) is that if a filing date is
missed, a recalibrated demand is sent out including penalties/ interest. The
powers of enforcement for failure to pay can be extreme- legal action,
embargoed accounts/ assets; ultimately the facility for the Spanish Tax
Authority to seize and auction assets to cover tax debts due. (Extreme cases
obviously, but the point being that the Spanish Tax Authority does have- and
does exercise on a case by case basis- extensive rights and facilities to
recover tax debts).
2. A further
potentially alarming consequence is something which is coming as a nasty
surprise for many sellers of Spanish properties who have failed to file their
annual tax returns.
When a non-Spanish
resident sells a Spanish property interest, 3% of the declared sale price is
retained for the Spanish Tax Authority. This is, in effect, on account of
Spanish capital gains tax liability. But if the retention is greater than the
actual tax liability, the seller can reclaim the tax.
But the Spanish Tax
Authority is now scrutinising the tax return history in dealing with reclaims-
and if found to be inadequate or incomplete, the tax retention on sale may not
So, 3% of the property
sale price can be ‘lost’ (even if there is no gain on the sale) for a simple
failure to make this tax return. To put that in context, on recent property
sale we saw for 900,000 Euros (at a loss) the seller waved goodbye to 27,000
Euros, for this administrative oversight.
therefore needs to be paid to this issue in the context of (and indeed following)
a Spanish property sale.
The Spanish Tax
Authority ‘means business’ over this. Compliance is, in reality, neither
complicated nor expensive. We will be happy to refer enquiries to associates
who provide this service extremely efficiently and cost-effectively; and their
service being provided in English, for non-Spanish speakers.
commentary is not intended to be exhaustive; and case-specific legal advice
should always be sought.
Please speak to us at
Legal 4 Spain when considering a sale or purchase of a Spanish property, to
ensure you have the best quality legal representation to protect your interests
fully; but always at a competitive cost.