Do you plan to buy or rent a property in Spain as a foreigner?
Consult your property tax advisor in Spain first!
In recent times there has been a growth in foreign investment in the Spanish property market and, unfortunately, there are more and more cases in which tax advisors receive the first visit from a foreign client already reporting problems with the Spanish Tax Administration.
Sometimes it is due to ignorance of their fiscal and legal obligations in Spain, and in others, to the contrary: there are small proactive investors who, in good faith, decide to do all the procedures by themselves using the information accessible in the networks. However, the result ends up being the same: the reception of a letter from the Spanish Tax Administration claiming the payment of tax debts that they did not know they had, with the consequent sanctions. What is a pity since, in the great majority of cases, if an advisor had been consulted in advance, a problem if detected upfront, would mean that a difficult (and more expensive) solution would have been avoided.
It must be kept in mind that Spanish tax legislation is characterized by being particularly complex and subject to constant changes, which entails the need to be continually aware of its interpretations and changes. Things like understanding the concept of fiscal residence and its implications; what are the International Double Taxation Agreements, read our earlier article on that: Tax Residence, Why is it important for you? Why do you have to pay taxes in Spain?; What the Non-Resident Tax is and what it consists of; assess whether it is appropriate to be taxed in Spain as a natural or as a legal person and, in the latter case, the steps to be followed for incorporation and annual maintenance; know the different tax rates, possible exemptions, deductions and tax reliefs applicable in each case; to know if it is better to pay the Value Added Tax (VAT) or the Transfer Tax (ITPAJD) when it is possible to choose in the purchase and sale of real estate; etc., are issues that need to be analyzed prior to any purchase.
Yet only in the fiscal area, there are many aspects that must be taken into account before making the decision to make a real estate investment, and which can hardly be dominated by any person who is not specialized in the sector of real estate taxation. Therefore, before taking the step, we strongly recommend that you consult a specialist of your trust.
This article is written by one of our independent partners in Spain, Maite, who is one of our Fiscal partners in Catalonia. Check her profile. Read another interesting Maite and her team wrote on a related subject: Spain property tax: What are the taxes involved in the purchase, holding, and sale of your Spanish property?