Not surprisingly, in these cash strapped days, the Spanish Hacienda are thinking up ways to squeeze every last drop of tax out of not only Spanish non residents who own property in Spain but Spanish residents who own property outside of Spain.
It has long been the rule that if you are a non resident and own property in Spain you should be paying non resident tax on that property and making an annual declaration to the Hacienda or Tax Authority. If you help to subsidise the running costs of your property in Spain by doing a bit of renting then you need to declare that income here in Spain also. What has changed? Well instead of the usual return process, you are now required to make a return for every client who rents from you even if it is only for 2 or 3 days. If the house is in joint ownership for example between husband and wife each needs to make a return so 2 returns per rental client. In addition, the Hacienda wants to see the Passport number or national identification (NIE or DNI) of the clients or if you rent through an Agency the Agency CIF will do. Quite what our already under financed and under staffed Hacienda will do with all this paper is a mystery but those are the rules. Lesley McEwan from Cadizcasa the well known rental agent on the Costa de la Luz said “rental property is a vital income for many overseas owners but these new tax rules are going to put many off renting as they are far more complex and costly.  The majority of overseas owners use a Spanish assessor to complete their tax return and they are not going to do 20 tax returns for the same price as they were doing 2.  In essence if you only rented to cover the costs you now need to factor in these additional charges when deciding if it is worth renting your property and I think many will decide not to rent.  This will affect our local economy so in my opinion the Hacienda needs to rethink this fast”.
You may feel that if you have declared yourself as a Spanish resident and are paying your way in Spain what you have outside the country is not their business but sadly that is not the case. For many years, you have been required as a resident to declare all your worldwide assets but there is great confusion over this and many have either failed to do so or do not know what to do. However, a new piece of legislation commonly referred to as 7/2012 may be sufficient to change things. It requires all Spanish residents to disclose any asset outside Spain with a value of 50,000 euros or over.  This also covers balances in different accounts which amount to more than the 50,000 limit. This includes bank account balances, property, insurances etc and to be able, if requested, to prove that the funds had been taxed appropriately in Spain before they left to purchase the item. If the funds came from the UK then you may still be asked to show where they came from. The penalties are harsh for failing to declare with minimum fines of 10,000 euros, the tax payable could be 52% with a penalty of a further 150% of that tax being charged on top. All in all you could end up losing the investment or property and still owe the Hacienda money. Is it practical for them to chased thousands of Brits for a small flat they use when they go home to see the grand children? Well, the wise owls believe that this tax is aimed at capturing rich Spaniards who shipped their black money out of the country by buying property abroad not at rounding up a few wayward foreign Johnnies who failed to declare their modest investment. Sadly though, as always happens in these cases, some innocents will undoubtedly get caught up in the net and pay dearly for their errors.  Lesley McEwan of Cadizcasa said “this new rule will affect the majority of overseas property owners in Spain.  Most people become very concerned when they feel their private affairs are under scrutiny but the penalties this new law carries are just too steep to ignore it.  Taxation in Spain is notorious for being punitive but we need to get a balance.  Many of my clients own businesses here in Spain and give work to the local community, they pay in to the tax and social security systems so I think we need to go steady on further taxion or we may drive some of them away”.
Bottom line is if you have anything worth 50,000 euros in any of the categories mentioned then get yourself to a tax specialist and submit the form. Likewise if you own a property in Spain or are renting out a property in Spain but not living in Spain then the time has come to do something about a declaration before the taxman comes knocking on the door.

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