11/01/2012 Canary Islands/Spain (SB) - In Spain, as in Great Britain or Ireland, home owners are liable for a variety of taxes. For example, there is tax on rental income, tax on furnished holiday lettings and of course council tax.
The Spanish equivalent is a kind of income tax for non-residents, the Impuesto sobre la Renta de no Residentes, which has to be included in the Modelo 210 non-resident form. This is a tax on nominal revenue and is in effect a way of taxing owner-occupied residential properties.
Many home owners, particularly those who live in their properties themselves without ever renting them, find this tax unfair, arguing that as they occupy the property themselves they cannot be earning any revenue from them.
The Spanish government has a different view. They do not only demand income tax from citizens who actually take money in rent, they also rattle the tin at property owners who live in their properties. The Spanish government charges this tax to resident property owners and non-resident property owners alike.
Thus, there are basically two taxes for Spanish home owners to pay: income tax and property tax.
Property owners living in Spain have to pay the annual income tax (Impuesto sobre la Renta de No Residentes, IRNR) plus the local government property tax (Impuesto sobre Bienes Inmuebles, or IBI), at a rate of 1.1% to 2% of the cadastral value of the property.
The IBI is a direct tax levied by the local authority. This council tax has to be paid every year and is calculated from the cadastral value (valor catastral) of a property or piece of land.
The rate of the IBI depends on the local authority where the property is located and can be set at any level beneath any given ceiling. Most authorities charge less than 1%, which may not sound much, but depending on the cadastral value the amount can soon reach four-figures.
Are you a resident or a non-resident?
There are only two options here as far as the Spanish tax office is concerned: you are either a tax-paying resident or you are not. There is nothing in between. This is the issue in Spanish law, not the question of whether you are in possession of a “Certificado de Registro de Ciudadano de La Unión", or "Residencia".
A natural person who spends more than 183 calendar days on Spanish territory counts as a resident, as does a natural person whose main field of activity or financial interests lie directly or indirectly in Spain. Spanish law does not require the 183-plus days to be consecutive in order for the natural person to be deemed to be resident.
A person is a non-resident on the Canaries (or in Spain) if their main place of residence and their fiscal domicile is other than Spain. If a non-resident is a property-owner on the Canaries they have limited tax liability. Tax-residents in Spain have to complete an income tax declaration. Non-residents are only obliged to pay what is known as income tax on owner-occupation if they are the only occupants of their property. The amount of tax is 24 % of 1.1% of the cadastral value (valor catastral).
If a non-resident owns a property and rents it, then 24% of the rental income must be paid as tax.