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Spanish tax surprise for ex-pats with second homes

Spanish Legal IssuesPosted by Andrew Thu, February 02, 2017 14:21:15

June 28th, 2013

The new requirement earlier this year for declaration of overseas assets by Spanish nationals and Spanish residents was expressly intended to be ‘for information purposes only’.

Most took this to mean that there would no immediate adverse fiscal consequences based on the declaration made. Indeed, where income and gains arising from the overseas assets in question were already being declared in Spain, the declaration of the details of the assets should make no difference at all (pending any Wealth Tax revisions).

However, it appears that some were unaware of one fiscal consequence of the declaration, being the impact of the Spanish tax which arises from ‘imputed income’ arising from non-principal residence properties.

To clarify, a Spanish national or Spanish resident who owns a property which is not their principal place of residence is deemed to derive an income from the property (based on its rateable value) even if no actual income is received in respect of the property.

For second (etc) homes in Spain, the Catastral value is used to calculate this liability. But for ex-pat Spanish residents for example, who still keep a property in their country of origin, the tax is assessed on the basis of the last declared value of the property. In the case of the overseas asset declaration, the requirement is to declare open market value of overseas assets.

So, in some cases, Spanish residents are now being required to pay a significant amount of additional tax in Spain in respect of their property in their home country, even though the property is non-income producing.

It is unclear as yet, whether this is being universally applied- or indeed was an intended consequence of the overseas asset declaration. Hopefully some clarification will be forthcoming from the Spanish Tax Authority, as it is a factor which will need to be taken into account by those considering becoming resident in Spain, but keeping their ‘bolt-hole’ back in their country of origin.