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31st December – your last chance

Published 10/11/2010

31st December – your last chance

The Spanish Tax Authority is closing the net on tax fraud.

Did you know that the Spanish Tax Authority is working even more closely with tax authorities in other countries – including HMRC in the UK?

Did you know that the Fiscal Fraud Prevention Plan in Spain raised more than 6,597 million euros of unpaid tax between January and August 2010? Twenty-four per cent more than in 2009.

Whether you are a resident or a non-resident in Spain, you should be paying tax. It’s more obvious for residents that this is the case as you expect to pay tax in the country where you live. But paying an income tax in another country where you only spend a few weeks or months in the year, can cause confusion. This article explains why you must pay imputed tax as a non-resident and what might happen if you don’t.

As a non-resident property owner in Spain you not only have to pay your local council tax but also what is called ‘imputed income tax’. This is the tax that you must pay instead of paying tax on a rental income. If your property in Spain is not your main residence, and it can’t be if you are a non-resident, then the theory is that you could rent it out. If you rented it out you would pay tax on the rental income. As you don’t choose to do that, then you are obliged to pay a notional tax instead.
Some people are still not paying this tax. In most cases it’s because they don’t realise that they should. In other cases they believe that they will get away with it. This might have been the case in the past but things are changing. The Tax Authority is using the latest technology to share information between departments and utility companies. You no longer know what information is held about you or who it is shared with.

Tax avoidance is a risky business. Here’s how the Spanish Government is recouping unpaid taxes: 

•    An improved ‘Fiscal Fraud Prevention Plan’ which is ensuring that all Spanish government agencies are working together to detect fiscal fraud

•    More links and information sharing between countries – there is increased collaboration with HMRC in the UK

•    Utility companies providing the Spanish Tax Authority with information to help establish resident and non-resident status

•    Information being exchanged between the Tax Authority, the Land Registry and the Cadastral Registry to identify property owners who are not paying taxes 

It’s not just the strategies for spotting tax avoidance that have increased, it’s also the penalties and methods of imposing them. For example, if they do discover that you are not paying your imputed tax they can place a fast track embargo on your bank account or even your house.

The irony is that imputed tax is not actually that expensive. It’s generally much cheaper than paying rates or income tax in the UK. For example, the table below shows what you might expect to pay on different values of property.

Value of property on title deed Catastral Value Annual imputed tax
100.000€ 35.000€ 168€
140.000€ 40.000€ 192€
220.000€ 65.000€ 312€

Making sure you pay this annual tax can save you the worry and severe consequences of non-payment. We do urge people to make sure that they do not put their property at risk and that they complete their 2010 tax declaration before December 31st.

To find out just how much you know about what tax you should be paying why not try our quiz ‘Whose tax is it anyway?’


Pablo Arteaga

Pablo Arteaga

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