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Missing Spanish Tax is traced back to your country

Published 03/12/2010

Missing Spanish Tax is traced back to your country

Pay your Spanish tax or you could risk losing your home. It’s that simple. There will be some people reading this who might be a little sceptical about whether this is really the case. We’ve heard the disbelievers too, “I’ve heard it all before and nothing ever happens. I’ve never paid my taxes and no one’s come after me”. Well perhaps they didn’t once upon a time, but we’re living in a different age when tax evasion means less money in very empty coffers and where IT capability means data crossing is getting more and more sophisticated. 

Let us give you a genuine case study.This was received in our offices on the 1st of December. Instead of opening her advent calendar window, Mrs. N. opened a message from Suma Gestión Tributaria, Alicante. It very much took her by surprise. A letter from Spain, from the Head of Foreign Taxpayers’ Information Service but there was no need to translate. The letter was in plain English:

Notification of Enforced Collection Procedure it informed Mrs. N of some rather unpleasant facts:

  1. that she must appoint a tax representative for dealing with Spanish Public Administration
  2. that she owed property tax
  3. that if she didn’t arrange payment of what she owed very quickly her house would be put up for public auction.

The facts speak for themselves, but if you don’t believe us read a copy of the letter.

So how had Mrs. N allowed this to happen? She wasn’t normally someone who avoided paying tax and she certainly didn’t want to lose her Spanish holiday home. Originally Mrs. N had been paying taxes and had a fiscal representative. However, in 2007, she was told by her fiscal rep that she no longer needed to pay ‘Wealth Tax’.

Unfortunately she took this to mean she didn’t have to pay any tax at all and cancelled her fiscal rep. She told customer care at Ábaco, “I was absolutely sure that this change in the law meant there was nothing left to pay. I know I should have checked my facts, but I’d also read something similar on a forum.” For a while Mrs. N was still in denial. But with a deadline of the 9th December for the debt to be paid, she had no time to lose and fortunately called Ábaco for advice.

For the tax advisers at Ábaco the debt came as no surprise. Every non-resident has two taxes to pay on their Spanish home. The  IBI or council tax must be paid by all home owners. But in addition to this everyone must pay an income tax. This is either rental income tax if they let out their Spanish property or second-home tax, sometimes known as non-resident income tax. This second-home tax must be paid if you just use your holiday home for your own personal use and don’t rent it out. Usually defaulters come to light when they sell or bequeath their property. This was different.

It was the change of tactic from the Alicante Tax Authority that grabbed Ábaco’s attention. This letter was in English, it emphasised that Mrs. N must have fiscal representation as a non-resident and stated in no uncertain terms that within a very short timescale  she could lose her home. This was no fiscal rep. crying wolf. This was in black and white.

Even more ‘big brotherish’ is that the address on the letter is not one that Mrs. N has given to anyone in Spain. Suma Geston Tributaria had obtained this from other sources, post code and all. However, Mrs. N does have something to be grateful for. The Tax Authority don’t have to seek you out at all. Without a fiscal rep we have seen occasions where property and bank accounts have been embargoed and the first that a non-resident has known is their property going up for sale.

This isn’t just a cautionary tale. It’s a living example. But just like a cautionary tale it has some very clear messages behind it:

  • all non-resident Spanish property owners should be paying two taxes
  • all non-resident Spanish property owners should have fiscal representation
  • it’s important to choose a reputable fiscal representative   
  • check your facts and check your sources
  • the Spanish Tax Authority are desperate to get some money
  • they will track you down

At least this story will have a happy ending and Mrs. N needn’t worry about seeing her house as a lot number at a public auction. Can the same be said for you?

Susan Partridge Helme

Susan Partridge Helme
Tax Advisor

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