Non-resident property owners in Tenerife
Many owners of Tenerife properties who are non-resident in Spain are unaware of their tax declaration obligations.
If you own property in Tenerife as a non-resident (e.g. you are resident in the U.K.) you are required to file a tax return and to pay both Non-Resident Income Tax and ‘IBI’, the equivalent of Council Tax. Tax returns for any given year must be submitted by June 30th in the subsequent tax year. You will generally be considered resident in Spain if you have resided here for more than 183 days in the past year.
Non-Resident Income Tax
This is a state tax, which is paid to the Spanish Tax Authorities for each tax year up to 31st December. It is payable on all properties, regardless of whether they are actually rented out for money. Tenerife residents also have to pay this tax upon any second property (i.e. any property that is not their principal private residence).
Historically, this tax appears to have been introduced to recover lost revenue where a large number of property owners were failing to declare rental income from their properties. The law therefore assumes that all such owners generate a notional 2% income return on the town hall assessed (catastral) value of their property each year, upon which they should pay income tax at their personal applicable rate (i.e. lower or upper rate tax). However, if a property is declared to be rented out (and assuming that the rental income is greater than 2% for the tax year), then the actual rental income should be declared and applicable tax should be paid upon it.
Property Council tax (IBI)
This is a local tax levied by the Town Hall (Ayuntamiento). All properties in each Town Hall catchment area (e.g. Adeje or Arona) are included in a census and have an assigned value (assessed value), upon which IBI is calculated on specific formulae. In addition to IBI, property owners must also pay a small additional amount on account of ‘Basura’ rubbish collections.
Recently the Tax Office has started sending out letters to property owners who are registered as owner of the property but who do not appear to have filed a tax return in respect of themselves and/or the property. In other words, they are now catching up with those property owners who have failed to file a tax return or pay income tax on their properties. The taxman is entitled to go back 4 years, so letters being sent out now will require assessment and payment of back-tax for the years 2009, 2010, 2011 and 2012, together with potential interest and penalties for late payment.
The taxman now appears determined to catch up with all non-resident property owners. If you have received such a letter, or if you would simply like to get your tax affairs in order without waiting to receive such written demand, please contact us to arrange a consultation. TENERIFE SOLICITORS work with both Spanish lawyers and registered accountants who can provide a one-stop-shop for all of your legal and tax needs and can assist in negotiations with the tax office to ensure that the regularisation of your tax affairs can be achieved as quickly, painlessly and economically as possible and at a very competitive prices.
Tenerife Solicitors can be contacted on 922 717845 (or 0871 218 0063 from the U.K.) or by email to: info @ tenerifesolicitors.com.