|||| Main on-going Spanish property expenses:

Community fees:
(Gastos de comunidad) Many properties are situated within a Community of Homeowners. The Community takes care of a number of services within a development and the level of service will vary from place to place. Some of the factors that are commonly included are: maintenance of the Community gardens and swimming pools, lighting, security, building insurance, etc. The Community will hold annual meetings during which the owners covering the expenses for the year approve a budget. This budget is then divided between Owners depending on the size of their property. This division is mentioned in the Title Deed (Cuota). The Community fees are normally paid half-yearly depending on the Community. It is important to try and attend these meetings and vote on any matters that may affect the Community, or to make any suggestions.

Local tax:
Your local Town Hall makes a charge to each property owner equivalent to Local Rates (Impuesto Sobre Bienes Inmuebles or I.B.I.). The amount of this tax will vary depending on the assessed value (Valor Catastral) and is paid annually. In certain cases, discounts can be obtained for early payment of these charges. Your receipt of payment will reflect the amount you have paid, the year in which the receipt corresponds and the assessed value that year.

The property income tax:
Whether the non-resident owner of the property is a natural person or a company, the taxable base is made up of the gross amount of income earned through the collection of rents Impuesto sobre la Renta). There are no permissible deductions on account of expenses incurred in collecting the rent or with renting the property. That base will then be taxed at 25%.

EXAMPLE: A non-resident rents his villa for twelve months for the sum of € 15.000. The taxable base will be € 15.000, which taxed at 25%, gives a tax liability of € 3.750.

It is evident that a property which is not let or sublet may be occupied by the owner, left empty or given to a friend to use on a gratuitous basis etc. In neither of the above cases does the owner earn any income from the property. Thus in such cases the law in Spain has defined an imputed income or fictitious income which is calculated by multiplying the Catastral Value (an official valuation of the property for the purposes of calculating certain taxes. Found on your Annual Real Estate tax receipt, I.B.I. for short and is usually considerably lower than the market value) of the property by 2% as a general rule or by 1,1% in the exceptions as described below. The taxable base is made up between the difference between this imputed income defined by the statute and certain deductible expenses. This imputed income is not produced where the property is Non-urban. The multiplicand of 1,1% is applicable in the two following cases:
- Where the Catastral value of the property has been revised or modified since 1-1-1994
- Where the property does not have a Catastral Value or this had not been modified at the time when the imputed income tax is due. In the latter case, multiplying the real value of the property, i.e. that declared on your title deed or the market value which ever is the highest, by 50%, arrives at the value of the base to be multiplied by 1,1%. This second possibility is applicable as from 1-1-1997

Property wealth tax:
The non-resident owner of real estate in Spain will be taxed on the value of the real estate on account of Wealth Tax (Impuesto sobre el Patrimonio). The same is applicable to residents save that residents have an exemption of 17 million pesetas, which the non-resident does not. IN GENERAL:
The taxable base will be whichever of the following three is the highest:
- The Catastral Value
- The real or market value, the purchases price. (I.e. that which figures on the title deeds)
- The value imposed by the Tax Authorities

Rubbish rates:
The Town Hall will also make a charge for the Rubbish Collection (Basura) from your property or development. This can be charged annually or quarterly depending on the Municipality in which you are purchasing the property. In certain cases this may be included in your Community fees.

Recycling rates:
In certain Municipalities there is an annual charge for the Recycling Tax (Tratamiento de Residuos). This covers the recycling of waste from the numerous glass, paper, battery banks that are distributed throughout the area. Again in some cases this may be included within the Community fee.

Utilities:
Most properties have electricity and water meters and you will be charged according to the amounts of each consumed. Some Communities will only have one meter for the whole development and therefore include the water in the Community Fees.

Others:
These are the main expenses that a property will incur, however, other charges such as telephone, alarm companies, gardeners etc. should also be taken into account. After you have completed the sale it is recommended that you establish standing orders with your bank for the payment of many of these items. This avoids any possibility of non-payment and the related problems of surcharges, reconnection fees etc.

This article serves only as a guideline to some of the tax laws affecting the ownership of real estate by non-residents in Spain. Spanish laws are complex and the above is not exhaustive. We recommend that you consult fiscal advisor or a lawyer when it comes to taxes and indeed any other areas of Spanish law.

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