The Spanish tax return nobody told you about

This is the single most common gap we see in British-owned Spanish property. Not a complicated legal problem — just a routine annual obligation that nobody explained at the point of purchase, because the estate agent had no reason to and the conveyancing lawyer, if there was one, considered the job finished at the deed.

Tax on a house that earns nothing

Spanish law treats a second home that is not let as producing a notional income for its owner. The Spanish term is renta imputada — imputed income. It is calculated from the rateable value of the property, the valor catastral, which appears on your annual Spanish council tax bill. A percentage of that value is treated as income you received, and that income is taxed.

Nobody actually received anything. The logic is that the property has a use-value to you and Spain taxes that. Whether you find that reasonable is beside the point; it has been the law for a long time and the tax office administers it methodically.

The amounts are usually modest — a few hundred euros a year on a typical apartment. The problem has never been the size of the bill. It is that the return is annual, obligatory, and easy to leave undone for a decade.

If you let the property

A different calculation applies to the rent you actually receive. And here Brexit made a real difference: British owners are no longer resident in the EU for this purpose, which means the rate is higher and — this is the part that stings — the costs of letting are no longer deductible. Mortgage interest, community fees, insurance, repairs, agency commission: an owner resident in the EU can set these against the rent, and since Brexit a British owner generally cannot.

If you have been letting a Spanish property and applying UK-style thinking about deductible expenses, the figure you have in your head is probably wrong.

Does Spain actually know?

Yes. The Spanish tax authorities receive land registry data and know precisely which properties are registered to non-resident owners. This is not a tax that depends on your coming forward. The question has never been whether they can find out; it is when they get round to your file.

What actually goes wrong

For years, nothing. Then one of three things forces it into the open, and all three are worse than the return would have been.

You sell. The buyer's lawyer checks the position as a matter of course. Unfiled years surface with a completion date already agreed, a buyer getting nervous, and everyone waiting on you. This is the commonest way British owners find out, and the worst time to find out.

You die. Your heirs inherit the flat and the problem together. The Spanish estate cannot be cleanly completed until the position is regularised, which adds weeks to a process that is already running against a six-month deadline, at a moment when your family has other things to deal with.

A letter arrives. In Spanish, from an office in a region you have visited twice, with a deadline. Once that letter has been sent, the surcharge for coming forward voluntarily is no longer available to you.

Being behind is fixable, and normal

Unfiled years can be regularised. There is a surcharge, it increases the longer the delay runs, and — the important part — it is substantially lower if you come forward before the tax office contacts you. Coming forward is treated as voluntary regularisation; waiting to be caught is not.

Four or five years behind is a routine job. We see it constantly and nobody is going to be shocked. What is not routine is discovering it during a sale.

What to do this week

1. Find your latest Spanish council tax bill — the IBI receipt. It carries the rateable value and the cadastral reference, which are most of what anyone needs to work out what you owe.
2. Work out how many years you have owned it and how many returns have been filed. If the answer is none, note the number of years.
3. If the property is in joint names, remember that each owner files separately for their share. Two owners means two returns, not one.
4. Deal with it before you think about selling, not during.

How we handle it

We file the return each year for £180, or £280 if the property is let, and £90 for each further property in the same ownership. You send a photograph of your title deed and your council tax bill once; after that we track the deadline, prepare and file the return, tell you what to pay and to whom, and send you the stamped confirmation. Keep those confirmations — the buyer's lawyer will ask for them when you sell.

Years you never filed are £110 each, on top of the tax itself.

The tax goes directly from you to the Spanish tax office. It never passes through us.

The full details, and how to start

Written by ABOGADO LIMITED. This is general information about Spanish tax filing obligations, not advice on your own circumstances.