renting a property abroad

Alisha2008

Hi,


We are thinking of purchasing a property in Spain that we would like to rent out most of the year, can anyone tell me how complicated is to do this? (only for taxes purposes)


I thought we would pay taxes for our earnings in the UK but I was told recently that we would have to pay taxes in Spain.


Thanks!

theartfullodger

Alisha2008 wrote: »

Hi,


We are thinking of purchasing a property in Spain that we would like to rent out most of the year, can anyone tell me how complicated is to do this? (only for taxes purposes)...

For myself, dunno.....However, in answer to your question, yes, someone can tell you how complicated it is...

......I thought we would pay taxes for our earnings in the UK but I was told recently that we would have to pay taxes in Spain.


Thanks!

Dunno....

G_M

Yes you'll need to comply with all the relavant laws in Spain. This will include tax, and much more.

I doubt a UK property site is the best place to ask - there are many more appropriate sites on the www, Try google.

edit: just googled and :

http://www.spanishpropertyinsight.com/legal/renting-in-spain-top-10-mistakes/

http://www.spain-holiday.com/rentalbuzz/dispelling-the-myths-about-holiday-rental-licences-in-spain

http://www.advoco.es/advice/8-personal-tax/75-taxation-of-rental-properties-in-spain.html

http://www.euroresidentes.com/Property/property_rent_spain.htm

AdrianC

You need to ask on a Spanish forum. The fact you are British and (presumably) based in Britain is irrelevant to your question.

Alisha2008

Thanks AdrianC but I'm spanish My partner is British though and the house would be under both our names.


For me it would be very easy to deal with the taxes only in Spain (if it was only me), but I always thought because I work and live in the UK I have to pay all my taxes here, maybe I'm wrong.


Will look at those links, many thanks.

AdrianC

Alisha2008 wrote: »

Thanks AdrianC but I'm spanish

See how lack of information leads to assumptions...? <grin> Seriously, that kinda proves my point. If you were renting a property here, you wouldn't ask about the legal and tax side on a Spanish forum - and, if you did, you'd be pointed to a UK one.

But at least it removes the language difficulties from asking a Spanish property question on a Spanish property forum...

eddddy

If you are resident in the UK, you are subject to UK tax.

So your worldwide income and worldwide capital gains would be subject to UK income tax and UK CGT.

I don't know the tax regime in Spain, but I would be pretty sure that the UK and Spain have a Double Taxation Treaty.

i.e. If the Spanish tax system requires you to pay tax as a non-resident (which they don't let you claim back), you can deduct it from your UK tax payment.

G_M

Most EU countries have double taxation agreement (or some such terminology). So that if you pay tax in one country, you don't get taxed again in the other.

I would guess that the critical factor is residency. So you pay tax in the country of residence - but please, this is just a guess. I'm not an expert. You need to research the tax laws in both countries.

You could try on the taxation board here as well.

This may also help:

https://www.gov.uk/government/publications/spain-tax-treaties-in-force

gingercordial

The UK-Spain double taxation treaty covers property rental income in Article 6. This gives Spain the taxing rights over income from a property located in Spain and owned by a UK-resident.

For this particular item (rental income) it doesn't matter if you're Spanish or British because the treaty means that the tax follows the property location not the residence of the owner.

You (and your spouse if it's joint) would need to do a Spanish tax return and pay income tax in Spain. You would also both need to do a UK tax return and on that you would claim double taxation relief under the treaty to avoid paying UK tax on it as well. You will most likely need an accountant for this.

You would also need to check the VAT position in Spain. Here in the UK a business (which is what you'd be by renting) can have income of up to £82,000 per year before having to register for VAT. In some countries (and I haven't checked Spain) the threshold is very low or zero, which would mean you'd have to register for and charge Spanish VAT on the rentals, and file Spanish VAT returns - depending on whether Spanish VAT applies to property rentals, of course. Again, accountant time.

The CGT and IHT rules are also likely to be complex on a sale or death and even more so since it sounds like you may be Spanish-domiciled. You would also need to check whether there are any annual property or wealth taxes in Spain.

I would only bother if the profit from this were likely to be substantial.

ETA: I am a tax adviser but not a personal tax specialist. This does not constitute advice!

always_sunny

If you're a UK resident you have to declare it as a foreign income through self-assessment. Expenses and deductions would work the same as if you had a property in the UK.

https://www.gov.uk/tax-foreign-income/overview

Alisha2008

Thanks to all , very useful info. Sadly it's complicated as it seems I need to declare it (and pay) both in Spain and in the UK! (I'd rather pay only in one place..).


I think what I'm really after is someone currently doing it that can tell me if it's possible to do it without an accountant's help (I'm worried about the cost). I'm also worried taxes are so high we end up with very little money after the big effort of renting it.