albertbridge

Hello everyone. I am a UK resident who owns a property in Spain which I rent out for short holiday lets until such time as I can move out to join you. I have been reading your forums with great interest for some time. What a lively, knowledgeable and interesting group of people you are!
I wondered if you could possibly help me out with a problem I am having with my Spanish tax return this year. I know that in the past, as a non-resident, I was not able to deduct expenses such as interest on the mortgage, water, electricity, repairs and maintenance, pool-cleaning, cleaning of villa between lets etc against rental income, however, I believe that the rules changed in 2010.
My gestor, however, insists that as a non-resident, I am still unable to claim any allowances, and has told me that I must still pay 25% tax on every penny I take from my guests ... Does anyone know which of us is correct? Thank you in advance.

snikpoh

I hadn't heard of any allowances being added for non-residents.

Are you aware though that even if the property is not fully let, tax is payable on the entire 'potential' rent?

PS. Isn't the rate 24% or has it changed?

Domino

Albert

as you seem to think your gestor is wrong have you considered asking another ??

but as a UK resident with UK tax liability can you get any relief from HMRC ?

is the mortgage in the UK or Spain ??

considering everything - the quicker you get out here the better



kr
Dom

albertbridge

Yes, you are right, it is 24% (typo)

According to the Agencia Tributaria document I have, Taxation of Non-Residents Income Accrued up to 31-12-2010 dated 16 May 2011, it states on page 24 that for let or sublet buildings

'The income is calculated by taking the gross amount that is received from the tenant ... without deducting any expenses (see note 2)'

And note 2 at the bottom of page 24 states
'When calculating the taxable base for taxpayers resident in another European Union member state on income earned without a permanent establishment, the expenses described in the law on personal income tax can be deducted provided that proof is provided that these expenses are directly related to income earned in Spain and have a direct economic connection that is inseparable from the activity carried out in Spain (Effective 1 January 2010)

My understanding of this is that I am now treated the same as a resident -something I had suspected when I saw my gestor in August, but something she flatly denied.

albertbridge

The mortgage is in Spain.

I don't need any relief from HMRC as when declaring in England, I make a loss on this property, given all the allowances available in UK.

I definitely need to seek advice from another gestor. The internet is littered with conflicting advice. I think my next question will be, does anyone have a gestor they recommend in the Javea/Denia area who specialises in tax affairs of non-residents?

The sooner I can get out to the Spain permanently, the better IMO

albertbridge

I understood that I had to pay 'deemed rental income' of 2% of cadastral value when it was not let.

Fred James

You do but you don't have to pay it for periods when it is let.

Your gestor is wrong. The law was changed 2 years ago to conform with EU rules that don't allow taxes to discriminate against non residents.

You can now deduct expenses so long as they are directly attributable to the letting.

Tell him to read Ley 2/2010 Article 4 Section 6 para 1.

http://noticias.juridicas.com/base_d...2-2010.html#a4

albertbridge

Thanks Fred ... that is very helpful. Do you have any idea of what might be deductible expenses? Are they written anywhere in law? Sorry to ask so many questions, but I'd like to be as sure as possible of the facts before I confront her with this error - hope you understand.

Fred James

In assume they are the same deductions that are allowed to residents - she should know what these are. Residents only pay tax on 50% of the income but that allowance still does not apply to non residents.

The deductions are things that are directly related to the actual let such as IBI and management fees etc.

The current tax rate is 24.75%

Domino

As usual good advice from Fred James
just remember you will need proper receipts !!

albertbridge

Thank you so much for the advice Fred ... and also thank you Domino for reminding me that I need proper receipts. As I am an accountant by profession in UK I understand the need to keep receipts for tax purposes, so that will not be a problem - now I just have to book another appointment to see her when I come to Spain next month, if an email pointing out the error still fails to do the trick...