Bri and Katee

yep just feel like I have been legally raped by the spanish government again!

a 46% increase from last years, 272€ up to 597€!!! Queried it with my solicitor it is all quite correct, did find out though that our 155.000€ mortgage is not offset against it like we were told it would be, reason? Its not a spanish bank!

Roll on next year and let us be rid of the wealth tax part of it, but knowing the spanish governmnet I am sure they have something waiting in the wings to replace it with!

EsuriJohn

Are you sure that is correct I understood that if the mortgage was against the Spanish property and notarised on the Escritura then it is allowed. Fred or Beechcomber might be along later and one of them will know for sure. It is a truly massive increase more than double did the solictor forget some part last year or has he cocked it up this year.

Beachcomber

Many municipalities increased their valores catastrales drastically in 2007. The renta (income tax) content of the non-resident income tax is based on the valor catastral and so is the patrimonio (wealth tax) when it overtakes the escritura value. However, the renta tax rate should then be 1,1% not 2%. I have always understood that a mortgage on the property does not count as a deduction.

AEAT is still refusing to clarify the situation regarding the abolition of patrimonio and, as far as I can ascertain, this measure has not yet been published in the BOE.

AEAT has suffered a vast reduction in revenue over the past few months and, under-employed staff are now trawling through the records of non-resident property owners in an effort to identify those who have not been paying these taxes.

Remember, even if patrimonio is abolished it will only be from the 1st January 2008 and they can claim back taxes for four years with fines and surcharges for late payment.

EsuriJohn

I thought there was a box just for the purpose of making that deduction on the Modelo 214?

Beachcomber

There is and it seems logical that this applies to mortgages but I have been told by several Spanish fiscal advisors that this is not the case.

I don't have personal knowledge because none of the people I help with this declaration has a mortgage.

Fred James

Quoting Blevins again, he says that only liabilities within Spain can be deducted, in other words only a Spanish sourced mortgage, duly registered against the property.

Residents apparently cannot claim a deduction for a mortgage because the house already carries a special exemption against Patrimonio.

Beachcomber

I suppose the only way is to try it and see if AEAT challenges it. The only problem is that it can take up to three of four years to get around to it by which time any error will have been compounded in subsequent years.

Fred James

Yes I agree absolutely. Everything seems to be by self declaration. On the 214 form you just enter a deduction with no corroborating evidence.

On the normal tax return, if you wish to claim relief for a mortgage you have to enter the details of the mortgage.

If they don't challenge it within 4 years you have got away with it (unlike the UK!).

The taxman is happy to get any sort of contribution bearing in mind that the Spanish culture is to declare nothing! This applies equally to income tax - every payment from a foreigner is a complete surprise to them - even if it represents half their income!

Beachcomber

A couple of years ago I stupidly left our annual IVA returns until the last moment on the last day. There was nothing to pay as the books balanced perfectly but the bank could not process the return because the line to AEAT was not working.

The bank stamped my return with a rubber stamp and promised to process the return the next day which they did. I have now, three years later, received a fine of €75 plus 15% surcharge because Correos did not notify me that I had a registered letter from them for late payment. One day late which was not my fault and nothing even to pay. Producing my manually stamped copy showing I attempted to make the payment within the time limit was greeted with the 'Spanish shrug'.

Whilst it won't break the bank I begrudge having to pay this and it does show that they are now scraping the bottom of the barrel in order to compensate for the continuing loss of revenue through the credit crunch (which wasn't my fault either).

The moral of the story is that just because you may think you have got away without paying any taxes for at least the past four years it doesn't mean they won't catch up with you just in the nick of time.

EsuriJohn

When I visited my very good and highly qualified Gestoria in early December to complete the 2007 paperwork the first question he asked was did I have a mortgage on my plot in 2007 when I signed the Escritura I said no so he said we would have to use the full valor catastral for the calculations. I assume that had I had a mortgage it would have been deducted.

Beachcomber

Actually, the patrimonio to which the deduction (if it is deductible) is applied is based on the escritura value not the valor catastral unless the former has been overtaken by the latter as it has in some coastal areas.

The valor catastral is used for the calculation of the renta in respect of which I know for a fact that no deductions are applicable.

I can only go by what I have been told both by fiscal advisors and by staff in the tax office which is that non-residents cannot claim any deductions for anything. However, I don't place any faith in any of them which is why I always do things for myself.

dream1

Can you tell me please if you have to pay for tax if you bought midway through the year please. ie if you bought in June would you have to pay tax for the year or would it be part year?

Beachcomber

Calculate the number of days you owned the property and enter the base imponible pro rata.