What is the imputed income and why do I have to include it in my tax return?

Summary:

Spanish tax residents with properties not being their principal residence, located in Spain or not, as well as non-resident or special tax regime taxpayers with properties in Spain, may need to include these properties in their tax return even if they are not receiving any income from it.

What is the imputed income and why do I have to include it in my tax return?

Many of our clients ask: why do I have to pay Spanish taxes due to having a property located in Spain if I am considered as non -tax resident in Spain?

The issue is that this analysis usually arises when the taxpayer is a Non-Resident for tax purposes in Spain, but in general terms, it can affect to all people who own real estate that does not constitute their habitual residence.

Article 85 of the Personal Income Tax Law (IRPF Law) establishes the following for taxpayers who are tax resident in Spain:

“In the case of urban real estate, classified as such in article 7 of the revised text of the Real Estate Cadastre Law, approved by Royal Legislative Decree 1/2004, of March 5, as well as in the case of real estate Rustic buildings with buildings that are not essential for the development of agricultural, livestock or forestry operations, not affected in both cases to economic activities, nor generators of income from capital, excluding the habitual residence and the non-built land, will be considered imputed income the amount that results from applying the 2 percent to the cadastral value, being determined proportionally to the number of days that correspond in each tax period. 

In general terms, individuals who are tax resident in Spain, who have properties located in Spain or outside of Spain, excluding their habitual residence, and that are not rented out or are not part of an economic activity, are subject to taxes and these properties must be included in their annual returns.

Likewise, for non-resident for tax purposes in Spain or who are under the Special Regime (known as the Beckham Law), the Non-Resident Tax Law (IRNR Law), establishes in its article 13.h) the following

“1. The following are considered income obtained in Spanish territory: 

(…)

 h) The income attributed to taxpayers’ natural persons who own urban real estate located in Spanish territory not involved in economic activities. 

Therefore, these taxpayers, will generally be subject to taxes when they have real estate located in Spanish territory.

The imputed income is calculated applying the percentage of 1.1% or 2% to the property’s cadastral value, depending on whether such cadastral value has been reviewed in the last ten years. In the case of properties located outside of Spain or that do not have a cadastral value, 1.1% of 50% of the acquisition value will be applied.

In the case of several owners, the amount of the imputed income must be prorated based on the percentage of ownership. And if the property has not been owned the whole year or has been temporarily rented out, the amount of the imputed income should be also is prorated, according to the number of days in the year that the property has been at the taxpayer’s disposal.

The calculated imputed income will be subject to the corresponding tax rates, depending on the consideration of the tax payer as resident, non-tax resident or resident under the Special Tax Regime.

Finally, how and when do I need to declare an imputed income?

 

  • Tax residents in Spain: to be included in the annual income tax return (form 100), which is filed in April, May and June following the end of the corresponding fiscal year (general deadline is June 30).
  • Taxpayers of the Special Regime: to be included in the annual income tax return (form 151), which is filed in April, May and June following the end of the corresponding fiscal year (general deadline is June 30).

 

  • Non-residentin Spanish territory: to be included in the annual form of this type of income (form 210), throughout the year following the end of the corresponding fiscal year (general deadline is December 31). Note that these tax payers should file a different form 210 per each property located in Spain.

Do not forget this issue when preparing your personal income tax returns! and contact us at info@albeatax.com if you need our assistance.

 

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