Lorraine Williamson
The Spanish tax authorities are intensifying their focus on multiple property ownership in Spain, particularly where second homes are concerned. This move is part of a broader effort to improve tax compliance and crack down on potential tax evasion linked to undeclared properties.
For property owners, it is essential to understand the requirements for declaring assets and income.
Increased scrutiny on second homes
In Spain, owning a second home is often seen as a financial investment. However, it also comes with tax obligations. If the property is not a main residence, it must be correctly declared in tax returns. This is a key area where the Spanish tax authorities are increasing their oversight, aiming to improve compliance and gain a clearer understanding of property ownership.
Who needs to declare?
Anyone living in Spain and owning multiple properties must include them in their annual income tax return (IRPF). It does not matter whether the properties are occupied, vacant, or rented out. Failure to declare these assets can result in hefty fines, or worse, being classified as a tax offender.
Tax on rental income
Property owners who rent out their second home must report the rental income on their tax returns. Fortunately, certain costs related to the property, such as maintenance, repairs, and mortgage interest, can be deducted from the total income. Homeowners are taxed on the net income after these deductions. Keeping thorough records of these expenses is essential for accurate reporting.
Tourist rental reforms
Reporting vacant properties
Even if a second home is not rented out and remains vacant, it must still be declared. The Spanish tax authorities calculate a “fictitious income” for these properties, based on their cadastral value. This calculation varies depending on the last cadastral revision: 2% for properties not updated in the last ten years, and 1.1% for those revised more recently. For properties with no cadastral value, the calculation is based on half the estimated market value.
Consequences of non-declaration
Failure to declare a second home, whether it generates income or not, can lead to significant penalties. The authorities use advanced data comparison techniques to detect hidden properties, and undeclared assets can lead to fines or even criminal charges. The fictitious income calculation ensures that even vacant properties are included in the tax return.
Owning multiple properties in Spain can be financially rewarding, but it is crucial to ensure proper tax compliance. The Spanish tax authorities are tightening their checks on property ownership, and non-declaration can lead to severe consequences. Property owners must declare all their properties, whether rented or vacant, to avoid fines or legal issues.