As the number of foreign property owners increased in the 1990s the Spanish authorities introduced a new tax charge whereby non resident owners were deemed to earn an income from their Spanish holiday home, even where no such income was being earned. The rational behind the decision to introduce this new tax was that non resident property owners derived certain benefits from the state e.g. civil defence, for which they are required to make a financial contribution. This new tax ran alongside the normal wealth taxes associated with Spanish situated property.
Over the last year the government has made several changes. Non residents have been affected in two ways. First of all, wealth tax has been all but completely abolished, and whilst it’s possible that it could come back in the future, wealth tax will certainly not be payable in 2008.
Following the change to wealth tax there has been understandable confusion amongst non residents about the continuing need to file a non resident’s tax return, stemming principally from its abolition. The current legal position is as follows.
If you are not resident in Spain and you own a Spanish situated property you still have to file a tax return in Spain every year. Historically, if you owned a property on 31st December you had to file a wealth and deemed income tax return by the end of the following year e.g. property owned on 31st December 2006 = return due between 1st January 2007 and 31st December 2007.