Thursday, May 14, 2015

Easy solution for imputed income tax for non-resident owners of Spanish property

Say you don’t live in Spain but you have property here for your personal use. In addition to all the other taxes, you are also expected to file a non-resident tax return and pay taxes on the “imputed” income from the property.

There’s a pretty simple solution to this, and that is to make sure you have other passive foreign income from a foreign country that doesn’t tax non-residents on your investments (eg Switzerland for interest or capital gains), or at least has a tax rate lower than your home country. (In some cases, this may be Spain, since Spain has a pretty low taxation of passive income).

Then when you do your declaration, you just credit the tax you paid on your imputed rental income against the tax you owe on your other foreign income, and voila, no net tax increase.

Some countries only let you credit foreign taxes against income from that country, so it may not work in all cases.


Anonymous said...

If you are non-Spanish resident, how do you pay the imputed income tax on 'residencia no-habitual' ?

Is it being withold somehow? I thought you had to pay it when you did your IRPF taxes (that you don't have to do if you are a Spanish resident).

santcugat said...

If you have property in Spain (even if you don't rent it out), and are not a Spanish resident, you need to file the Modulo 210 non-resident tax return.

If you are a resident, and you have a property that you are not living in and not renting out, then PADRE will fill this in for you when you download your information.

Juan said...

Tx.. This Technique should work for any income you pay taxes in the country you are not resident off. Spanish dividends, for instance (currently taxed in Spain at ~20%).

However, I understand Spanish dividends taxes are easy to avoid via script dividends (you get paid with stock and you don't have to pay anything till you sell the stock), similar to mutual funds.

What is the best way to invest on Swiss (or similar) stocks. Any mutual fund that specializes on it?

santcugat said...

One easy way would be to just buy an ETF that invests in foreign stock in a country that doesn't require foreign withholding. Alternatively if you have a US brokerage you can buy the ADRs for Nestle, Novartis and Roche.