Our Spanish Dream - Part 25: Keeping it Legal

Taxation is always a tricky subject. I’m not going to try and advise you on what you should pay, just that you should be declaring your income in both Spain and the UK if you are renting out your Spanish home and are a UK tax resident. The Spanish are slowly catching up with illegal renters and fining them for non-declaration and non-payment of tax.

We had always wanted to do things legally, but persuading our fiscal rep to do it was another matter. For years the ‘black economy’ had flourished and the Spanish tax authorities had largely ignored the situation. The financial crisis would change all that.  Post 2008 all European governments have chased unpaid taxes however they can, and not declaring your income in Spain carries high fines. The rules have changed in both countries over the past few years so do seek proper qualified advice on tax. The short version is that you need to declare your income in Spain and after certain allowances have been deducted you will pay around 24% tax on the net earnings. As Spain and the UK have a dual tax agreement you can declare in the UK your earnings, less certain expenses (what is allowed is different in the two countries!), the amount of Spanish tax you have paid and the HMRC will not tax you twice on the same income. BUT you MUST declare the income in both countries.

In some regions of Spain you need to register a rental property, Alicante region is just starting this but as at early 2015 it isn’t necessary if you only own one house. I suspect this will change. In some regions there has been a registration requirement for many years and in others there is none at all. The bottom line is that it is up to you to make sure you are complying with the local laws and national laws in both countries - if you don’t keep it legal then don’t moan if you receive a fine!

Dave and Bev Townsend have two homes, their main one in Norwich and a second home in Playa Flamenca in south Costa Blanca, Spain which they also let as a holiday rental www.house-by-the-pool.com. They run a property finding business offering a free service for those seeking to buy a property in the Costa Blanca (Alicante) or the Mar Menor area of the Costa Calida (Murcia) www.SpanishDreamProperty.com. Bev has family in Spain and they intend to move there full-time in a couple of years.