Tax Liability on a Spanish Property and Other Noob Questions

[anonymous-user]

For various reasons which I won't go into here, I may end up taking on a small flat in South Eastern Spain. This is not an ideal situation, but the place is mortgage free and currently has long term tenants (just signed up for a 12 month let).

Leaving aside any liability under inheritance tax, where do I start trying to understand liabilities both here and in Spain for income tax? Is there a reasonable recent guide online or book I can purchase? Everything I can find is years old and I'm not sure of the relevance now. My guess is that this is about to become even more of a minefield once we leave the EU.

If there is no mortgage on the place, would I be liable for tax on the income less any costs (repairs and maintenance etc) or the entire gross income? Is this the same for the UK and Spain?

It may be that selling is the best option, but as it was purchased in early 2006 I expect there to be a fairly sizeable loss involved.

Really don't know where to start!

[Eric Mc]

If you are a UK tax resident (which I assume you are) you will be liable to UK tax on the profits from the operation of your overseas holiday let. You will need to complete a self assessment tax return in order to notify HMRC of the profits arising each tax year.

Essentially, the profit that is subject to tax is the gross income from holiday letting less all allowable costs. These costs would be -

repairs and maintenance
local taxes
agents fees and commissions
legal costs in respect of letting
management costs including travel costs incurred by you in running the property
insurances
light and heat costs
advertising and promotion

[anonymous-user]

Very useful, thank you. So its really a case of logging and keeping receipts for everything related? Presumably I would also be liable for the same in Spain too?

[Eric Mc]

I'm no expert on Spanish Tax. The normal procedure is that you pay tax in the country of which you are a tax resident. If the Spanish do take tax from you, you should be able to credit any such Spanish tax against the UK tax arising.

[tigerkoi]

Eric Mc said:

I'm no expert on Spanish Tax. The normal procedure is that you pay tax in the country of which you are a tax resident. If the Spanish do take tax from you, you should be able to credit any such Spanish tax against the UK tax arising.

I thought for the OP’s scenario you pay 24% of gross even if you’re non-dom.

Edit to add:

If greater proportion of OPs overall income is derived from the rental etc then the Spanish will apply domicile tax status.

Edited by tigerkoi on Tuesday 5th March 19:56