As a property owner on the island of La Palma—particularly as a non-resident—it is important to stay informed about recent changes in Spanish tax legislation in order to avoid unpleasant surprises. This article outlines some of the most relevant updates in recent months.
1. Change in the Taxable Base
Some property owners may have noticed a significant increase this year in the amount payable under Non-Resident Income Tax (IRNR). What is the reason for this? The increase is due to a rise in cadastral values, as determined by local councils. This results in a higher taxable base, and consequently a higher amount payable in non-resident income tax.
It is important to remember that anyone who owns property in Spain without being a resident is liable to pay income tax on this basis. For this reason, it is necessary to appoint a local fiscal representative, who also acts as a point of contact with the Spanish Tax Agency. Failure to comply with this obligation may result in significant penalties—something that can easily be avoided.
2. The Spanish Tax Agency Focuses on Online Platforms
The Spanish Tax Agency is intensifying its efforts to combat tax evasion and undeclared income in the field of holiday rentals and tourist accommodation intermediaries. In particular, attention is being directed towards the numerous online platforms that advertise holiday homes and apartments.
Since January 2018, all online platforms dedicated to holiday rentals are required to report monthly to the Tax Agency on things like published listings, property owners, occupancy levels and booking requests, etc.
As a result, all parties involved in the holiday rental market—whether companies or private individuals—can be clearly identified. It must therefore be assumed that all related economic activity is known to the authorities. Consequently, it has become virtually impossible to fail to declare and correctly tax income derived from holiday rentals.
3. Advice on Capital Gains Tax
As a property owner in La Palma, it is essential to ensure that any extensions or improvements to your property are always supported by an official invoice. It is also advisable to retain proof of payment. Only in this way can these investments be deducted when calculating Capital Gains Tax (Impuesto sobre la ganancia patrimonial) in the event of a future sale.
This tax is applied to the difference between the acquisition value and the sale value of the property. Please note that Capital Gains Tax and municipal capital gains tax (plusvalía) are not the same. Unlike Capital Gains Tax, plusvalía is a tax levied on the increase in the cadastral value of the land.
