How to avoid penalties when filing property taxes late in Spain
Have you missed a tax deadline? Or maybe you’re not sure which form you should be filing when? Don’t panic – there are still a couple of things you can do to minimise penalties and protect your property finances.
Managing local taxes can be a nightmare for many expats living or owning property in Spain. The different forms, dates and obligations can be a big challenge – and that’s before language gets involved. There are several different types of property taxes that expats need to pay in Spain. Each comes with its own strict deadline, and it’s surprisingly easy to miss one, especially if you’re unfamiliar with the process.
If you’ve realised you’re late filing property tax forms in Spain, then you’re not alone. The good news is that there are a couple of things you can do to reduce or avoid more serious penalties. Here’s everything you need to know.
Which property taxes do you need to pay as an expat in Spain?
There are a couple of different taxes that you need to fill out if you buy or rent property in Spain.
IBI (Impuestos Sobre Bienes Inmuebles) – Local Property Tax. Every homeowner has to pay IBI, regardless of whether they’re a Spanish resident or not. It’s an annual tax that’s based on the government-assessed value of your property. The due date for this tax varies between municipalities in Spain, which is often when non-residents get caught out. Generally speaking, IBI ranges between 0.4% and 1.1% of the property value.
Non-Resident Income Tax. As the name suggests, this is a tax that only non-residents owning property in Spain need to pay, and it’s due by December 31 of the following year.
If you rent out your Spanish property, you’ll need to fill out the Modelo 210 tax form and declare your rental income. You can deduct certain expenses from their income. If you don’t rent out your property, you’ll need to pay tax on the imputed income, which is usually 1.1% of the cadastral value. The tax rate on this amount for those living outside the EU (including the UK) is 24% and 19% for those living in it. You can find out more about non-resident income tax in our detailed guide.
Wealth Tax. Wealth tax is a tax that’s set out by local governments and some regions, like Madrid, actually apply a 100% discount on this tax. Both residents and non-residents pay wealth tax if their total assets exceed €700,000 (but property owners get a €300,000 allowance for their main property if they live in Spain). The tax rates are progressive and range from 0.2% to 2.5%.
Capital Gains Tax. If you’re thinking about selling your Spanish property, then you’ll need to pay capital gains tax. This is another progressive tax system for residents and the rates vary based on the amount of money gained (19% to 28%).
What happens if you miss your Spanish tax deadline?
Missing payments or filing a form late can result in:
Late Fees. These often increase the longer the delay goes on.
Interest Charges. This is a percentage of the amount of unpaid tax.
Potential Legal Actions. This is particularly common for repeated cases.
Impact on future property transactions. If you’re very late paying due tax, you may face future restrictions when it comes to buying/selling property or dealing with the bank.
Step by step guide: how to avoid penalties when filing property taxes late
Step 1: Act as quickly as possible
Speed really is important when it comes to the possible penalties associated with late tax payments. After all, voluntary compliance can help to reduce penalties. If you realise you’ve missed a tax payment, file it as soon as possible and, ideally, before the tax office notifies you. This type of declaration is called Declaración Extemporánea sin Requerimiento Previo.
If you get this sorted within 3 months of the missed due date, you’ll need to pay a 1% surcharge, plus 1% for every missed month. The surcharge steadily goes up, and you can expect to pay 15% plus extra late interest after 12 months. So, the quicker you get things sorted (and if you do it voluntarily without a warning) the smaller the penalty you’ll have to pay.
Step 2: Request an installment plan
Paying unexpected tax (especially if a penalty is involved) can be difficult for some households. If this is your case, you can request an installment plan from the Agencia Tributaria. You’ll need to justify your reasoning for filing the form, such as unemployment, and possibly provide a guarantee for large tax sums. It’s then essential that you pay the installments on time to avoid further issues and penalties.
It’s worth noting, however, that interest still applies to the installments, so it’s not the best solution for everyone. It is, however, much better than accumulating tax debts, which could result in much more severe penalties.
Step 3: Correct any errors quickly
Mistakes can happen when filing tax returns, especially if you’re doing them yourself and you’re unfamiliar with the procedures and errors. If you’ve made a mistake on your declaration, then it’s important to file a complementary return (called a Declaración Complementaria). The Spanish system allows you to do this to correct whatever the issue was in the first declaration.
Again, it’s best to do this before you receive a notification from the tax office, especially if the amendment increases your tax liability (for example, if you need to add forgotten rental income). This will help to reduce any potential fines you need to pay.
Step 4: Hire a tax consultant
Tax forms can be complicated, especially if you’re a non-resident or are renting out property in Spain. Add paying tax in other countries, multiple properties or assets, and it can be a real minefield. You might think you’ve done everything correctly, but in actual fact, you’ve missed out an important part or an entire form.
If you get a notification from the tax office and you’re unsure of the possible consequences or what it means, it’s best to hire an expert to manage it for you. They’ll be able to minimise penalties and explain where the error was, so it doesn’t happen again. They’ll help you to avoid double taxation if you’re a resident in another country and identify municipal discounts (for example, for large families or disabled homeowners).
It’s also worth remembering that laws change from region to region in Spain and a local tax consultant will know exactly what needs to be done for you and when.
Step 5: Plan ahead (so it doesn’t happen again!)
The best way to make sure your taxes are paid on time and are correct, is to do your research and plan ahead. It’s essential to know your tax obligations or hire a professional who can help you with them. At Bueno, we offer expert advice and assistance when it comes to filing your non-resident tax return, and our multilingual team will be happy to help ensure you avoid penalties in the future and always file your tax returns on time.
Apart from hiring a professional, it’s important to keep all your contact details up to date. It’s important that the tax office can contact you whenever they need to, especially if you live outside of the country.
If you’re not planning to hire a professional, then marking key dates on your calendar is essential. IBI deadlines change from region to region, so find out which date you’ll be expected to pay in yours (most are between May and November). Non-resident tax is usually due by December 31 for the previous year.
Another step you can take to plan ahead is to set up a direct debit (Domiciliación Bancaria). This is an easy way to pay taxes, such as IBI, and helps to ensure the correct amount is paid on time. Setting up a Spanish bank account with Bueno is the best way to be in control of all your property (and non-property) related finances, which means your taxes can always be paid on time!
Avoiding penalties when filing property taxes late in Spain – final thoughts
Paying taxes is part of the luxury of owning property in Spain. But you need to pay them on time to ensure you avoid penalties. Working with professionals who know all about finances in Spain and the struggles expats face is a great way to ensure compliance and make the whole process easier.
If you do run into issues when paying taxes in Spain, it’s best to act quickly. The quicker you resolve the issue, the lower your penalty will be. If you’re worried about it, work with a professional who can help to do your non-resident taxes. Contact the team at Bueno to see how multilingual professionals can take the stress out of tax payments in Spain, so you can concentrate on enjoying your property.
Note that this article is general and is shared as information. Property, tax, finance and other legal topics are personal and can vary not only from person to person but between the different regions of Spain. We recommend that you seek professional guidance if you need advice on matters covered in this article.