Yes, you must declare any property purchased in Spain to the French tax authorities if you are a French resident.
Ownership of a property in Spain is considered an asset and must be declared to the French tax authorities. If you are a French resident, you must declare to the French tax authorities any property you own anywhere in the world. Failure to declare the property and pay the appropriate taxes may result in fines and penalties.
France and other European countries have concluded a tax treaty with Spain governing the taxation of income and assets between the two countries. For example, there is no double taxation between France and Spain.
⦁ Under this agreement, the income and assets of French residents in Spain are subject to French tax law.
⦁ You must also declare on your French tax return any income you receive from letting the property in Spain.
⦁ This must be declared on your annual tax return in France, which must be filed by 31 May each year.
⦁ The value of the property and any rental income received must be declared on your French tax return
⦁ Even if you do not rent out the property, you must declare it and pay the corresponding taxes in Spain. (IRNR tax)
⦁ It is important to seek advice from a tax expert who is familiar with French and Spanish tax laws to ensure that you are in compliance.
What do French and Spanish laws say?
The purchase of property in Spain by a non-resident for tax purposes can raise a number of questions, particularly regarding tax returns and obligations. This article aims to clarify the procedures to be followed by foreign buyers, focusing on the regulations in force in France and Spain
The Law in Spain:
In Spain, property owners, whether tax residents or non-residents, are subject to certain tax obligations:
⦁ Non-Resident Income Tax (IRNR):
⦁ Non-residents who own property in Spain are liable for IRNR. This tax is calculated on the basis of the property’s cadastral value, and a flat-rate tax applies.
⦁ Wealth Tax:
⦁ Non-residents may also be liable for wealth tax in Spain if the net value of their assets exceeds a certain threshold.
⦁ Property Declaration:
⦁ Property owners must declare their real estate holdings in their annual tax returns. Income generated from letting the property must also be declared and is subject to tax.
The Law in France
For French tax residents who own property in Spain, here are the tax obligations to be met:
⦁ Declaration of Property Income:
⦁ Rental income received in Spain must be declared in France. However, thanks to the tax treaty between France and Spain, this income is not taxed twice.
⦁ Property Wealth Tax (IFI):
⦁ Property held abroad, including in Spain, must be included in the IFI return if the net value of the property portfolio exceeds the taxable threshold.
⦁ Foreign Declarations:
⦁ French residents must also declare bank accounts held abroad, including those linked to the management of their property in Spain
L‘Property registration:
Where: At the Spanish Land Registry (Registro de la Propiedad).
Documents required:
⦁ Signed deed of sale.
⦁ Proof of payment of taxes and fees.
Taxes and fees:
⦁ Property transfer tax (ITP) or VAT for new builds.
⦁ Notary fees.
⦁ Registration fees.
Tax Return
⦁ Where: Tax Agency (Hacienda) offices.
⦁ Taxes to be declared:
⦁ Wealth Tax (Impuesto sobre el Patrimonio) for assets exceeding a certain threshold.
⦁ Non-resident income tax (IRNR) whether the property is let or not.
Practical tips: To avoid mistakes
It is strongly recommended that you consult a tax expert or engage a tax adviser specialising in international tax to help you understand and comply with tax obligations in both countries. OPENNESS works with law firms specialising in Spanish property law who can guide and assist you, but you should also:
⦁ Keep accurate records
⦁ Retain all evidence of tax payments, rental income and property-related expenses to facilitate annual tax returns.
⦁ Use management services
⦁ Consider engaging a property management company to ensure your property in Spain complies with tax and administrative requirements.
Practical Cases :
Example 1: If you are a French resident and have purchased a villa in Marbella, Spain, as a second home, you must declare its value and any rental income received in your French tax return. If you do not rent out the property, you must still declare its value and pay the corresponding IRNR taxes. Failure to comply may result in penalties and fines. To ensure compliance, seek advice from a tax expert familiar with French and Spanish tax laws. Example 2: If a French resident buys a vacation home in Spain, they must declare it to the French tax authorities. For instance, if the property is rented out during the summer months, the rental income must be declared on the French tax return. Example 3: If you are a French resident and have recently purchased a villa in Spain, you must declare the property to the French tax authorities. The villa is considered an asset and must be included in your income tax return. Failure to do so may result in penalties and fines. However, if the property is your primary residence, you may be eligible for tax benefits in France. It is recommended to seek advice from a tax advisor to ensure compliance with all regulations.
Conclusion :
Owning property in Spain as a non-tax resident involves complying with tax obligations in both Spain and France. It is crucial to be well-informed and seek professional assistance to ensure the smooth and compliant management of your real estate assets
OPENNESS BY CARLOTA is at your disposal to help navigate these obligations and provide personalized support to ensure your investment in Spain is secure and hassle-free.
