What to do if you get a letter from the Spanish Tax Office

The target audience of this article is very specific: the people who have received a letter from the Spanish Tax Office (Agencia Tributaria) and don’t know what to make of it or what to do.  I am writing about letters they started sending out from Autumn of 2011 with the title “Comunicacion”.

I have done it in a Q&A format. If you have any further doubts about what to do after reading this then please contact us for advice here

What letter do you mean?

The Spanish Tax Office have started targeting non-resident property owners with letters asking why they haven’t received tax returns from them. They seem to have been going through land registry (“catastral”) records but they could equally have been using their access to utility company computer systems or local tax records held by municipal authorities. It is then easy enough to cross-check against their own records of who files a tax return and send out a letter to those who haven’t.

To identify what I mean it is entitled “Comunicacion” and will have your name, NIE (they say NIF – your “fiscal” number – which s the same thing) and address on it. It will come from your regional tax office (“Delegacion de”), is in Spanish of course and has three paragraphs of text (“Comunicacion”) and a list of the relevant statutes (“normas”) at the bottom. 

If you have been sent one of these and are unsure what to do, this article  is aimed at you.

Why me?

I don’t know. Not every property owner who doesn’t pay taxes has received one of these letters but it seems to be across Spain. Perhaps in time they will get to everyone who has avoided paying taxes so far but maybe they have just targeted some people at random to try and drum up more tax revenue.

What does it say?

It is not a tax demand as such, more a polite but firm querying of your tax affairs in Spain. Paragraph one notes that you have owned a property in Spain for at least part of the period since 2007 and they have not received non resident or resident income tax returns from you or wealth tax declarations.

The second paragraph states that you should make the declarations you have omitted or face a possible tax investigation and fines.

The last paragraph is just to say that the letter itself is not a tax demand or the start of an investigation.  If you get a letter headed “requirimientos” (literally “requirements”) that is a formal request for you to explain yourself and submit certain documents and proofs within a certain deadline.  That is a more advanced stage of Tax Office attention and demands an urgent response.  This is more a warning of problems ahead.

What do I do now?

Clearly that depends on your situation:  what your actual liability to declare and pay taxes in Spain was for the period in question. 

Here are some scenarios –

I have been making tax declarations during this period.

I haven’t yet seen an example of someone getting one of these letters who HAS been paying their taxes for all of the years under scrutiny. If this is your case then either it is a mistake on the Agencia Tributaria’s part or you haven’t declared everything you should. 

If you think it is their error you could ignore the letter and carry on declaring as normal. If you are wrong and there is something irregular about your declarations then there is a possibility that they chase you at a later date with one of the stronger “requirimientos” letters which will require you to prove you are in the right.

If you think you have received the letter because you missed a year or are not sure whether all the right forms have been submitted (e.g. you relied on an adviser to pay your taxes) then it is clearly worth checking up that you do not have a residual liability.  The Tax Office will not automatically give you a list of declarations outstanding in your name but if you go to the local office with the letter and copies of the declarations you have made then you should be able to get some answers.

I am a Spanish resident and haven’t been declaring.

The reason the tax office has not got a tax return from you maybe that you are resident and either have no income or not enough to take you over the thresholds which make a declaration obligatory. See the "declaration thesholds" on this page.

At some point you may be asked to prove that your income is below the thresholds. If you have exceeded the thresholds or may have done it is worth considering making a declaration for the years in question.  It may not involve paying any tax as the personal allowance may not have been exceeded or you may have paid tax already "at source".

Note that official Spanish tax residents do not have to pay the non resident income tax on imputed rent that non resident property owners do (but see below).

I am Spanish resident but have never declared

Even if you have been resident and have had little or no taxable income the letter could spell trouble. This is because all residents must register as tax resident and submit a declaration in the year in which they register regardless of their income level. Until they do so they will not be considered as Spanish tax residents and therefore may be obliged to submit non resident tax returns.

So if you have never declared, either as resident or non resident, then you may well have to retrospectively do non resident income tax returns (see next section). The tax office will not simply allow you to say that you are resident if you haven't officialised that by registering and submitting at least one tax declaration.

I am not Spanish resident and haven’t been declaring.

Non resident Spanish property owners will almost certainly have some catching up to do when it comes to Spanish tax returns if they want to avoid this letter turning into a full on tax investigation. This is because non residents have to declare a special income tax in Spain based on the "imputed rent" they are deemed to have received on their property or the real rent if they have actually been renting out their property.

It is an unusual tax and catches a lot of foreign holiday home owners out because there is no equivalent in many countries like the UK. Unfortunately ignorance is no defence and if you have owned a property in Spain at any time since 2007 then you are due to have been making tax returns every year.

The nature of the tax, often called Form 210 tax after the declaration form number, and how to go about declaring are dealt with in a separate article on this site.  Spanish tax form 210.

What about prior to 2007?

Spain has a kind of statute of limitations for undeclared taxes. The tax office can't go back more than four years after the tax is due to chase unpaid taxes.

What will I end up paying?

Obviously for residents it depends on their income and circumstances so is impossible to say, but for non residents who have missed the requirement to pay tax on the "imputed rent" on their property it is more predictable. The tax rate is 24.75% of the imputed rent in years 2012-2014 (24% prior to this). The tax rate will be reducing a little in 2015. The imputed rent is usually calculated as 1.1% of the registered value of the property, which can be found on the annual local tax bill that you get from the Ayuntamiento (look for the "valor catastral").

If you declare voluntarily there frequently may not be any fines or interest charged, but there will be if you leave it and the Tax Office come after you later.

Can ADVOCO help?

If you are worried about this then you may want to contact us. There is an ADVICE section with many articles on personal tax which may clarify your particular situation.

We provide an online declaration service for non-resident income tax: Form 210 service.

Also we provide an email query service - simple queries are answered free and for a small fee we will do longer email consultations to clarify your tax situation. Contact us here.

Related article:  UK and Spanish Tax Implications of a property in Spain