Spain has long been associated with tax evasion and its famous cash economy. This aside, it is imperative that you have an understanding of Spanish taxation, double taxation benefits and legislation and wealth taxes.

Countries now operate tax partnership laws that take into account global wealth, irrespective of where it is held. Laws relating to taxation in Spain differ from other countries, even those within Europe, but none the less, tax is one of the areas that has the attention of the Spanish government. Advice on taxation in relation to income and property and your liability is imperative, and avoidance of the subject can land you in a bit of a mess. Don't be afraid to ask for assistance and advice - paying into the system has its benefits and trying to hide is no longer an option!

The information below has been taken from an article received from Strong Abogados, an English-speaking law firm with a focus on property conveyancing and tax planning.

The first question is whether you will file taxes in Spain as a resident or as a nonresident. Assuming you don't have Spanish citizenship, you're a resident if either:

• You're physically present in Spain for more than 183 days (including sporadic absences).
  
• The main base of your professional activities or economic interests are in Spain.

The tax requirements are as follows:

• If you are a resident, you are subject to personal income tax (including capital gains tax) and property tax (IBI).
  
• If you are nonresident, you are subject to personal income tax (including capital gains tax), property tax, plus an additional nonresident property tax. Personal income tax for nonresidents only represents income from the property; income from salary is declared where you are a resident. If the property is for your own use, you must pay a certain percentage of your property; if the property is rented, you declare the amount you have received in rent.

Residents: Personal Income Tax
This is the standard "IRPF" income tax that most Spaniards pay. If you are a UK citizen, you must apply for certificate E101 to indicate that you will be a resident of Spain, and no longer subject to pay income tax in the UK.

Nonresidents: Personal Income Tax
If the property is owned by a married couple or by various individuals, each person is treated as a separate taxpayer and must file returns separately. Depending on what the property is used for, the income subject to taxation is as follows:

• Property for own use: The income to be declared is a percentage of the cadastral value of the property, as indicated on your IBI property tax receipt. The tax rate is then 25% of this "income". If you didn't own the property for the entire year or if it was rented for part of the year, then you would pro rata the amount accordingly. A nonresident whose only taxable property in Spain is a dwelling fundamentally for own use may elect to use a single form for declaring both property tax and personal income tax on the estimated income from the use of that dwelling.
  
• Property used for rental: The income to be declared in this case is the total amount collected from the tenant, without deducting any expenses. The tax rate is 25% of this income.

Residents and nonresidents: Capital Gains on the Sale of Property
A capital gain on the sale of property is taxable income that must appear on your income tax return. The capital gain is generally the difference between the sale amount and purchase amount, including in both cases, the expenses and taxes involved in the transaction. If the property has been rented, the purchase amount must be reduced by the amount of depreciation corresponding to the rental period.

Residents and nonresidents: Property Tax (IBI)
Each year, the municipality issues a property tax payment slip for all properties. The tax is usually between 0.5% and 1.1% of the cadastral value (valor catastral) of your property, which is roughly 20 times lower than the market value.

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