La Renta Tax

Jul 18, 2008 · Tyke · 6 replies · 2927 views

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Can anyone help me concerning how the La Renta tax is calculated when the Catastral Value has not yet been declared by the town hall? I do not get any income from my property.

I think that I know how it is calculated when the Catastral Value is available - but what if it is not yet known? Does anyone know if this happens often?

I had to sack my Fiscal Representative because they got the Patrimonio Tax wrong. This resulted in a massive overpayment which they were incapable of retrieving. After 12 months of being the polite Englishman I finally had to threaten legal action to get them to cough up. In a nutshell - they failed to take into account the fact that I had a mortgage with a Spanish bank. although I had told them that I had right at the start of our relationship. The mortgage with a Spanish Bank is deductible when calculating Patrimonio tax. Me being quite new to Spain I wonder if this is common knowledge amongst expats? Hope this doesn't sound patronizing as it's me that's the new kid on the block!

The Fiscal Rep said it wasn't deductible until I proved it was, then they said the tax office wouldn't pay back the overpayment, then they said that time for retrieving the overpayment had run out......! No wonder I'm balding!!

I just need to confirm whether my ex-Fiscal Rep got the La Renta right or not.

Your comments would be appreciated.

Jul 19, 2008 · ROBI

You make some interesting points which back up a growing theory of mine that either these so called professionals dont know what they are doing or because they dont want to really give us foreigners a good and fair service.

Fact: Mortgages on your primary main residence are Spanish tax deductable in you are a full time resident in Spain (NOT for buy to lets or part time 2nd homes)

Your bank holding the mortgage will send a statement to both you and the AEAT (Spanish tax people) when you make your tax return you must show this statement and the escrituras for the property and prove it is your main home via padron.

Understand that many banks will help you (for free and give a better service?) to do this or go and see the tax man direct - they are very helpful but of course you will need some Spanish (unless you are lucky) or take an interpretor.

Jul 19, 2008 · Tyke

Thanks ROBI - it seems that we are in the same camp on this one.

I am actually a non-resident but of course pay the Patrimonio and La Renta taxes through the Modelo 214 tax return for non-residents.

It is just one aspect of the La Renta tax that still troubles me - that is ' Is La Renta still paid when there is not yet a Valor Catastral set for a property and if so how does it work?' if the VC is in place it seems pretty straight forward but what if the VC has not yet been declared by the townhall. It's one of those quirks which may not occur very often but my ex-fiscal expert/professional certainly 'paid' a lot of La Renta tax for me even though there was no VC.

I really need help here ROBI.

Jul 19, 2008 · ROBI

OK as a non resident you will not being able to have the mortgage relief.

Actually it is probably not as rare as you imagine - in this area they are years behind because of the building boom, so the tax is based on 50% of the escritura value - which can be very unfair.

I know of a property with a declared value of 120,000 thus making the tax based on 60k but as it has now been through the system the tax is based on a much lower figure. This seems to be an unfortunate part of a tax system which is actually not bad for residents. Neither can you claim that tax back when the true value is set either!

Jul 24, 2008 · Tyke

Thanks for taking timeout to reply again Rob.

Your comments reference the La Renta tax were right on the nose! That is exactly how it happened with me. I paid three times more because the Valor Catastral had not been declared. How lucrative for the taxman!! I wonder if the townhall are getting a kick back for their ineptitude? It's an absolute disgrace that there are no means to reclaim the overpaid tax. None of this was within my control and I went the extra mile to ensure that I paid all the taxes that were necessary. I am quite sure that this practice must be illegal in the European Courts. Does anyone out there have the ability to raise this issue with the Euro bureaucrats?? Yet another example of prejudicial treatment of foreigners in Spain. I trust the Spanish people would know of this problem and not pay the La Renta until the VC is declared?? Is this true?

Regarding the Patrimonio Tax (yet another example of prejudicial treatment of foreigners - fortunately ended from 01/01/08) I am sure from my experience that Mortgages with Spanish Banks are in fact deductible against this tax as they are a 'deduction' not an 'allowance'.

Spain - sun, sea, sangria and stick it up the strangers!!

I'm disillusioned!

Jul 24, 2008 · ROBI

Hi Tyke,

OK but hang on a minute - I think we have 2 issues crossed:

1. This tax anomaly whereby if the Valor Catastral has not been set they apply the 50% of the escritura value (which I think is always in excess of the Valor Catastral) is equally applied to BOTH residents and non-residents and the Spanish! - so we cant claim discrimination. We can claim it is very unfair and I am sure the Spanish would agree - I assume this has not been a major problem before because probably pre-building boom they kept up todate with the RVs.

Perhaps some Spanish Tax people would like to comment further?

2. My point regarding incorrect advice I believe does apply again to both residents and non residents who are not savvy enough to use bona fide advisers or back to using a bank or go direct to the tax man.