Have you paid your ITP tax on your rental?

Although many tenants are not aware of this, when renting they have to pay a tax called ITP (impuesto sobre transmisiones patrimoniales). And this year, most regions of Spain will be cracking down on defaulters – which means the tenant will be liable.

Although the rental of commercial space (offices, warehouses, garage parking etc) is subject to IVA, private accommodation is subject to a different tax – ITP. Which must be declared and paid for on a separate tax form to your usual income tax, within 30 days of the contract having been signed.

How to calculate it
If you are involved in renting a property, remember that the tenant is obliged to pay this tax. Here’s how to roughly calculate the amount it will be:

  • Base amount: Take as the base the rent you will pay during the life of the contract. If no expiry date is specified in the contract, then six years is the usual estimated lifespan. If the contract aims to satisfy the need for a permanent home of the tenant then the minimum lifespan is considered to be three years, even if the stated lifespan in the contract is less.
  • Amount to pay: The amount to pay (cuota in Spanish) is calculated on a special rate specified in the law, unless you live in a region of Spain which specifies a different amount. However, the tax is not very high. For example, a three year contract at €500 a month (€18,000 total) would be liable to an ITP tax of €72,02.
    Contract extension
  • If, after the contract expires, the parties agree to renew the contract, the tax must be paid anew upon the lifespan of the new agreement and the base rent, within 30 days of signing.ç

Paying the tax
There are two ways of paying the ITP.

  • The first is by buying timbres from an estanco. Timbres are government issued stamps – you purchase the correct number and that way have paid your tax. You keep the timbres in a special book to be presented upon request.
  • The other way is to pay the amount in a bank via tax form 600.

2016 tax requests
A number of regions have announced they will be checking this tax as part of their regulatory tax inspections of 2016. They will be cross referencing tenants with registered tenancy agreements and demanding proof of payment. Failure to prove payment will result in a back-dated tax demand and a hefty fine.
Tenants are always liable for this tax, unless they have been declared insolvent. In which case, the landlord is responsible for paying it.

What to do if you haven’t paid?
If you are a tenant who did not pay this when signing, you may receive a tax letter this year. You will be charged back dated interest on the non-payment as well as a minimum fine of 50% of the unpaid ITP tax.

You can reduce this fine substantially by paying your ITP now by presenting tax form 600. If a fine is levied at a later date, you will only be fined a late payment penalty up to a maximum of 20% of the paid tax, plus back-dated interest, a substantial saving.

For more information
on this tax, rental agreements in general or other personal taxation advice, contact Maria Luisa Cervantes at Cervantes Alarcon Consulting in her offices in Garrucha. Friendly and sound advice in English!

Maria Luisa

María Luisa Cervantes is a chartered accountant who graduated from the University of Granada in 2002. Founder of Cervantes Alarcón Consulting, she is an experienced accountant and financial advisor who is a member of the Almería guild of economists. With more than 15 years of experience in business administration and international trade, she is also a subject matter expert in the UK - Spanish bilateral agreements which cover the rights of expats to live, work and retire in Spain.