Personal income tax of a property located abroad

By: Josep Navarro

Income tax on an unleased property located abroad

Real estate income must be allocated for the property located abroad:

Article 85 of the LIRPF, regulates the allocation of real estate income, providing in paragraph 1: " 1. In the case of urban real estate, qualified as such in article 7 of the revised text of the Law of Real Estate Cadastre, approved by Royal Legislative Decree 1/2004, of 5 March, as well as in the case of rural real estate with constructions that are not essential for the development of agricultural, livestock or forestry operations, not affected in both cases to economic activities, nor generating capital returns, excluding the main residence and the non-built up land, the amount resulting from applying 2% to the cadastral value will be considered as imputed rent, determined in proportion to the number of days corresponding in each tax period.

In the case of properties located in municipalities where the cadastral values have been reviewed, modified or determined through a general collective valuation procedure, in accordance with the cadastral regulations, and have come into effect as of 1 January 1994, the imputed rent will be 1.1 percent of the cadastral value.

If, on the date of accrual of the tax, the properties referred to in this section lack a cadastral value or the holder has not been notified of the value, 50 per cent of that for which they should be computed for the purposes of Wealth Tax will be taken as the basis for imputation. In these cases, the percentage will be 1.1 percent.

In the case of property under construction and where, for urban planning reasons, the property is not suitable for use, no income will be estimated.

2. This income will be charged to the owners of the property in accordance with Article 7 of Law 19/1991, of 6 June, on Wealth Tax.

When there are rights in rem of enjoyment, the income computable for these purposes in the holder of the right will be that which would correspond to the owner.

(…)”.

Article 10 of the Wealth Tax Act provides as follows:

"Goods of an urban or rustic nature shall be computed in accordance with the following rules:

One. For the greater value of the following three: The cadastral value, the value verified by the Administration for the purposes of other taxes or the price, consideration or value of the acquisition.

Two. When the real estate is in the construction phase, the amounts that would have been effectively invested in said construction up to the date of the accrual of the tax shall be estimated as the patrimonial value, in addition to the corresponding patrimonial value of the land. In the case of horizontal property, the proportional part in the value of the land will be determined according to the percentage set in the title.

(…).”

From all the above, it can be concluded that you should charge real estate income for the property located abroad, which does not constitute your habitual residence or generate rental income.

On the other hand, since it lacks cadastral value because it is a property located abroad, the income to be imputed will be 1.1 percent of 50 percent of the value to be computed for purposes of the Property Tax.