Double Tax Relief - Spain

Client with FHL portfolio

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UK Client owned 2 residential properties in Czech Republic and 1 ski property in Bulgaria has accumulated rental losses of £33K. Recently sold these properties and bought in Spain, golf apartment (aparthotel arrangement) and townhouse (Airbnb letting with some private use). The aparthotel has deducted 24% from his gross income and he has also paid 24% on his gross Airbnb income via Spanish tax form 210. Total tax deducted circa £2100 for 21/22 and estimated £4800 for 22/23. 21/22 rental profits from these 2 properties was £100 which was offset against previous losses. 

Client has other 21/22 income of £12K pension, £11.5K UK rental income and £31K dividends. So total income £54.5K and £4K net gift aid.

He wants me to offset Spanish tax under double tax relief, but my understanding is this can't be offset against other income. Given he pays 24% on gross Spanish rental and will make modest profits once expenses are offset for UK Tax Return, it seems there is little to no actual double tax relief but rather the Spanish tax authorities are quid’s in.

Was hoping some kind contributor would confirm if my understanding is correct or even better if I am missing something that would advantage my client?

 

 

Replies (5)

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By David Ex
01st Aug 2022 10:14

Have you spoken to the client’s Spanish tax advisor? Does the DTA offer any help?

If the profits are “modest”, why is the client bothering?

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By Tax Dragon
01st Aug 2022 10:45

TIOPA 2010 - see s112.

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Replying to Tax Dragon:
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By David Ex
01st Aug 2022 11:13

Tax Dragon wrote:

TIOPA 2010 - see s112.

Yup. I completely forgot about that.

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By colinx
01st Aug 2022 11:29

Thank you for your replies although TIOPA 210 s112 is double dutch to me. I've found an online article which confirms my fears. It states that pre brexit Spanish tax was 19% of income less expenses. Post brexit it's 24% of gross income. Example shown is very similar to my clients situation
Jane bought an apartment in Spain with a mortgage and is renting the property until retirement when she will move to Spain. She receives €1,000 a month in rent, has property running and mortgage costs that total €8,000 a year and she is entitled to deduct depreciation of a further €3,000.
Pre-Brexit her annual net income of €1,000 results in annual tax of €190.
Post-Brexit she will pay tax of €2,880, ie, tax at 24% on her gross rental income of €12,000.
Jane will be €2,690 worse off post-Brexit. She will not be able to claim a tax credit in the UK for most of the extra Spanish tax because the UK system allows reasonable deductions for property costs and so she will pay little or no corresponding tax in the UK.

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By jvenegas16
01st Aug 2022 17:25

Speak to me if you want to go through that. I don't know all the details, but can you client claim any tax back in Spain too?

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