Belgian tax on second residence in Spain

As a resident of Belgium, you are required to report in your personal income tax return that you own foreign property. You will also have to declare any income from the foreign property, whether or not you rent out. Therefore, this article discusses Belgian taxes on a second residence in Spain.

Principle: income exempt in Belgium, but...

The double taxation treaty between Belgium and Spain stipulates that, in principle, only Spain is entitled to tax property located in Spain. This means that Belgium may not tax your second residence in Spain. However, income from Spanish property is eligible to determine the progressive personal income tax rate. This is called progression reservation. Therefore, your other income may be taxed higher due to the fact that you own a second residence abroad.

How is taxable income calculated?

After you have bought property in Belgium, you must report the current sales value of the Spanish property to the tax authorities within 4 months. This can be done by post, but is easier via Myminfin. Based on the sales value, the tax authorities calculate a foreign cadastral income (hereinafter: foreign KI).

Find more information on the foreign KI declaration here.

You do not rent out your second residence in Spain

For residential property, you need to index the foreign KI and multiply it by 1.4. You have no expense deduction and you cannot reduce taxes paid in Spain. You can, however, deduct interest on a loan.

If you purchased the property during the current income year, you may calculate the tax pro rata. For example, if you bought the property on 1 December 2023, you can calculate the tax based on 31/365.

An example: you have a second residence worth €400,000. The foreign KI determined by the Belgian tax authorities comes to (rounded) 1400 euro. In code 1106/2106 (box III, A. 2), enter 1400 euro. You also fill in point B of box III. The taxable property income for 2023 is 1400 * 2.0915 indexation x 1.4 = 4099.34 euros. This amount will be exempt with progression proviso thereafter. So you will not have to pay an additional 4099.34 euros, but your other income may be taxed (partially or not) at a higher rate because of that 4099.34 euros.

You do rent out your second residence

If you rent out your second residence furnished, you need to split between the income from the property and the income from the furniture.

Real estate section: If you rent out a second residence to an individual who does not establish a professional activity in your property, you will only be taxed on the indexed foreign KI multiplied by 1.4 as regards the immovable part. You have no expense deduction, nor can you reduce taxes paid in Spain. You can, however, deduct interest for a loan.

If you were to rent to a company, you would be taxed on the actual rental income less a cost lump sum of 40% (with maximum foreign KI x 2/3 x revaluation coefficient).

Movable part: The double taxation treaty between Belgium and Spain stipulates that movable property may be taxed by Belgium, unless the Spanish tax authorities take a position in which they assume that the co-letting of furniture is also considered as real estate income. To our knowledge, no such explicit position exists.

For furnished rentals, the Belgian tax authorities assume that 40% of your rental income consists of moveable income. This moveable income is reduced by a flat-rate cost deduction of 50%. The rate is 30%. In the tax return, you can declare the income in box VII, B.

However, you can include a different ratio in your rental agreement. For example, you include in the rental agreement that 20% of the total rent relates to the fee for the use of the furniture. However, you should be able to justify this ratio based on the value of the contents and the value of the property, for example, by invoices from the furniture shop.

Other services: If you also provide other occasional additional services, for example paid cleaning, these revenues are taxed to 33% as miscellaneous income.

An example: You have rented out your second residence in Spain furnished. The foreign KI is 1,400 euros. The actual rent received is 10,000 euros. You did not split between immovable and movable income in your rental contract.

The immovable part is taxed in the same way as in the first example. You declare 1400 euros in the personal income tax return. The taxable immovable income for 2023 is then 1400 * 2.0915 indexation x 1.4 = 4099.34 euros. This amount is then exempted with progression proviso.

The movable part comes to 40% of 10,000 euros, i.e. 4,000 euros. From this, you deduct €2,000 in flat-rate expenses. The taxable base is then 2,000 euros, on which you pay 30% taxes, or 600 euros.

What about Spanish taxes?

Also in Spain, you need to declare the full rental income. Spanish non-resident tax does not provide a specific taxable base for movable income for residential rentals by non-resident individuals to private tenants. In addition, Spanish personal income tax allows depreciation of furniture only if the contract makes the split between movable and immovable rent.

In order to avoid double taxation on furniture (the movable part), until the Spanish tax authorities explicitly rule on the taxability of non-residents on furniture co-letting, we recommend declaring only the income from the immovable part in Spain, provided that this is contractually defined and the ratio corresponds to economic reality.

Learn more about Spanish taxes on rental income here.

Source: FPS Finance

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