Tax on rental Income in Canaries NB

[petem]

We're thinking of buying a holiday place in the Canaries. Obviously rental income will be subject to UK income tax. Does anyone know if there are additional Spanish taxes to pay on the rental income?

Thanks, Pete

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[jfm]

I dont know. But the naries tax is creditable against the UK tax, so you only pay tax at the higher of the two rates. You dont pay tax twice on the same income

Simplified example,
Rental profit 100
naries tax 25
Cash received in UK 75
Taxable income UK 100 (nb, not 75)
UK tax say 40
Less credit for naries tax 25
Net UK tax to pay 15

Total tax paid 15+25=40. After tax profit 60

This is a pretty simplified example. It's called "Double Tax Relief" to a UK tax inspector or "foreign tax credit" in international circles (ie for those who get out more than a UK tax inspector). Beware the above example is simplified, will be affected by interest expense if you borrow money to buy the property, etc You have to fill in the "foreign" page of the tax return, pdf download from inlandrevenue.gov.uk

PS, sorry I still owe you a s58 article for website, will do soon, honest!

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[petem]

Thanks John, exactly what I needed to know.

Pete

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