In the recent ruling 167/2013, of 13 February, the Supreme Court (SC) establishes that non-residents who own real estate located in Spain can only deduct from Wealth Tax (IP), and therefore, in the Temporary Solidarity Tax of Great Fortunes (ITSGF), the mortgages constituted for the acquisition or refurbishment of said real estate.
The Supreme Court stresses that in the case of taxpayers under real obligation, the delimitation of the taxable base of the tax is linked to the property and/or right located in Spain itself, so that the deductible debts are limited to the mortgage charges incurred to acquire or reform the property.
Consequently, if the taxpayer subsequently grants a loan secured by a mortgage on the property located in Spain (i.e. the loan is not linked to the acquisition or refurbishment), it will not be deductible, since, although the two debts are secured by the same property, the mortgage taken out to acquire or refurbish the property is a security interest, whereas a mortgage taken out subsequently and not used for the acquisition or refurbishment of the property is a personal debt secured by a mortgage on the property itself.
Therefore, non-resident taxpayers owning real estate located in Spanish territory must take this ruling into account in their investment and indebtedness strategies on real estate they own located in Spanish territory.
Expatfeliu can advise and support you in analysing the tax impact of your investment and debt strategies on your property located in Spain.