When you prepare for property purchase, it is important to estimate the total amount of your payment. Besides the property cost you have to expect some additional taxes, which you have to pay both at the purchase and after becoming an owner. Let’s talk about taxes in one of the most popular country for foreign buyers.
The first thing we need to establish is the difference between ‘residents’ and ‘non-residents’, because these categories of buyers pay different taxes.
In the context of taxation, residents are considered to be those who meet at least one of these requirements:
Spend more than 183 days a year in Spain, not necessarily continuously.
Declare Spain as the center of their life interests, in other words, their family and business are there.
Buying Spanish property does not make you a Spanish resident. Most foreign owners remain under wing of their native tax system.
Please note! The information in this article is provided for informational purposes only and cannot be considered as legal advice. To calculate the tax burden in each specific case, we recommend contacting professionals.
Taxes When Buying Property in Spain
During purchasing everyone is equal. Locals and foreigners, residents and non-residents pay the same taxes. These taxes are paid immediately after the conclusion of a sale contract. You cannot register your transaction without paying state fees.
The tax rate depends on the type of your property/ Whether it’s residential or commercial, primary or secondary, the rate is different. Even location matters.
Secondary market Property transfer tax (Impuesto sobre Transmisiones Patrimoniales-ITP). Depends on the property location. The average around the country is 8%, but in Catalonia it’s 10%, while in the Canary Islands it’s 6.6%.
Primary market Value added tax, i.e. VAT (IVA, Impuesto sobre Valor Añadido). It’s the same in every region - 10%.
If you buy a land plot or commercial property, the VAT is 21%.
These are the most important taxes you are going to face. But there are also stamp duty, payment for making entries in the register of owners and notary expenses about 2-4% of the price. If you take out a mortgage, additional expenses increase by a couple of percent.
Please note! In Spain taxes are never included in the property that you see in ads for purchase and sale. Therefore, feel free to add about 13-15% to the price and you get the amount of your total expenses.
Taxes on the Maintenance of Real Estate in Spain
In addition to the cost of utilities expect for annual taxes, the amount of which will depend on the price of the property, it’s location, the quality of construction as well as on whether the property is rented or not.
Local authorities issue the main fee to all owners, including foreign ones. It’s called the IBI property tax (Impuesto sobre Bienes Inmuebles).
The tax is calculated from the cadastral value of real estate, which is always much lower than the market value. Each municipality determines the payment procedure independently.
Rates are different in all regions from 0.4% to 1.16%. The table below shows the average IBI property tax rates and the year of cadastral valuation in the Spanish provinces that are popular among foreigners.
Valencia
1998
1.07%
Girona
1990
0.88%
Alicante
1996
0.84%
Barcelona
2002
0.82%
Murcia
2002
0.79%
Malaga
2002
0.72%
Most owners of holiday homes and apartments in Spain receive an annual bill of €200-800. However, the IBI tax may be twice as high, if you buy luxury property in a premium location.
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The next government fee in Spain is the IRNR income tax (Impuesto sobre la Renta de No Residentes). It depends on your status in Spain, as well as on how you dispose of real estate. It applies to non-residents only.
Property tax in Spain for non-residents, who do not rent out their property:
If you do not make any profit in Spain and use the property yourself, the tax base for you is 2% of the cadastral value, or 1.1% for properties with the assessment carried out after 1994.
The IRNR tax rate for residents of the European Union, Iceland and Norway is 19%, and for all others it’s 24%.
Property tax in Spain for foreigners, who rent out their property:
If you make a profit from your Spanish real estate, the income tax IRNR is calculated on the amount of the annual rent. The rates are the same: 19% for European citizens, 24% for all other foreigners.
Owners of luxury real estate in Spain also pay the annual wealth tax (Impuesto sobre el Patrimonio). It was entered in 2008, when the Spanish economy was going through a crisis. The debate about the need to cancel this tax is still on.
The tax is collected by local municipalities. The tax base depends on the region, but in most cases owners of properties less than €700 000 are freed from payment (€1 400 000 for married couples). Various encumbrances such as mortgages can be deducted from the tax base. The stakes are rising along with the price of from 0.2% to 2.5%.
Property owners in Spain have one more fee to pay, which is the municipal tax on garbage disposal. It’s collected by the local authorities and used to keep surrounding areas clean.
The size of this tax depends on the location of the property. Usually, you will receive a check for €100-200 per year.
Please note! It is a duty of the owner to pay all fees and taxes on time. The city authorities send a notification to the Spanish address after you officially registrate as the owner. If you lose this notification or do not notice it (or it does not reach, which also happens), and as a result, the money is not paid, you will be charged a penalty. You will not be able to sell or mortgage real estate until you pay it. In cases of large debts, property can be seized by a court order, but in practice it rarely happens.
To simplify the calculation you can set the automatic payments from your bank account in Spain. Many agencies also offer a real estate management service to foreign owners, which includes monitoring and paying all bills.
