Buyers Guide

3. TAXES IN SPAIN

The purchase of a property in Spain involves, both for residents and non-residents, a series of fiscal obligations which must be met

3.1. TAXES ON CONVEYANCE OF ASSETS

a) New Properties

The IVA tax (VAT) is applicable to the purchase of new properties and urban plots (which have never been transferred before). It amounts to 10% of the purchase price, and 21% for the purchase of urban plots. This tax must be paid on each instalment. In addition, the obtaining of the title deed is also subject to Stamp Duty (AJD Tax, tax on Conveyance of Assets and Documented Legal Procedures) at 1,2%.

b) Resales

When properties have been already transferred before, the applicable rate is not IVA but ITP tax (transfer tax). The rate of ITP is 7% of the property purchase price.

Note that the total costs associated to a property purchase transaction are normally between 10% and 14% of the purchase price (without a mortgage involved).

3.2. TAX ON REAL ESTATE (IBI in its Spanish acronym)

The IBI tax must be paid to the corresponding Town Hall every year, in one payment to be made between September 15 and November 15 (this is the usual period, however it might change in accordance with each Town Hall). Your local lawyers can ensure this payment is made by direct debit from your Spanish bank account.

3.3. PROPERTY INCOME TAX

Anyone who owns properties in Spain must file a tax return with the Spanish tax authorities. The Tax Office calculates an annual Imputed Income as a percentage (1.1% to 2% depending on the Town Hall) of the Cadastral Value of the real estates. Note that the Cadastral Value is normally significantly lower than the market value. On the Imputed Income, Income Tax is 24% for non-EU citizens, and 19% for tax residents in the ECC (Economic European Community).

If you decide to rent out your property, the above Income Tax would not apply for the periods in which the property is occupied, and a separate tax declaration must be filed accordingly. In that case you pay Tax on Rental Income. As a general guideline, the percentage of tax you pay on profit is 24% for non-EU citizens, and 19% for tax residents in the ECC (Economic European Community).

We advise that any person who owns a property in Spain, but is not resident there the entire year, should designate a ‘fiscal representative’ who will carry out all the procedures necessary before the tax authorities.

3.4. CAPITAL GAINS TAX

Capital gains tax is payable based upon the increase between the original purchase price of a property and the selling price. This tax applies to the seller, and is levied at 19% in the case of non-residents.

Anyone purchasing a property from a non-resident must withhold 3% of the purchase price, which is then paid to the tax authorities on account of any liability by the vendors. The vendor then has a 3-month period to pay the rest of this tax to the tax authorities. There are situations in which the tax due would be less than the 3% withheld, in which case it needs to be claimed back from the tax office. Your local lawyer can assist you in that matter.

3.5. WEALTH TAX

If you are non-resident in Spain, you may be liable to pay Wealth Tax (Impuesto sobre el Patrimonio), which is applicable to all the assets you have in Spain. Among these assets are real estate, bank accounts and other assets.

The obligation of filing this tax arises either when your net wealth (assets minus obligations) is more than 700,000 Euros per individual, or when your gross wealth is more than 2 million Euros (even if there is no tax to pay).

Rates are from 0.20% to 2.5% for residents in Andalusia or for those non-resident owners whose properties are located in this region.