
For expats and non-resident buyers aspiring to own a home in Spain there’s a lot to learn. From understanding property tax in Spain to learning about the mortgage process and interest rates, there’s a lot of information you’ll need to cover before you put an offer in on your dream home.
For foreigners, navigating Spanish property taxes can be complex, especially with different rules to consider for residents and non-residents. We’re going to explore the taxes you’ll encounter, how they work, and which costs you’ll need to consider when buying a property in Spain.
Types of property tax in Spain
There are a few types of property tax in Spain and these can be categorised into purchase-related taxes, ownership taxes, and taxes when selling.
These won’t always be immediately relevant but it’s important to understand the long-term costs of owning a property in Spain.
Let’s take a closer look.
Taxes When Purchasing Property
When buying a property in Spain, there are a number of costs involved. Non-resident buyers need to be prepared to pay larger deposits and notary fees. There are also two taxes you may encounter.
Transfer Tax (Impuesto sobre Transmisiones Patrimoniales or ITP)
This applies to resale properties. The rate can vary by region and is based on the value of the property.
VAT (Impuesto sobre el Valor Añadido or IVA)
For new-build properties, VAT is charged instead of transfer tax. The rate is usually 10% for residential properties and 21% for land or commercial properties.
Additionally, buyers must pay stamp duty (Actos Jurídicos Documentados or AJD), usually ranging from 0.5% to 1.5% depending on the property’s location.
Ongoing Property Taxes
There are also some taxes that come with property ownership.
Annual Real Estate Tax (Impuesto sobre Bienes Inmuebles or IBI)
This local municipal tax is similar to council tax in the UK. The price is based on the assessed value of the property and usually ranges from 0.4% to 1.1%. Local authorities set the exact rate so the area will determine the cost.
Non-Resident Income Tax (Impuesto sobre la Renta de No Residentes or IRNR)
Non-residents who own property in Spain also have to submit yearly based on the rental income the property could generate, even if it’s not rented out.
Based on the assessed value of the property, a portion of 1.1% is outlined.
Of this, a percentage is payable depending on the “home” nation of the owner.
- For non-residents from the EU or EEA this is 19%
- For non-residents from outside the EU/EEA this is 24%
EXAMPLE:
Of the €1,100 taxable amount on a €100,000 property, an EU resident would pay €209 whilst a non-EU owner would pay €264.
Wealth Tax (Impuesto sobre el Patrimonio)
Non-residents may be subject to wealth tax if their Spanish assets exceed €700,000. Rates vary and some exceptions may apply based on regional policies.
Taxes when selling property in Spain
What taxes must non-residents consider when selling a home in Spain?
Capital Gains Tax (CGT)
If you sell a property in Spain, you’ll pay capital gains tax on the profit.
- For EU/EEA residents: Rates range from 19% to 26% depending on the profit amount.
- For non-EU residents: A flat rate of 24% applies.
Plusvalía Tax
This municipal tax applies to the increase in the property’s cadastral value during ownership. The exact amount depends on the local council and how long you’ve owned the property.
Property tax in Spain for foreigners: special considerations
With all of this in mind, what other considerations might be important for non-resident buyers purchasing property in Spain?
The cost of moving
There are a number of costs associated with moving to Spain that non-residents need to understand.
Deposits, for example, are higher for non-residents with most lenders needing 30% of the property's value.
On top of this, buyers should budget around 10-15% for additional costs and taxes.
A mortgage calculator can help you to understand the cost of moving and identify how much you can comfortably afford to pay for your dream home or property in Spain.
Knowing how to pay property taxes
Taxes associated with purchase or sale are often highlighted by a mortgage broker. A non-resident buyer should seek the advice of someone familiar with the mortgage process in Spain when buying a property. Brokers will help to analyse a buyer's case and inform them of any costs.
Ownership taxes are the responsibility of the buyer. Tax returns for non-resident income tax are due by December 31 each year and are done by self-assessment.
Owning a second home in Spain
If your Spanish property is a second home, you’ll still need to pay the IBI and non-resident income tax, even if it’s not rented out.
Understanding property tax in Spain for foreigners is essential for effectively budgeting.
Why understanding Spanish property taxes is important
When moving to any new country it’s important to understand the taxes and liabilities you will have as a property owner.
Not only will it ensure you can budget for any potential costs, but it also means you’re able to avoid any legal issues or complications.
The process of getting a mortgage isn’t always simple, particularly if the processes are unfamiliar or there is a language barrier. An adviser who is familiar with the Spanish property market will help you to navigate the taxes and costs associated with buying a home.
Analyse your case. Find out the requirements for you to secure a Spanish mortgage.
Buying a home in Spain
Buying property in Spain of course has a number of wonderful benefits, from stunning locations to a change in lifestyle. However, understanding property tax in Spain for foreigners is essential for making informed decisions and avoiding unexpected costs.
Whether you’re purchasing a holiday home or investing in a permanent property, working with professionals like tax advisers or mortgage brokers can streamline the process and help you to stay compliant with Spanish tax laws.