Sep 1, 2024
Buying a property in Spain is a great investment, as evidenced by the rapid growth of the Spanish real estate market. However, in addition to the basic cost of the property, it's important to keep in mind that the buyer will also have to pay other fees, including significant taxes.
It's important to remember that fees and taxes vary depending on the region and autonomous community in which you plan to settle.
In this article, we'll look at the main types of property taxes and their costs when owning or purchasing a property in Spain, the differences in tax obligations for residents and non-residents, when and how taxes are paid, and the differences between regions or autonomous communities.
One of the main costs of buying a property in Spain is the Spanish government's property transfer tax.
The two main transfer taxes in Spain are:
VAT = (Value Added Tax)
ITP - (Property Transfer Tax)
The Spanish government charges VAT on the purchase of a new property in Spain. The current tax rate is 10% of the property's purchase price. Therefore, for new properties, the VAT is .
The new property owner pays the Spanish VAT directly to the developer along with the money to pay for the property purchase, and the developer is responsible for passing it on to the government.
Buying a second-hand property in Spain involves paying the ITP (Transmission Tax on Property Sales). The exact amount you will need to pay will depend on the property value and the location of the second-hand property, with tax rates ranging from 6% to 13%.
The reason the tax rate varies is due to the local property tax system in Spain, as each region imposes a local property tax.
The Spanish tax authorities require this Spanish property tax to be paid within one month of the purchase date, and this is done at the local tax office. It is the buyer's responsibility to ensure the tax is paid at the local tax office.
Land Registry Fees
Registering a new property deed in the Spanish Land Registry when purchasing a property entails paying a property registration fee. Although it is not mandatory to register the purchase in the Land Registry, it is highly recommended to protect the title, and if a mortgage is used to finance the purchase, it will be required by the Spanish bank to provide the financing.
The fees charged by the Land Registry vary depending on the value of the property. There are a minimum and maximum fee: the minimum fee is set at 24 euros and the maximum at 2,181 euros.
Costs of owning a Spanish property, paid by the owners
There are various taxes or costs associated with owning a property in Spain. Some of these vary depending on whether the owner is a tax resident in Spain.
The main costs associated with owning a property are:
IBI (Real Estate Taxes)
IBI is an annual tax payable on the ownership of a property. IBI is normally paid in Spain once a year (sometimes quarterly) at the town hall, and the exact date of payment varies from region to region, although most commonly at the end of the calendar year.
The amount payable is expressed as a percentage of the "cadastral" value of the property.
The cadastral value is the value of the property expressed in euros, and is assigned to the property as a reference value for local administrative matters such as IBI tax.
! It is not linked to the actual price you paid for the property, but is assigned by the registry. When buying, be sure to check the cadastral value of the property you are interested in.
IBI tax is determined by multiplying the cadastral value by a coefficient or percentage. For urban properties, this usually ranges between 0.4% and 1.1%..
Community fees
In Spain, there is a very high proportion of apartment-type housing and urbanisations..
When several owners share common areas of the property, such as the building's lifts, garden, security, parking or swimming pool, there are costs associated with the maintenance of these common facilities.
Consequently, each owner is obliged to contribute financially to the maintenance through a community fee, known in Spain as "la comunidad".”.
The amount payable varies from building to building or development to development, but will also be determined by the size of the property..
Other positions
In addition to the basic taxes and fees described above, there may be additional charges to pay, such as waste collection, water and electricity charges..
Typically, owners have direct contracts with utility companies and when the property is sold, these contracts are transferred to the new owner..
However, there are cases where the former owner breaks the contract and then the connection of water and electricity can cost a significant amount of money..
Income Tax for Non-Residents in Spain
Non-residents who own property in Spain must pay a tax known locally as IRNR (Impuesto sobre la Renta de No Residentes)..
This Spanish income tax rate is an annual "imputed income tax" based on the cadastral value of the property. The tax base is 2% of the cadastral value of the property (1.1% if this value has been revised within the last 10 years) and the tax rate is 24% for non-EU residents and 19% for non-residents who are tax residents in EU member states..
If the property is rented out to third parties, the owner must pay income tax on any income earned from renting the property..
EU residents are subject to a personal income tax rate of 19%, which is payable to the Spanish tax office after deducting expenses and charges from their taxable income.
However, non-EU residents, including UK residents, who earn rental income from their property pay a higher rate of 24% on their gross rental income, meaning rental costs and expenses cannot be deducted.
Conclusion
As you can see, there are a number of important tax implications when buying a property in Spain, and it is inevitable that you will have to pay Spanish taxes..
However, as discussed above, your specific tax liability will be determined by your individual circumstances, in particular the size of the property, its value, its location and whether or not you are resident in Spain.