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Taxes in Spain for Property Owners

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Taxes on the purchase of Spanish real estate are low if you do not plan to make a profit from the object. In the latter case, the country has a single income tax rate for non-residents in the amount of 24%. But foreigners have the right to buy real estate of any type in the country and apply for a Schengen visa, regardless of the purchase amount. If the transaction value exceeds €500,000, the owner can apply for a residence permit for the whole family.

Right and Obligations of Non-resident Owners of Real Estate in Spain

Real estate in Spain can be bought by citizens of any country. You can make a deal for an individual or a legal entity. It is usually not required to obtain additional permits from local authorities (an exception is that in some regions they still request permission from the Ministry of Defense, however, the number of such places is decreasing). To buy an object, you do not need to have a local residence permit or become a resident of Spain.

There are no restrictions on the types of real estate: foreigners can freely buy apartments on the primary and secondary market, land plots, private houses with land, commercial facilities.

The owner of any Spanish property, regardless of its value, can count on a multiple-entry Schengen visa valid for up to 90 days in half a year. In 2013, another opportunity appeared – a so-called "golden visa" for foreigners who purchased real estate in Spain for €500,000. The owner receives a residence permit with the right to work and the opportunity to move his family with him.

The rights and obligations of a foreigner towards owned real estate are no different from those for citizens of the country. That is, you will have to pay taxes, cover utilities, and adapt to the requirements of rental legislation, which has become tougher in recent years.

Barcelona
Barcelona< Spain. Author: Aleksandar Pasaric

Taxes on the Purchase of Real Estate

Taxes paid when buying property depend on the type of object.

Primary market. When buying from a developer, you will need to pay local VAT (IVA – impuesto sobre valor añadido), which, regardless of the region, is 10%. If we are talking about a commercial object, a land plot, an unfinished or commissioned house, parking spaces that are located separately from housing (that is, not on the territory of the complex), the rate is 21%.

Stamp duty or the tax on the legal fixation of the act (IAJD – impuesto sobre los actos jurídicos documentados) is also charged separately for new buildings. Depending on the region, the rate is 0.5-1.5%.

Secondary market. The tax on the transfer of ownership (impuesto sobre transmisiones patrimoniales, ITP) varies depending on the region of the country. On average, it is 8%. The lowest is 6%, for example, in Alava, Biscay, Madrid, Navarre. In the Canary Islands – 6.5%. 8-11% – in Andalusia, Aragon, Asturias, Cantabria, Extremadura, the Balearic Islands. 10% – in Catalonia, Valencia, Galicia.

Learn more about: Mortgage in Spain. How to Get a Real Estate Loan As a Foreigner

Taxes on Property Ownership

There are three taxes for owners of Spanish real estate. 

Real estate tax (el impuesto sobre bienes inmuebles, IBI). It is charged to both residents and non-residents. It is paid once a year by the owner to whom the property was registered on January 1 of the reporting year. The rate is 0.4-1.1% of the cadastral value of the object, which is usually several times lower than the market. The payment can be made automatically by linking it to a current account in a Spanish bank. 

The exact rate depends on the municipality. For example, in Valencia the tax is 0.950%, in Altea - 0.503%, in Benidorm - 0.682%, in Calpe - 0.0867%, in Torrevieja - 0.400%, in Barcelona - 0.825%, in Madrid - 0.604%. 

About a month before the deadline for payment, the owner of the property should receive an information letter indicating the amount. But it is worth remembering: even if you did not receive the letter, this does not release you from responsibility – a penalty fee will "drip" for the delay, and sanctions will be imposed as a result. As a rule, you can pay the tax until the end of October of the year following the reporting year. 

Income tax for non-residents (impuesto sobre la renta de no residentes, IRNR). Only those who spend less than 183 days a year in Spain and do not indicate it as a center of vital interests pay. 

The owner calculates the amount of the fee independently, fills out the declaration, and sends it to the tax service. The specific rate depends on the status of the object and its cadastral value, which can be viewed in the tax receipt received by mail or on the cadastre website. There are two options regarding the status of the object.

  1. The property is not for rent. The declaration must be submitted by December 31 of the reporting year, and the payment must be made by about December 20 of the following year. The imputed tax rate is 24% of 1.1% of the cadastral value. Sometimes 2% is taken as a basis if the revaluation was carried out more than ten years ago. For example, if an apartment in Malaga costs €200,000, the owner will have to pay about €500 per year.
  2. The property is for rent. The declaration is submitted every quarter, in the first two weeks of April, July, October, and January. The tax depends on the amount of profit received. The rate is 24%, but actual expenses related to the maintenance and improvement of the facility can be deducted from the tax base. If the property was empty for a certain time, you do not need to pay tax, but you will still have to file a tax return.

The wealth tax (impuesto sobre el patrimonio, IP). Applicable to both residents and non-residents, if the value of the property is more than 700 thousand euros. The rate varies between 0.2-2.5%, but since 2021, in regions that have not approved their rate, the government has increased the maximum tax by 1%. That is, in some parts of the country, the rate maybe 3.5%. You need to file a declaration at the end of the year and pay by the end of June next.

Examples of apartments in Spain:

Taxes When Renting Out Real Estate

The income tax rate for renting out real estate is 24% for non-EU residents and 19% for EU residents. The tax base can be reduced due to depreciation, which is 2-3% per year and confirmed receipts for the costs of improving and maintaining housing. Note that for residents of Spain, the income tax rate is 19-45%, depending on the amount of annual income. 

Features of the rental market

  • Regardless of whether you rent a property for short-term or long-term rent, the object must be registered with the Ministry of Tourism. And even with zero income, you will need to file a declaration.
  • The rental rate is set based on a personal agreement – this moment is not regulated by law. All obligations of the parties are prescribed in the lease agreement, which is initially concluded, as a rule, for a year. It lists the available furniture and appliances, describes the condition of objects, defects, and damages. It is possible to raise the rate during the first five years only commensurate with the level of inflation.
  • Utilities are usually paid by the homeowner, after which the tenant reimburses the amount based on checks. According to Spanish law, the costs of capital and cosmetic repairs fall on the shoulders of the owner of the property, and minor repairs are carried out by the tenant. But before you change something in the house, you need to get the permission of the owner.
  • Regardless of the deadline, information about tenants should be submitted to the local police department.

A must-to-read:
How to Buy Property in Spain as a Foreigner?

Taxes on the Resale of Real Estate

Only the direct owner or the person for whom a notarized power of attorney has been issued can sell real estate in Spain. If you entrust this issue to the agency, be sure to check the availability of the appropriate license.

Capital gains tax (IRPF) is paid by the seller, the rate is 24% for non-EU residents. The taxable base is the difference between the cost of purchase and sale. For residents of Spain, a rate of 19-45% is used, depending on the amount of profit. In some cases, Spanish residents do not pay capital gains tax – for example, if they used the property as their main place of residence for three years before the sale.

Depreciation expenses can be deducted from the tax base, as well as investments in home improvement, taxes on the purchase.

You will also have to pay the land value gain tax (IIVTNU). The rate depends on the specific district, the final amount is usually several hundred euros. If the land on which the house stands has not risen in price during the period of ownership– you will not have to pay the tax.

Examples of houses in Spain:

Inheritance and Gift Taxes

Inheritance and donation taxes are paid by everyone and in any case, regardless of the degree of kinship. But this applies to non-residents only if the property is located in Spain, and residents, if we are talking about any object anywhere in the world. 

Depending on the category of the heir, benefits are provided

  1. Hereditary and adopted children under the age of 21 – €15,956.87.
  2. Hereditary and adopted children over the age of 21, parents/adoptive parents, spouses - €15,956.87.
  3. Brothers and sisters, nephews/nieces, uncles/aunts - €7,993.46.
  4. There are no benefits for relatives of the fourth degree, friends.

After deducting the corresponding benefit, a rate is applied, the amount of which depends on the cadastral value of the property. The rate varies from 7.65% if the price is lower than €7,993.46, to 34% if more than €797,555.08. For example, you will have to pay 15.3% for an apartment worth €75,000 inherited or as a gift, and €350,000 - already 25.5%.

How to Save on Taxes

First of all, it is worth remembering that the tax service closely monitors the fulfillment of tax obligations. Therefore, in case of delay, at least you may be refused an extension of a visa or residence permit, while simultaneously setting a penalty for each day of non-payment. In the worst case, the municipality blocks the accounts and takes the property for payment. 

If you decide to repay the debt voluntarily, you are entitled to a substantial discount, which can reduce the size of the real debt several times. 

Otherwise, almost the only real way to reduce property taxes for a non-resident of Spain is to contact a tax consultant before buying the property. The specialist will advise the region to which it is most profitable to pay attention, explain how to distribute property, and avoid wealth tax if the estimated transaction amount is over €700,000. It will also specify what and when you will have to pay, depending on how you plan to use the property.

Quoting conditions of Prian materials

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