What taxes do I have to pay? All about property taxes in Spain.

 

What can you expect if you decide to buy a property?

What taxes and fees are payable when buying, selling, or renting a property? What are the obligations of a property owner in Spain? These are the questions we will explore now.

As always, if you’re uncertain about anything or would like further information, please don’t hesitate to contact us.

SUMMARY

 

When purchasing a new property, you can expect to pay an additional 11-13%, most of which is VAT (IVA).

If you are buying a pre-owned property, you should add an extra 8-10% to the advertised price, with the largest portion being the property transfer tax.

The annual property tax is calculated based on the cadastral value of the property, which is a fraction of its market price.

When you sell the property, you only pay tax on the capital gains, which is 19% for EU citizens.

Income tax on short-term rental income is also payable in Spain, and it is set at 19%.

It may seem more complicated in some areas but don’t be alarmed. By using our legal support, you will receive an accurate, comprehensive, and detailed offer when you purchase a property, and we will handle all the transfers and paperwork for you. And if you need us, we will be there for you after the sale.

Table of Contents

TAXES AND FEES WHEN BUYING A NEW PROPERTY

1. VAT (IVA – Impuesto sobre el valor añadido) – 10%

VAT is not unknown to us. In Spain, the 10% rate is applied to real estate. 

Example: If the developer has set the price of the property at EUR 250,000 in its price list, the VAT amount will be EUR 25,000.

2. Stamp Duty (AJD – Impuesto de Actos Jurídicos Documentados) – 0.5% – 1.5%

Stamp duty, or AJD in Spanish, is paid by the buyer when purchasing the property. This tax must be paid to the Autonomous Community’s tax office within 30 working days of the sale. Stamp duty is usually 1% of the purchase price, but it can vary from region to region (1.2% in Andalusia, 1.5% in Catalonia, 0.75% in Madrid, but 0% in the Basque Country).

3. Notary Fees – 0.1% – 0.4%

Notary fees for the purchase of a property are paid by the buyer. They depend on the purchase price and the number of clauses in the deed.

The fees are usually calculated as follows, depending on the purchase price of the property:

  • 0 – EUR 100,000: the fee is 0.4% of the purchase price
  • EUR 100,000 – EUR 400,000: the fee is 0.1% to 0.4% of the purchase price
  • Above EUR 400,000: the fee is 0.1%

If the buyer takes out a mortgage, an additional notary fee is payable according to the number of clauses in the mortgage deed.

The notary checks not only the documents but also wills, marriage agreements, general contracts and agreements, loans, mortgages, and other documents relating to debts to ensure that the property is being sold legally.

4. Land Registry Fees – 0.1% – 0.4%

These fees are paid by the buyer to ensure that the property is registered in their name at the Land Registry. These fees are calculated by the Spanish Land Registry and depend on the region, location, and type of property. Land Registry fees are usually half of the notary’s fees.

5. Bank Charges, Gestoría Fees (gestoría) – 0.1% – 0.2%

For the sake of completeness, we also list these fees, which are low, but of course, they must be taken into account.

6. Mortgage Costs (if you are applying for a loan in Spain) – 1.5% – 3.5%

When you take out a mortgage in Spain to buy a property, there are additional costs of 1-2% for setting up a bank account, €300-600 for a valuation report, and the 0.5-1.5% stamp duty mentioned above.

In total, you should expect to pay an extra 1.5% – 3.5% for your mortgage. If you are considering a loan to buy a property, please contact us. Of course, we can help you with this as well.

7. Legal Services (if you choose) – 1%

We strongly recommend hiring a lawyer to guide you through the buying process. Our office works with one of the most experienced law firms in the real estate industry. The legal fees will be billed to you after the purchase process is complete when everything is finalised and the property is registered in your name at the Land Registry.

The law firm will not only audit the property and its owner but will also carry out all ancillary tasks to facilitate the process. For example, if you do not have an N.I.E. tax identification number, they will apply for one on your behalf.

TAXES AND FEES WHEN BUYING A PROPERTY FROM THE SECONDARY MARKET

You are exempt from VAT (IVA) and stamp duty (AJD) when you buy a second-hand property, but you must pay transfer tax. The other fees are the same as when you buy a new property, so we don’t list them separately here.

1. Transfer Tax (ITP – Impuesto de Transmisiones Patrimoniales) – 7%

Property transfer tax in Spain, like stamp duty, can vary from one part of the country to another. The rate varies from 4% (Basque Country) to 10% (Valencia). In Andalusia, the tax rate is 7%. The amount of the tax is determined by the notary based on the real value of the property, which may be slightly lower or higher than the market price. This tax must be paid within 30 days of the purchase of the property.

TAXES AND FEES ON PROPERTY YOU ALREDAY OWN

1. Property Tax (IBI – Impuesto sobre Bienes Inmuebles)

Property tax in Spain is an annual tax based on the ‘cadastral value’ of the property – the official value, which takes into account the location, size, use, and condition of the property and is much lower than the market price.

The tax rate is set by local authorities and ranges from 0.4% to 1.1% of the cadastral value. You can find out the cadastral value from your tax bill or the local tax office, but it will also be stated when you buy.

For example, if the market value of your property is EUR 300,000, while its cadastral value is EUR 30,000 and the local tax rate is 0.7%, the amount of property tax per year will be EUR 210.

2. Wealth Tax (Impuesto sobre el Patrimonio – IP)

If the total value of your assets in Spain exceeds €700,000, you may be liable to pay the Wealth Tax. In Andalusia, this tax is progressive, ranging from 0.2% to 2.5% depending on the total value of the assets. For example, if your assets are valued at €840,000, the taxable amount would be €140,000 (€840,000 minus €700,000 exemption), and the tax could be approximately €280 annually at the lowest rate of 0.2%. If one of the properties is your main residence, you may be eligible for an additional exemption of €300,000, which could reduce or eliminate this tax liability.

However, if a married couple purchases the property in joint ownership and the total value of the properties is €840,000, with each owning a 50-50% share, then each person’s share will be €420,000. Since the wealth tax exemption in Andalusia is set at €700,000 per person, neither of them exceeds this threshold, and therefore, they do not have to pay wealth tax.

3. Common Charges – Charges for Shared Premises and Services

Common charges are those paid by property owners in shared buildings or complexes such as flats, terraced houses, and villas. Their main purpose is to cover the cost of maintaining and upkeeping the common areas within the property.

Their amount varies depending on the type of common facilities of the apartment building or complex. If you do not pay these fees, you may have legal problems and, for example, you may not be allowed to use the swimming pool.

Don’t forget that you need to think about common charges when buying a property in Spain as they are part of the ongoing costs. Most of the time, these fees range from €50 to €300 per month, but sometimes, in luxury communities, they can be higher.

4. Waste Collection and Disposal (Basura)

Property owners in Spain have to pay an annual waste tax. Costs vary depending on location and are often part of the IBI mentioned above. The money from the waste tax is used to collect household waste, keep the streets clean, and maintain collection yards. Basura is usually between EUR 50 and EUR 400 per year.

5. Overheads and Insurance

In short: water, gas, electricity, internet, property insurance. In many cases, they are not billed on an annual basis (monthly deposits), but based on the previous month’s actual consumption – so you have to allow for larger seasonal differences. When the property is not in use, overheads are minimal.

HOW MUCH WILL I PAY WHEN I SELL THE PROPERTY?  

1. Capital Gains Tax – 19%

f you sell the property for more than the price you bought it for, you will pay capital gains tax. If you are an EU citizen but not a tax resident (not staying in Spain for more than 183 days), your tax rate is 19%. If you come outside the EU your tax rate is 23%, 

Example: If you bought a property for €200,000 and sold it for €250,000, the resulting profit is €50,000. The tax rate on the profit is 19%, i.e., EUR 9,500.

Tip: If you have lived in the property for more than 3 years, you pay less tax in certain cases. If you have made improvements, repairs, or renovations to the property, you can also add these costs to the original price, which may reduce your taxable profit.

2. Tax Retention – 3%

It’s worth bearing in mind that if the seller is not a Spanish tax resident, the buyer is liable to pay 3% of the sale price to the tax authorities due to any capital gains tax. This tax must be paid by the seller.

If the seller has not made a profit, he can apply to the tax authorities for a refund of the 3% tax. If a profit has been made, this amount is included in the capital gains tax.

WHAT TAX DO I PAY WHEN I RENT OUT MY PROPERTY? 

1. Personal Income Tax – 19%

If the property generates income for you, you have to pay income tax in Spain. Of course, all expenses related to the rental are deductible.

  • If you handle your short-term rentals through a property management company, you need to attach the bills sent by the company showing the total income and fees of the company. In addition, of course, repairs, improvements, cleaning, painting, etc., can be accounted for.
  • If you are renting out the property yourself, you need to collect all the relevant invoices (Airbnb, Booking, cleaning company, insurance, etc.) with your tax return.

We can, of course, help you with your tax declaration.

In addition to the above, you may also come across the imputed income tax, which is not applied in many EU countries and is intended to balance social justice between property owners and tenants in the property market. However, the rate is very low. It is also worth mentioning the solidarity tax, which means that if your assets exceed €3 million, you pay tax on the excess over €700,000. This is calculated separately for spouses, so you don’t have to consider this tax unless your combined assets exceed €6 million.

Better informed? We hope so. And we also hope that the detailed description has not put you off, but rather confirmed your conviction that there is no risk for you in Spain.

Of course not, because we are here for you!

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