Paying property tax In Spain

22.05.17
9 minute read
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Whether you’re looking to live life at a more relaxed pace or simply want a break from the hustle and bustle of daily life, Spain is always a popular choice.

With long hours of sunshine, beautiful scenery, great food and friendly people, there’s lots to love.

And if that were not enough, property prices are quite low compared to the rest of Europe, which makes getting your own place in the sun all the more tempting.

Unfortunately, there’s more to buying and owning a property in Spain than just paying the sale price. The list of fees and taxes is long, and costs can quickly add up.

Read on to find out more.

What taxes do I need to pay?

Broadly speaking, there are two main categories of taxes you need to consider when buying a property in Spain: sales taxes and maintenance taxes.

Sales taxes are due at the time you buy or sell your property, whilst maintenance taxes are payable on an ongoing basis.

Let’s have a look now at each category.

Sales taxes

Which taxes are payable depends on whether the property is a new build or a resale. There are also a number of fees due on every property purchase.

New builds

A new build is a property that is being sold for the first time. You’d normally buy this kind of property from a developer or a bank.

As a buyer, there are two taxes you’ll need to pay on new builds: VAT (called IVA in Spain) and stamp duty.

VAT is currently set at 10% of the purchase price, except in the Canary Islands. Here, VAT is known as IGIC (Impuesto General Indirecto Canario), and it’s 4.5% of the sale price.

You’ll also have to pay VAT if you purchase a commercial property or a plot of land. In this case the amount of VAT payable is 21% of the purchase price.

Stamp duty is normally 1% of the purchase price. However, it may vary in different regions, so it’s a good idea to check with the regional government. In Andalucia, for example, stamp duty is 1.5%, while in Murcia it’s 2%.

You’ll usually need to pay at least part of the VAT and stamp duty at the time you make your deposit, settling the rest when you sign the contract of sale.

Resale properties

A resale property is any property that isn’t being sold for the first time.

In this case, you won’t have to pay VAT or stamp duty. Instead, you’ll need to pay transfer tax (impuesto sobre transmisiones patrimoniales), which is due upon signing the contract of sale.

As a general rule, transfer tax is 7% of the purchase price. However, many regions apply their own rate of tax (which can be as high as 11%), so you’ll need to check with your region.

Land appreciation tax (Plusvalía)

Land appreciation tax is payable on every transfer of property, whether it’s a new build or a resale.

It’s a tax on the increase in value of a property since the last transfer of ownership, and it’s due to the municipality where the property is situated, within 30 days of the date of sale.

The tax is calculated as a percentage of the property’s cadastral value - the value given to the property by the municipal government - but it can vary quite a lot. Factors affecting it include the property’s size, whether it’s a new build or an old one, the number of years the seller has owned the land and even the municipality’s population.

Land appreciation tax is normally payable by the seller. However, it’s not unusual to negotiate its payment during a sale, and some vendors will insist the buyer should pay it directly, or at least refund it. You can confirm the cost at the municipal tax office (recaudación municipal) before you sign the contract of sale.

Capital gains

As a seller, you’ll have to pay capital gains tax on your profits from the sale. This is calculated as a percentage of the sale price.

Capital gains tax is 19% for non residents, while residents pay it on a sliding scale as follows:

  1. 19% on the first €6,000;
  2. 21% on €6,000 to €50,000; and
  3. 23% on €50,000 and above

If you’re a resident, however, you can apply for tax relief; provided you’ve lived in the property for at least three years before selling it.

Normally, the buyer holds 3% of the purchase price and pays part of the capital gains tax on the seller’s behalf. As a seller, you’ll then have to file a tax return and pay the remainder within one month of the sale.

Sometimes, it may turn out that you’re due a refund. Unfortunately, tax due is payable immediately, whereas you’ll have to wait at least a few months for a refund. Either way, you’ll need to obtain proof of original payment from the buyer in order to file your return. This is a form called Modelo 211.

Other fees

While strictly speaking, these aren’t taxes, they’re still due on every property purchase and they can add up. You’ll need to take them into consideration when budgeting for your purchase or setting your sale price.

Registration fees

When you purchase a property, you’ll need to register your title deed with the land registry.

The fee will vary depending on the property and the area. However, you should expect to pay between €400 and €800. A portion of the fee is due as part of your deposit, and the rest is payable on the day you sign the contract of sale.

Notarial fees

As a rule, notarial fees are paid by the buyer. You should expect to pay between 0.5% and 1% of the purchase price.

Banking fees

Many sellers will only accept a banker’s cheque issued by a Spanish bank as payment, so you’ll need to open a Spanish bank account before you can purchase a property. Most banks will charge a fee to issue a banker’s cheque, often in the region of 0.3% to 0.5% of the amount.

Obviously, you’ll need to transfer money into your Spanish account, so you should also take international transfer fees and the exchange rate (if applicable) into account. Your bank should have a schedule of fees that outlines all the fees and charges involved.

If you’re paying for your property with a mortgage, you’ll need to budget for a number of additional costs.

Most banks will want to value the property before approving your mortgage. You should expect to pay about €500 for this. Very often, you’ll also have to pay an opening fee and a processing fee.

A mortgage will also increase notarial fees.

Legal fees

While it isn’t strictly necessary, it’s a very good idea to hire a good lawyer well versed in Spanish property law to act on your behalf.

Your lawyer will explain the process to you, draft contracts, carry out any background checks, prepare the relevant documentation and generally ensure that you are not being treated unfairly or illegally.

Legal fees will vary depending on the amount of work involved. Different lawyers may also price their services differently. Many charge per hour, but some may charge you a percentage of the sale price.

Agency fees

While hiring one isn’t strictly necessary, agencies are often involved in property sales.

Agency fees are normally paid by the seller, unless specifically agreed otherwise by the buyer. The fee can be upwards of 2% of the purchase price.

If, as a buyer, you hire an agency to help you find a property, you’ll be responsible for its fees.

Survey fees

Hiring a surveyor also isn’t absolutely necessary, but it’s a good idea.

A surveyor will inspect the building and check it for any structural or other problems. The surveyor will also carry out a valuation, so you’ll ensure you’re not paying more than you should.

Depending on the type of property and the complexity of the survey, fees can range from €500 to €2,000.

Summary of sales taxes and fees

New Build Rebuild Buyer Seller Cost
VAT 10% (4.5% in the Canary Islands)
Stamp Duty 1%(May vary by region)
Transfer Tax 7%(may vary by region)
Capital Gains 3% paid by buyer on behalf of seller Non-residents: 19%_Residents:19 - 23%
Plusvalía (Land Appreciation Tax) Seller may insist buyer pays it Variable per municipality
Land Registration Approx.€400 - €800
Notary Approx.0.5 - 1%
Legal Fees Optional but recommended Optional but recommended Variable and negotiable
Banking Fees Variable
Agency Fees Optional Optional Buyer pays if hires agency / may agree to pay agency fees VariableApprox. 2% +
Survey Fees Optional Optional VariableApprox. €500 - €2,000

Source: www.spainaccountants.com, www.spanishpropertyinsight.com and

www.mamsolicitors.com as at April 2017

Maintenance taxes

As a property owner, you’ll need to pay property ownership tax and wealth tax, whether you’re a resident or a non-resident.

If you’re a non-resident, you’ll also have to pay income tax on real or potential income generated by your property.

Property ownership tax

Property ownership tax (impuesto sobre bienes inmuebles, or IBI), is due to your local government authority. It’s based on your property’s cadastral value and payable each year.

Because it’s a local tax, it varies from area to area. Factors that are usually taken into account when calculating the tax include whether the area is urban or rural (urban areas typically have higher taxes), the building’s age, the type of property and it’s overall size.

As a general rule, IBI is about 0.3 to 0.5% of your property’s cadastral value, which is usually about 70% of your property’s real value. You can check the total amount of tax due at your local town hall.

Wealth tax (Impuesto Sobre El Patrimonio)

Wealth tax is a tax on the total value of your estate, including your property. The Spanish government has said it intends to abolish it in 2017, but for the time being it looks like it’s here to stay.

The tax applies to both residents and non-residents, but there are some differences.

If you’re a resident, you pay wealth tax according to the rules of your regional government. Some regions use national rules, whilst others have their own rules, including different tax free allowances and rates. Non-residents, on the other hand, pay wealth tax according to national rules.

Currently, you don’t have to pay wealth tax on your first €700k. Residents also benefit from an additional tax free allowance of up to €300k per individual on the value of their main residence.

Anything above your tax free allowance is taxed according to a sliding scale. The current national rates are as follows:

Excess as from €700,000 To Tax Rate (%)
Nil 167,129 0.2
167,129 334,235 0.3
334,235 668,500 0.5
668,500 1,337,000 0.9
1,337,000 2,673,999 1.3
2,673,999 5,347,998 1.7
5,347,998 10,695,996 2.1
Over 10,695,996 2.5

Source: www.spanishpropertyinsight.com as at April 2017

Income tax

If you’re a non-resident, you have to pay tax on all income generated in Spain, including income from property. This tax is called Impuesto sobre la Renta de No Residentes, or IRNR.

IRNR is due whether your property generates income or not. You can pay it online on a quarterly basis.

If you do rent out your property, calculating the tax due is relatively straightforward.

If you’re an EU citizen, you can deduct any rental expenses, including any interest you pay on a mortgage. Tax due is 19% of your net rental income.

If you’re not an EU citizen, you can’t make any deductions. Tax due is 24% of your gross rental income.

If you don’t rent out your property, you’ll be taxed on the potential income your property could generate if you had rented it out. Currently, this is 1.1% of your property’s *cadastra*l value. You can find this value on your latest IBI bill.

The tax due is 19% for EU citizens and 24% for citizens of other countries.

Summary of maintenance taxes

Resident Non-Resident Cost
Local Property Tax (IBI) VariableApprox. 0.3 - 0.5% of property’s cadastral value.
Wealth Tax VariableFirst €700k tax freeAdditional €300k for non residents
Income Tax (IRNR) EU: 19% of net income_Non-EU: 24% of gross income

Source: www.spanishpropertyinsight.com as at April 2017

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