Are you considering investing in property in Spain as a foreigner? Understanding the intricacies of property tax in Spain is essential to ensure a smooth and successful purchasing process. In this comprehensive guide, we will provide you with all the information you need to know about property tax in Spain, specifically tailored for foreigners.
As foreigners, it’s important to be aware of the tax obligations when buying, owning, and selling property in Spain. This guide will cover key topics such as the different types of property taxes, how they are calculated, and the deadlines for payment. We will also explore any potential tax exemptions that may apply to you as a foreigner.
By gaining a thorough understanding of property tax in Spain, you will be better equipped to make informed decisions and avoid any unexpected financial burdens. Whether you are looking to purchase a holiday home or invest in rental property, this guide will be an invaluable resource for navigating the Spanish taxation system.
Take control of your property investment journey in Spain by diving into our complete guide to understanding property tax for foreigners today.
Understanding the different types of property taxes in Spain
When it comes to property tax in Spain, there are several types that you need to be aware of.
We will differentiate the property taxes during the purchase itself and after the sale when you already own the property.
Property tax in Spain for foreigners when you are buying a Property in Spain
It is important to say that property tax in Spain for foreigners when you buy a property are the same as Spaniards paid, i.e. foreigners pay the same property taxes as Spaniards when buying a property in Spain. The tax is a function of the house, not whether the person is a resident or not.
Let’s separate if the house you buy is new property or a second hand property.
You buy a new house
If you buy a new house you will pay two taxes:
– VAT ( impuesto sobre el valor añadido) 10% (in the Valencian community) on the sale price. VAT is paid to the builder.
– ADJ (actos jurídicos documentados ) 1,5 to 2 % depending on the community where the house is located. The ADJ is paid within 30 days after the signature at the notary.
Note : apart from the taxes you will have to pay the notary’s fees, the land registry fees and the lawyer’s or consultant’s fees.
Buying a second hand property
If you buy a second hand property you will pay one tax:
– ITP (Impuesto de Transmisiones Patrimoniales) 10% (in the Valencian Community) on the sale price or the reference value (the value calculated by the land registry).
The ITP is payable within 30 days after the signature at the notary.
Note, i.e. if the reference value is higher than the sales price, you will pay 10% of the reference value. Therefore always ask beforehand what is the reference value of the property you are going to buy.
Apart from the taxes you will have to pay the notary’s fees, the land registry fees and the lawyer’s fees.
Property tax in Spain for foreigners when you are the owner of the property
When you are the onwer of a property in Spain all owner have to pay 2 taxes:
The two main taxes are :
1 – The Impuesto sobre Bienes Inmuebles (IBI)
The IBI is an annual tax that is levied on the ownership of property in Spain. It is based on the cadastral value of the property, which is determined by the local municipality. The IBI is used to fund local services and infrastructure, such as street maintenance and garbage collection.
Calculating property tax in Spain can seem complex, but it follows a relatively straightforward formula. The IBI tax is calculated by applying a tax rate set by the local municipality to the cadastral value of the property. The cadastral value is determined by the municipal authorities and is updated periodically.
2 – Non resident tax
- Rental incomes
If you rent your Spanish property you must declare the profit every quarter. Non resident tax rental income has 2 categories. Rental Property tax in Spain for foreigners diference between: european persons and non european persons. European individuals pays diferent taxes than non european persons.
How is the rental income non resident tax calculated in Spain?
Europeans declare income net of expenses and pay 19% tax.
Non-Europeans declare income but cannot deduct expenses and pay 24% tax.
Imputation of real estate income
As owner of a property in Spain you have to pay a tax for the imputation of real estate incomes.
How is the imputation of income calculated in Spain?
The imputed rent is the result of multiplying the cadastral value of the property by 2%. This value is multiplied by the percentage established by each town hall. Sometimes is multiplyinf tomes 1,1% if the cadastral value have been reviewed.
This tax is paid at the end of the folling year and mus t be submited online. A gestor or Solcitor use to submit this tax.
Understanding these two main types of property taxes in Spain is crucial for foreigners looking to invest in property. By familiarizing yourself with these taxes, you can better estimate the overall costs of owning property in Spain.
Property tax when you are selling your property in Spain
Capital gain tax in Spain
When you sell a property in Spain you must pay a tax on the profit you make on the sale.
how to calculate capital gains in spain
the sale value minus the sale costs minus the purchase price minus the purchase costs
For example if you sell a house for € 200.000
Value of the sale € 200.000,00
Plusvalia Tax – € 1.000,00
Real estae agent fees – € 5.000,00
Purchase price – € 150.000,00
Taxes on purchase – € 15.000,00
Notary fees on purchase – € 1.000,00
Land registry fees on purchase – € 500,00
Consultancy fees – € 1.210,00
Result € 26.290,00
Capital gain tax to pay for foreigners in Spain
19 % on €26.290 for european person
24% on € 26.290 for non european person
The Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana (IIVTNU), also known as the “Plusvalía” tax.
The Plusvalía tax, on the other hand, is a tax that is levied on the increase in the value of urban land when it is sold. It is calculated based on the number of years the property has been owned and the cadastral value of the land. It is important to note that this tax is paid by the seller, not the buyer.
The Plusvalía tax is calculated based on the number of years the property has been owned and the cadastral value of the land. The tax rate for the Plusvalía tax varies depending on the municipality.
To ensure accurate calculations, it is important to consult with a qualified professional or use online calculators provided by the Spanish tax authorities. By understanding how property tax is calculated, you can better estimate your tax obligations and plan your finances accordingly.
Tax residency and its implications on property tax
Tax residency plays a significant role in determining your obligations as a property owner in Spain. If you spend more than 183 days in Spain in a calendar year, you are considered a tax resident and are subject to Spanish tax laws. As a tax resident, you will need to declare your worldwide income, including any rental income from your Spanish property.
On the other hand, if you spend less than 183 days in Spain, you are considered a non-resident for tax purposes. Non-residents are only required to declare income generated in Spain, such as rental income. It is important to note that non-resident property owners are subject to same tax rates compared to tax residents but different tax form.
Understanding your tax residency status is crucial for complying with Spanish tax laws and determining the applicable tax rates for your property.
Exemptions and deductions for property tax in Spain
As a foreigner, you may be eligible for certain exemptions and deductions when it comes to property tax in Spain. For example, if you purchase a new property, you may be exempt from paying the Plusvalía tax for a certain period of time. Additionally, if you rent out your property, you may be able to deduct certain expenses from your rental income if you are an euroepan persons
It is important to consult with a tax advisor or lawyer who specializes in Spanish tax law to determine if you qualify for any exemptions or deductions. By taking advantage of these opportunities, you can potentially reduce your property tax liability and maximize your returns on investment.
Important deadlines and procedures for property tax payments
Property tax payments in Spain have specific deadlines that must be adhered to. The exact deadlines may vary depending on the municipality, so it is important to check with the local tax office for the specific dates.
Typically, the IBI tax is paid annually, while the Plusvalía tax is paid at the time of property sale. Failure to pay property taxes on time can result in penalties and interest charges.
To ensure a smooth and efficient payment process, it is advisable to set up automatic payments or work with a bank or tax advisor who can assist you in meeting the deadlines and fulfilling your tax obligations.
Common misconceptions about property tax in Spain for foreigners
There are several common misconceptions about property tax in Spain for foreigners that need to be clarified. One such misconception is that foreign property owners are taxed at a higher rate compared to Spanish citizens. In reality, the tax rates for property owners are the same for both foreigners and Spanish citizens.
Another misconception is that property taxes in Spain are excessively high. While property taxes may vary depending on the location and value of the property, they are generally comparable to other European countries.
Understanding and dispelling these misconceptions is crucial for foreign investors who may be hesitant to invest in Spanish property due to perceived tax burdens. By having accurate information, you can make informed decisions and confidently pursue your property investment goals in Spain.
Tips for minimizing property tax in Spain
While property taxes are an unavoidable part of owning property in Spain, there are several strategies you can employ to minimize your tax burden. One effective strategy is to make use of any available deductions or exemptions, as mentioned earlier.
Another strategy is to consider the location of your property. Different municipalities in Spain have different tax rates and regulations. By carefully selecting a municipality with lower tax rates, you can potentially reduce your property tax liability.
Additionally, it is important to keep accurate records of your property-related expenses, such as maintenance and repairs. These expenses can be deducted from your rental income, reducing your taxable income.
By implementing these strategies and seeking professional advice, you can effectively minimize your property tax liability in Spain and optimize your investment returns.
Seeking professional advice for property tax in Spain
Given the complexities of property tax in Spain, it is advisable to seek professional advice from a tax advisor or lawyer who specializes in Spanish tax law. They can provide personalized guidance based on your specific circumstances and ensure that you are fully compliant with Spanish tax regulations.
A qualified professional can assist you in understanding your tax residency status, calculating your property tax obligations, and identifying any available exemptions or deductions. They can also help you navigate the tax payment procedures and ensure that all deadlines are met.
By working with a professional, you can have peace of mind knowing that your property tax affairs are in order and that you are optimizing your tax position in Spain.
Conclusion: Key takeaways for understanding property tax in Spain for foreigners
NEW BUILD MODERN VILLAS IN BENIJOFAR
Benijofar, Costa Blanca South Spain
NEW BUILD APARTMENTS IN VILLAJOYOSA CLOSE TO THE SEA
Villajoyosa, Costa Blanca North Spain, Alicante
NEW BUILD VILLAS IN SAN MIGUEL DE SALINAS
San Miguel de Salinas, Costa Blanca South Spain
Relaxation and well-being by the Mediterranean
Denia, Costa Blanca North SpainIn conclusion, understanding property tax in Spain is crucial for foreigners looking to invest in property. By familiarizing yourself with the different types of property taxes, tax residency implications, calculation methods, exemptions and deductions, payment deadlines, and common misconceptions, you can make informed decisions and navigate the Spanish taxation system with confidence.
Remember to consult with a qualified professional to ensure that you fully understand your tax obligations and take advantage of any available opportunities to minimize your tax liability. With the right knowledge and guidance, you can successfully navigate the world of property tax in Spain and make the most of your investment.
Take control of your property investment journey in Spain by diving into our complete guide to understanding property tax for foreigners today.
