TAXATION OF SPANISH PROPERTY
LOCAL TAXES
There are two local property taxes which are both based on the property’s rateable value, the “Valor Catastral”. This value is set by the local Town hall, and is adjusted in line with inflation. The rates of tax will vary from region to region due to the varying rates of tax imposed by the regional and local governments.
Local property tax (Impuesto Sobre Bienes Inmuebles (IBI))
This is the main local property tax affecting owners of properties in Spain payable yearly to the town hall. The amount of the tax is calculated by reference to the valor catastral (official value of the property) registered in respect of all properties in Spain. The percentage charged varies from area to area, and is roughly 0.5% to 1%.
Local mains drainage and waste collection tax (alcantarillado y basura)
This local tax payable by the property owner and is related to rubbish collection and drainage. The amount to pay varies from area to area, and should be paid to the local town hall every 3 or 6 months. This tax should be between €200 and €250 per year. In addition, if your Spanish property has a garage entry you are obliged to pay €18 per year.
PERSONAL TAXES
As a non-resident property owner in Spain, you may be liable for income tax, value added tax, wealth tax, capital gains tax and inheritance tax. Individual situations vary considerably and it is best to seek specialist advice from a tax consultant who has knowledge of the Spanish tax system.
Personal Income Tax (“Impuesto a la renta de las personas físicas”) each taxable situation may vary then we suggest you to get advice from an expert but we may mention some guidance in this point. Includes two concepts that are based on the cadastral value (“valor catastral”) which is the official value for taxes purposes. The rate varies in some autonomous community within Spain.
If the property you have bought is your permanent residence, there is an exemption. However, if it is your second residence and it is not rented to a third person, Spanish Tax authority will assume you are receiving an imputed income, which is about 2% of the cadastral value. Additionally, if you are non-resident tax-payer, you are obliged to pay a tax rate between 19% or 24% depending the type, amount of income as well as the country you are tax resident.
https://sede.agenciatributaria.gob.es/Sede/ayuda/manuales-videos-folletos/manuales-practicos/manual-tributacion-no-residentes/tributacion-rentas-comunes-obten-espana-nr/rentas-imputadas-bienes-inmuebles-urbanos.html
Capital Gains Tax.- The current level of capital gains tax is set at 19% to 26% for Spanish residents, except to those over the age of 65 that are exempted and those who are selling their permanent address that are exempted while reinvesting in another property for this purpose.
| Net Benefit = (Adquisition value + expenses ) – (Sale value – expenses) |
The tax rate is 19% to apply to the Benefit Value for both Spanish Tax Residents and Non-Residents. In the case of non-residents, the purchaser is obliged by law to retain 3% of the sales price and pay it directly to the tax authority (Tesoro Público) as credit for the pending tax. In the case that the 3% is greater than the actual capital gains tax payable, the vendor can reclaim this amount.
https://sede.agenciatributaria.gob.es/Sede/ayuda/manuales-videos-folletos/manuales-practicos/manual-tributacion-no-residentes/tributacion-rentas-comunes-obten-espana-nr/ganancias-patrimoniales/ganancias-patrimoniales-derivadas-venta-inmuebles.html
Wealth Tax- (“Impuesto al patrimonio”)- This national tax is applicable differently depending on the autonomous community you are resident. In Andalucia, the minimum exempted is 2.000.000,00€ of the net wealth value for Year 2022. However, it has been approved to abolish the tax from 2023.
Plusvalia
Plusvalia is a tax levied by the local Town Hall based on the particular area where the property is located, on the surface area of the land, on the Catastral value and on the date of the previous title deed. This tax is essentially a tax on the increase in value of the land may range from a few approximately £12 to tens of thousands, on larger properties owned for many years. By law the vendor (seller) is obliged to pay this tax but it is common practise for the parties to negotiate on who is to assume this liability.
https://cpd.sanroque.es/ap/sites_ayto/inicio/app/calculo_plusvalia.php
Inheritance Taxation.- Expats resident in Spain and paying tax are liable to pay Spanish Inheritance tax regardless of the country in which the inheritance is situated. Non-residents are liable to pay Inheritance Tax in Spain only on assets which are physically located in Spain. In Andalucia, is currently subsidised by 99% for spouse and direct relatives.
Again, this is a very basic but uncomplicated guide to Inheritance Tax. For a more in-depth guide, you will need to investigate the subject further and get professional financial advice.
There are ways to avoid and minimize Wealth Tax and Inheritance Tax
- Buy jointly with spouse and children and or future inheritors, to spread the wealth.
- Take out a mortgage loan on the property to reduce the Net wealth and liability.
- Buying or owning through a Spanish limited Company
- Buying or owning through an EU company
- Buying or owning through a UK limited company
- Sell the property to future inheritors either fully or partly.
- Organising life insurance ensuring adequate funds to cover the Inheritance Tax bill.
For a more in-depth guide, you will need to investigate the subject further and get professional financial advice.
Holmes Property Sales S.L. does not take responsibility for the accuracy of the information contained in this post, it may be out of date, incorrect or may not be applicable to your personal situation. It is meant to be used only as a guide. If you would like full detailed advise applicable to your own personal situation we recommend you speak to a professional legal and fiscal adviser.