Property Tax in Spain: Read Our Overview

Property tax in Spain is the taxation on real estate, and it is a very common Spanish tax. You will have to pay multiple taxes on your property, and in Spain, all property owners are required to pay these taxes.

You must apply for a NIE (Número de Identificación de Extranjero) to pay these taxes, which is your Spanish tax identification number. When purchasing a home in Spain, you must also have this number. This number identifies you with the Spanish authorities and is required to pay taxes.

Property taxes in Spain for non-residents

You are subject to income tax (including capital gains tax), annual property tax, wealth tax, and stamp duty if you reside in Spain as a non-resident.

Spanish income tax

The income tax for non-residents is limited to income from Spain only. A non-resident is always taxed at a flat 19% when you are from Europe and at 24% if from somewhere else.

When renting out a property in Spain, you will have to pay rental income tax. Non-residents only have to pay income tax over the income they get within Spain only.

Next to this, when you sell your property, you will have to pay capital gains tax on it. You do this via the income tax declaration form as well. In this way, the capital gains tax includes your income tax.

Annual property tax

When you are not renting out your property in Spain and using it for personal uses, you will also have to pay a tax based on the percentage of the value of your property. This is called the IBI tax. Next to the IBI tax, you will have to pay another tax that is the IRNR (Impuestos sobre la Renta de No Residentes).

IBI tax on property in Spain

The “Impuesto sobre Bienes Inmuebles,” or IBI, is the annual property tax in Spanish. The tax rises every year based on inflation. The tax rate for each year is between 0.4 per cent and 1.4 per cent of the property’s cadastral value.

The cadastral value is the Spanish authorities’ value for your property, and your real estate lawyer will be able to provide it. You can object to increases in the cadastral value, so you won’t have to pay more at the Spanish tax office, but you will have to provide good reasons for it.

The municipality’s annual real estate tax is a local property tax, and IBI tax rates increase every year depending on inflation. Remember that the cadastral value for the same size of properties in the same area can vary dramatically.

The IBI also takes into account your cadastral reference number, which identifies your property at the cadastral office, in addition to the assessed value of your home (cadastral value). This may be crucial when purchasing and selling properties because the physical description on the title deed does not match that on paper.

In general, the IBI bill will be sent to you, or you can pay it online. Your local tax office (SUMA) will handle the payments of the IBI.

IRNR tax on property in Spain

This tax is for non-residents that own property in Spain. The government created it under the assumption that non-resident property owners somehow profit from having a holiday home in Spain, even though they don’t rent it out.

Even if the owner does not receive any income or rent from their home, the property is taxed 1.1% or 2% profit on the property’s cadastral value. The amount of taxes varies on whether or not this cadastral value has been updated (1.1%) or not (2%). The tax is reported via the Modelo 210.

Wealth tax

The wealth tax in Spain is an annual tax on the wealth over a certain threshold that you own in Spain. This includes your Spanish property and other assets such as cash, cars, artwork etc.

The tax is levied on the market value of your total assets each year. As this amount increases every year, so will the resulting taxes owed to the Spanish government. You will have to pay wealth tax when your assets in Spain are over 700,000 euros.

Property taxes for residents

You are subject to income tax, capital gains tax, annual property tax, and wealth tax if you are a resident.

Spanish income tax

When you get a Spanish rental income from your property or properties in Spain. You will of course be obligated to pay tax. Residents of Spain will always have to pay the rental income tax in Spain.

The percentage to pay ranges from 15% for low-income individuals and 30% or 40% for those with high income.

When you rent out your property, you will have to pay taxes on your rental income, and this rental income tax is called notional rental.

Annual property tax

In Spain, there is an annual property tax. The annual property tax is derived from the cadastral value of the property. The tax is called the IBI, “Impuesto sobre Bienes Inmuebles”. The tax increases every year depending on inflation.

The annual tax rate is 0.4 per cent to 1.4 per cent of the property’s cadastral valuation. The yearly tax is set by the municipality and can vary a lot.

Wealth tax

As a resident in Spain, you will have to pay wealth tax on your worldwide assets. The wealth tax is a progressive tax rate.

You will have to pay wealth tax over the value of assets above 700.000 euros, and you don’t have to pay wealth tax on the first 300.000 euros of your home property.

The wealth tax is a tax put by the autonomous regions, and it differs from region to region.

The wealth tax can be complex to pay, especially for foreigners. It is recommended that you hire a Spanish accountant.

Property tax when purchasing new properties

When you purchase a new property in Spain, you will have to pay Stamp tax and VAT.

The Stamp Duty

The stamp duty is a fee that any person or entity that buys a new property needs to pay. The Spanish government sets this fee. The stamp duty is 1.5% of the sale of the property, and they are charged on top of the property price.

VAT

On top of the stamp duty, a 10% value-added tax (IVA in Spanish) is levied on the purchase price. While this seems higher than the tax on resale properties (ITP), this tax can be deducted from other expenses when buying property under a business.

Actos Juridicos Documentados (AJD)

The notorious mortgage tax or AJD (Actos Juridicos Documentados) is one of the taxes you must pay in Spain. This tax is known to vary by region, with a minimum of 1% and a maximum of 1.5%.

The percentage is determined on the basis of the “Responsabilidad Hipotecario,” which means “mortgage responsibility”. The mortgage responsibility is what the bank would owe if the person failed to pay for a period. It is an average of what it costs if they go to court and how much money the bank may need.

This is generally equivalent to between 150 and 200 per cent of the mortgage amount.

Property tax in Spain when purchasing resale properties

When ​you purchase a resale property in Spain, there are two taxes that you need to pay: the ITP and the AJD

The Impuesto de Transmisiones Patrimoniales (ITP)

The only tax imposed on real estate resale is transfer tax (Impuesto de Transmisiones Patrimoniales/ITP in Spanish). The autonomous regions set ITP. The amount owed is determined on a sliding scale depending on the property’s price. In general, ITP adds between 8% and 11% to the cost of buying a property.

Actos Juridicos Documentados (AJD)

As mentioned before you will have to pay the AJD. which is 1 to 1.5 per cent of the mortgage responsibility.

Selling a property in Spain

Because the Spanish Tax Agency (Hacienda) may check your records at the time of property sale, you can’t avoid paying property tax in Spain.

3% deposit for capital gainst tax

The Spanish Tax Authorities will require a 3% deposit within 3 months of the time of sale. The deposit is a guarantee against capital gains tax, income tax, and wealth tax in the previous four years, as well as a guarantee against your tax debt on capital gains. When you have paid your taxes and the 3% was not needed, then you get them back at your next Spanish tax return. At the time of sale, you will have to submit the sales agreement in order to pay this real estate tax.

Capital gains tax

When selling the property, you will have to pay capital gains tax. The capital gains tax for residents is:

• 19%: for the first 6.000€ obtained as a profit
• 21%: From 6.000€ to 50.000€
• 23%: From 50.000€ onwards
• 26%: From €200.000+

Fee’s

Many of the fee’s associated with the selling of property in Spain, are often paid by the buyer. However, you can expect:

• Estate agent fee (around 4.5% of the sales price)
• Bank transfer fee’s
• Legal and financial fee’s (around 800 euro)

How to pay Spanish property taxes

For a non-resident, the best solution is to pay the tax by direct debit. The bank will provide you with a form authorizing the bank to pay the tax, and a copy of the document will be deposited with the local council. This will ensure that taxes are paid at the right time, just like other utility bills owned by you.

You will receive a letter from the municipality about your local taxes, while your annual income tax should be done on your annual personal income tax return.

The Spanish tax authorities are strict about the late payment of taxes, and any delay will result in penalties or fines, which can be very expensive. Next to this, your property must be adequately registered with the Spanish tax authorities for them not to claim that you are avoiding property taxes as well.

Frequently asked questions

Below you can find some frequently asked questions about Property tax in Spain.ert

Are there any other taxes I might have to deal with when selling or buying a property?

Yes, for example, you might encounter inheritance tax (succession tax), council tax, or other municipal tax. There are many taxes involved with buying and selling property in Spain, and it is advised to hire a tax advisor when dealing with the Spanish tax system.

Can you help me when I want to buy and let properties in Spain?

Yes, we offer a wide range of services for businesses such as company formation, accounting services, and property buying guidance. Get in touch with our team if you need any help or have any questions about buying and letting properties in Spain.

Get help with your property taxes

You need to pay any taxes when owning a property in Spain. If you want to be fully up-to-date with your tax payments, you should hire a Spanish tax advisor. Next to this, it is also recommended to hire a real estate lawyer when buying a property in Spain. If you want our help, you can contact us at contact@spaindesk.com.

Disclaimer: Information on this page may be incomplete or outdated. Under no circumstances should the information listed be considered professional legal advice. We highly recommend seeking guidance from a legal expert if you lack extensive knowledge or experience dealing with any of the procedures outlined in these articles.