Get expert’s guidance to navigate your complex property tax laws from Legal Management and ensure to optimize your tax liabilities and compliance strategies.
Spain has a wide range of property taxes that owners should be aware of. These taxes can affect the purchase, ownership, rental and sale of property. Our team of experts is focused on helping you navigate this multitude of tax requirements. We offer assistance in paying taxes properly, avoiding penalties and implementing strategies to optimize and minimize tax payments.
We often buy property in Spain as an investment and/or to spend our holidays here. What are your running costs if you are not a tax resident in Spain?
Let us take an example from a client of mine who owns a property valued at 1.2-1.3 million €:
a) – Property tax (IBI): Property tax is paid annually and is the responsibility of each Autonomous Community. Therefore the cost varies depending on the location of the property. Nevertheless, the cost of the IBI is limited to a minimum of 0.4% and a maximum of 1.3% of the cadastral value of the property.
Don’t worry: the cadastral value is far below the real value of the property. In my client’s case, the cadastral value is around €165,000, and he pays a property tax of around €900 per year. (0,55%)
b) – Wealth tax: As a non-resident, you pay wealth tax on the assets you own in Spain. It is calculated as follows:
The cadastral value of the property x 1.1%/2% x 0.19.
Whether we multiply the cadastral value by 1.1% or 2% depends on whether the cadastral value has been updated in the last 10 years. If the owner does not update the value, we calculate 2% of the cadastral. My client pays a property tax of approx. 627€ per year.
c) – Shared housing costs (Cuota de comunidad): It is not uncommon for properties in Spain to be in shared flats, which have their own large garden and pool, resulting in high communal living costs.
My client pays 200€ per month “maintenance costs”. This means that it might incur further costs during the year for repairs or other work.
In total, my client pays running costs of around €4,000 per year. Please note that we do not calculate water, gas and electricity costs, which can be quite expensive.
What taxes do we pay as property owners in Spain? We are going to explain the taxes based on an example of a client who owns a property worth between €1,200,000 and €1,300,000.
a) – Property tax (IBI): Property owners pay property tax annually and is the responsibility of each Autonomous Community. Therefore the cost varies depending on the location of the property. Nevertheless, the cost of the IBI is limited to a minimum of 0.4% and a maximum of 1.3% of the cadastral value of the property.
Don’t worry: the cadastral value is far below the real value of the property. In the case of my client, the cadastral value is around €165,000 and he pays a property tax of around €900 per year. (0,55%)
b) – Wealth tax: As a non-resident, you pay wealth tax on the assets you own in Spain. We calculate it as follows.
Cadastral value of the property x 1.1%/2% x 0.19.
Whether we multiply the cadastral value by 1.1% or 2% depends on whether the cadastral value has been updated in the last 10 years. If the owner does not update the value, 2% of the cadastral value is calculated. My client pays a property tax of approx. 627€ per year.
c) – Property transfer tax (ITP): The property transfer tax in Spain is relatively high compared to the property transfer tax paid in Germany for the purchase of property.
0-400.000€: 8%
400.000€-600.000€: 9%
600.000€-1.000.000€: 10%
1.000.000€+: 11%
For example, if you were to buy a property for €1,200,000, you would have to pay land transfer tax of no less than €112,000.
d)- Taxes on rental income: As non-residents, we pay a fixed tax rate of 19% on our rental income in Spain (if you are an EU citizen). However, please note that you will normally have to pay additional taxes in the country of your main residence.
e) – Speculation tax when selling the property: The so-called speculation tax does apply in Spain under any circumstances. Regardless of how long you have owned the property, you must pay tax on the capital gains at a fixed rate of 19%. Whether you pay further taxes in your home country depends entirely on the regulations there.
