The tax year in Spain is the calendar year ending on December 31st.
Spain has a Double-Taxation Treaty with many countries, including the UK. This means that total annual taxes are recovered in the relevant countries and not both. Taxes due in Spain are offset against domestic taxes, where such an agreement is in place. So a property investor or homebuyer should not be subjected to duplicate taxes, or paying tax twice. The Treaty has been renewed and came into force June 2014, with income tax and other changes, mainly for expats, coming into force in January and April, 2015.
Spain property transaction taxes - for the purchase
Taxes in Spain can be complicated and for residents it is advisable to employ an assessoria (accountant). For non-residents of Spain there is a legal requirement to have a nominated assessoria to take control of the annual tax returns. Spanish residency hinges on spending more than 183 days (about six months) in Spain in one calendar year (not necessarily consecutive days).
VAT Tax (IVA)
The standard rate is 21%.
Services linked to transport and purchases from a property developer (off plan, new build property) have a reduced rate of 10%
The Canary Islands, Ceuta and Melilla have a different rate.
NOTE: The Spanish Government temporarily cut VAT on new homes in Spain from 8% to 4% on 31.12.11. This was subsequently extended until 31.12.2012.
Transfer Tax (ATP) / Stamp Duty
Set by municipal governments and so can vary. It is levied on properties where VAT is not, so non-new or resale properties.
This tax is paid by the purchaser, or the beneficiary. The rate starts at 0.5% (for commercial activities) and rises to 10% (for property resale transactions).
Spain Property - Capital Gains tax
This tax is 30% for residents and 21-27% for non-residents.
Property Spain - Inheritance and Gift Tax
This tax applies to the beneficiaries of the inheritance or gift. The tax is on assets received over a certain value. Even if the beneficiaries are not residents of Spain, they must pay this tax when the assets, or rights, are located in Spain. The tax rate starts at 7.65% and rises to 34% for assets over a certain value. If the beneficiary is a child (under age 18) of the deceased, then the tax rate on the assets is reduced to 5%.
Spain Property taxes - ongoing for the property investor
Spanish Property Owners - Wealth Tax (impuesto sobre el patrimonio)
First introduced in 1977 as a temporary tax it lasted 3 decades, suspended in 2008 which brought Spain more in line with European neighbours, it then got re-introduced as an austerity measure in 2011, 2012 and extended to 2013, 2014
The tax (patrimonio) is paid on net assets above 700,000 Euros, with a main-home allowance of 300,000 Euros (not applicable to holiday-homes).
The autonomous governments are responsible for this tax, so local variations may occur.
Spain Income tax
Is split into general income (renta general) and savings income (renta del ahorro). General income is taxed at progressive scale rates, which range from 24.75% to 52% and can vary among autonomous regions.
Savings income is taxed at 21% and includes income from interest and dividends, income from a purchased annuity and capital gains.
Rental income is treated as general income, with allowable expenses deducted.
General income tax rate is 24.75%
Withholding tax on dividends, interest and CGT is 21-27%
Property Tax (IBI)
Each year, the municipality issues a property tax payment slip for all properties. The tax is usually between 0.5% and 1.1% of the official value (valor catastral) of your property, which is roughly 20 times lower than the market value.
Property Spain - Deemed rental income tax (Rendimientos del capital inmobiliario)
As a non-resident a "notional rental income" is levied by the Spanish tax authorities. So if your Spanish property is not rented out, or not your primary residence (i.e. a holiday home), you may be liable for the deemed rental income tax, whether the property is let or not, unless you can show it is not.
As a guideline the local town hall will charge according to the valor catastral (rateable value). It is assumed you are making 2% of this value in rent annually and charge you 25% of that "income", which equates to a total of 0.5% of the valor catastral (rateable value) of the property. For example, if you own a Spanish property with a valor catastral (rateable value) of €200,000 and you are not renting it out, you may still be liable for 25% of €4000, which equates to €1,000.
Municipal Tax (basura)
This varies depending on where you live, according to the Autonomous Community or Region's policy. It is usually assessed per house or building. Sometimes the tax is combined with water consumption. It is generally around euros 200-250 per annum.
Please note: this page is provided as guidance only to home buyers in layman's terms
For a quick overview of Spain’s country profile and macro-economic indicators, click on Spain - Snapshot Profile
To give you more background as to why you might consider investing in Spain, go to the Spanish cities and Costas section.
To see what property is available in Spain, click here on Spanish property If you cannot find what you like, please contact us on +44 (0)1932 849536, as we have lots more properties than are shown on the website.
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