Costs and taxes for buying and owning Spanish property

Buying a property in Spain is a great investment, as the rapidly growing Spanish property market confirms. However, in addition to the basic cost of the property, it is important to keep in mind that the buyer will also have to pay other fees, including significant taxes.

It is important to remember that fees and taxes vary depending on the region and autonomous community in which you plan to settle.

In this article, we will look at the main types of property taxes and cost in Spain that are payable when owning or buying a property in Spain, the differences that exist in the tax obligations of residents and non-residents, when and how taxes are paid, and any differences between regions or autonomous communities.

One of the main costs of buying a property in Spain is the Spanish government's property transfer tax.

The two main property transfer taxes in Spain are:

• IVA = (Impuesto de Valor Añadido - VAT)

• ITP – (Impuesto Transmision Patrimonial - Transfer Tax on Sale)

The Spanish government charges VAT (known as IVA in Spain) on the purchase of new property in Spain. The current tax rate is 10% of the purchase price of the property. So for new properties the IVA is .

The new property owner pays the Spanish IVA directly to the developer along with the money to pay for the purchase of the property, and the developer is responsible for passing it on to the government.

Buying a resale property in Spain incurs what is known as the ITP (Transfer Tax on Sale). The exact amount you will have to pay will depend on the value of the property and where the resale property is located, with tax rates ranging from 6% to 13%.

The reason the tax rate varies is due to the local Spanish property tax system, with each region imposing a local property tax.

The Spanish tax authorities require this Spanish property tax to be paid within one month of the date of purchase, and this is done at the local tax office. It is the buyer’s responsibility to ensure that the tax is paid to the local Spanish tax office.

• Land Registry Fees

Registering new title deeds at the Spanish Land Registry when purchasing a property will incur a property registration fee. Although registering the purchase at the Land Registry is not mandatory, it is highly recommended to protect your title and if a mortgage is used to finance the purchase, this will be a requirement of the Spanish bank to provide the finance.

The fees charged by the Land Registry vary depending on the value of the property.  A minimum and maximum fee are set: the minimum fee is set at 24 euros and the maximum at 2181 euros. 

 

Costs of owning a Spanish property, paid by property owners.

There are a number of taxes or costs associated with owning a property in Spain. Some of these vary depending on whether the owner is a tax resident in Spain.

The main costs associated with owning a property are:

• IBI (impuestos de Bienes Inmuebles)

The IBI tax is an annual tax paid on the ownership of a property. You usually pay your IBI tax in Spain once a year (sometimes quarterly) at the town hall, and the exact date of payment varies by region, although it is most often at the end of the calendar year.

The amount to be paid is expressed as a percentage of the “cadastral” value of the property.

The cadastral value is the value of the property expressed in euros, and is assigned to the property as a reference value for local administrative matters such as the IBI tax.

! It is not linked to the actual price you paid for the property, but is assigned by the registry. When buying, be sure to check the cadastral value of the property you are interested in.

The IBI tax is determined by multiplying the cadastral value by a coefficient or percentage. For urban properties, this usually ranges from 0.4% to 1.1%.

• Community Fee

In Spain, there is a very high proportion of apartment-style properties and urbanisations.

When several owners share common areas of the property, such as the lifts in the building, the garden, security, the car park or the swimming pool, there are costs associated with the maintenance of these common facilities.

Accordingly, each owner is required to contribute financially to the maintenance through a community fee, known in Spain as “la comunidad”.

The amount to be paid varies from building to building or from urbanisation to urbanisation, but will also be determined by the size of the property.

• Other Charges

In addition to the basic taxes and fees described above, there may be other additional fees to pay, such as waste collection and water and electricity charges.

Usually, owners have direct contracts with service companies and when the property is sold, these contracts are transferred to the new owner. However, there are cases where the old owner breaks the contract and then connecting water and electricity can be a significant amount.

• Non Resident Income Tax in Spain

Non-residents who own property in Spain are required to pay a tax known locally as IRNR (Impuesto sobre la Renta de no Residentes). 

This type of Spanish income tax is an annual “imputed income tax” based on the cadastral value of the property. The taxable base is 2% of the cadastral value of the property (1.1% if this value has been revised within the last 10 years) and the tax rate is 24% for non-EU residents and 19% for non-residents who are tax residents in EU member states.

If the property is rented out to third parties, the property owner must pay income tax on any income earned from renting out the property.

EU residents have a personal income tax rate of 19% payable to the Spanish tax office after deducting expenses and charges from their taxable income. 

However, non-EU residents, including UK residents, who earn rental income from their property pay a higher rate of 24% on their gross rental income, meaning rental costs and expenses cannot be deducted.

Conclusion

As you can see, there are a number of important tax implications when buying a Spanish property, and you will inevitably have to pay Spanish taxes.

However, as we have discussed above, your specific tax liability will be determined by your individual circumstances, in particular the size of the property, its value, its location and whether or not you are a resident of Spain.