Spain remains one of the most popular countries in Europe for foreigners to buy property. But, as in other EU countries, property ownership brings with it obligations – primarily tax obligations. Below is a short and easy to understand guide to property taxes in Spain for individuals.
Main taxes when buying a property
1. Property Transfer Tax (ITP)-applies to the purchase of secondary property, the rate depends on the region: from 6% to 11% of the cadastral or market value (the higher of the two is taken).
2. VAT (IVA) and stamp duty (AJD)- when buying a new property from a developer: VAT – 10% (for ordinary housing) or 21% (for commercial property)AJD – 0.5-1.5% depending on the region
Annual taxes for owners
1. IBI (Impuesto sobre Bienes Inmuebles) – tax on immovable property – compulsory for all owners – calculated on the basis of the cadastral value (valor catastral) – rate is set by municipalities and varies from 0.4% to 1.3% – for example, with a cadastral value of €100,000 the tax can be from €400 to €1,300 per year
2. Land Improvement Tax (Basura / Residuos Sólidos) – essentially a tax on rubbish collection – set by local authorities – from €50 to €200 per year, depending on the size of the property and the region
3. tax on property income (IRNR)-for non-residents who do not rent out their home-is taxed on the estimated income from owning the property (most commonly 1.1-2% of the cadastral value × 19% for EU/EEA or 24% for other countries)
4. tax on rental income – if you rent out a property, the income is taxed at the following rate: 19% – EU and EEA nationals (expenses can be deducted) 24% – other foreigners (expenses are disregarded).
Other possible improvements (contribuciones especiales) – when building roads, water pipes, etc. near your property Capital Gains Tax (plusvalía Municipal) – when selling the property, calculated as the increase in the cadastral value of the plot of land.
IBI tax is payable annually, the due date depends on the municipality (usually from May to October). If you do not receive a notice by mail, it does not release you from the obligation to pay the tax. It is recommended to activate the electronic office of the taxpayer or use the bank’s Autopayment. In case of delay, a penalty is accrued, which can be significant.
Buying in Spain: the region matters
Each autonomous region of Spain has its own fiscal policy. For example: in Andalusia ITP can be 7% in Catalonia – 10% in Madrid and Valencia – benefits for young and large families
In recent years, Spain has been discussing reforms in property taxation – in particular, the revision of cadastral values, as well as restrictions on renting out accommodation to tourists in major cities. This may affect the amount of taxes in the future.
Spain offers an attractive property market, but every owner must consider local tax obligations. Rates and rules depend on the status of the owner, the type of property and the region. It is advisable to consult a local lawyer or tax advisor before buying or renting a property.