Buying a home in Spain, especially on the coast, is undoubtedly a joyful event in your life. Now the sun, sea and great weather will always be «at your hand». So that nothing could cloud your joy from buying property in this sunny country, today we will touch a very serious topic as: what taxes property owners have to pay, being non-residents in Spain.
Initial costs by purchasing real estate in Spain are as follows:
- Transfer tax: Non-residents are required to pay a transfer tax of 10% of the purchase price of the property on the Costa Blanca and 7% on the Costa del Sol.
- Value-added tax (VAT): If the property is newly built, non-residents will be required to pay VAT of 10% of the purchase price.
- Stamp duty: Non-residents must also pay the stamp duty of 1% of the purchase price of the property.
- Notary and registration fees: These fees vary depending on the property value, but are usually around 1% of the purchase price.
What taxes does a non-resident have to pay annually?
A non-resident purchasing property must pay the following types of taxes in Spain:
Income Tax for non-EU residents. It is payable whether you receive rental income or not;
- IBI Tax (Property Tax);
- Rubbish Collection Fees;
- Wealth Tax (applied selectively);
- Special Tax (applies only to offshore holdings).
Let’s consider each of them in more detail.
Income Tax for non-EU residents
In 2023, income tax rates for non-EU residents in Spain are the same as for EU residents. However, non-EU residents may be subject to different tax treatment depending on whether they are considered tax residents in Spain or not.
If a non-EU resident is considered as a tax resident of Spain, he will be subject to Spanish income tax on his worldwide income. The tax rates for income in 2023 are as follows:
- Up to €12,450: 19%
- €12,450 to €20,200: 24%
- €20,200 to €35,200: 30%
- €35,200 to €60,000: 37%
- €60,000 to €300,000: 45%
- over €300,000: 47%
It’s important to note that these rates apply to general income, which includes employment income, self-employment income, rental income, and investment income. There are also separate tax rates for capital gains, which may apply to non-EU residents who sell property or other assets in Spain.
The tax is calculated based on the net income earned after deducting applicable expenses and deductions. Non-EU residents may also need to pay taxes in their home country based on the double taxation treaty between Spain and their country of origin.
In some cases, it is better to consult a tax advisor for specific advice on non-EU resident taxation in Spain in 2023.
IBI Tax for non-EU residents
IBI tax, also known as Impuesto sobre Bienes Inmuebles, is a real estate property tax that all property owners in Spain must pay. It applies to both residents and non-residents of the country. Non-EU residents in Spain have to pay the same IBI tax as EU residents.
The amount of IBI tax payable depends on various factors, including the property’s location, size, and land value. The tax is calculated as a percentage of the cadastral value of the property, which is determined by the Spanish government.
Non-EU residents can pay their IBI tax at any local tax office, bank, or through online payment systems. The tax is usually payable annually, though some municipalities may allow for quarterly or bi-annual payments.
In summary, non-EU residents in Spain are required to pay the same IBI tax as EU residents, and it is based on the cadastral value of the property. The tax can be paid at local tax offices, banks, or online payment systems.
As for our city – Torrevieja, the tax rate here is 0.4% (for 2023). That is, if the cadastral value of your housing is 100,000 euros, you would pay:
100,000*0,4% = 400,00 (€)
In respect of due date for IBI in the province of Alicante in 2023, it is the period from July 25th to October 10th.
Important: in some instances, non-payment of IBI tax may lead to confiscation of property. In order to avoid difficulties with paying this and other taxes, you can always contact the experienced professionals of our Easy Tax & Legal company to conduct your tax accounting.
Rubbish Collection Fees (Waste Disposal Charge)
Waste Disposal Charge means the collection of domestic refuse for disposal. This fee is paid by both non-residents and residents of the Spanish kingdom.
The regularity of this tax payment in Torrevieja is two times a year (21.36 euros each). Also, this year’s payment period in Torrevieja lasts from 6 March to 10 May 2023.
Direct debited tax bills will be paid on 3 May 2023. New direct debit orders will be accepted until 26 April 2023.
However, the terms and amounts of this tax may differ in each Spanish province.
Wealth Tax
Wealth tax in Spain applies to all the assets that a taxpayer owns, including property, shares, savings, vehicles, etc. This tax is payable annually, and the amount varies depending on the total value of the assets owned.
Regarding property, the wealth tax applies to the property’s cadastral value, which is determined by the local government based on a property’s location, size, and other characteristics.
The Wealth Tax (Impuesto sobre el Patrimonio) is a tax on the net worth of an individual, including any real estate properties they own. In Spain, the tax rate for wealth varies from 0.2% to 3.75% depending on the amount of net worth an individual has. However, there are some exemptions and deductions available, such as primary residence allowance and business assets.
Non-residents of third countries (outside the European Union or the European Economic Area) are under regional wealth tax regulations of Spain. It should be noted that non-residents are eligible for a €700,000 reduction per person.
This tax payment must be made by December 31st. The form Modelo 714.
In recent years, there has been an active discussion of the abolition of this tax. At present, the situation is as follows:
The regional authorities announced the end of wealth tax in Andalusia as of the 2023 the year. Another region of Spain where Wealth Tax is not payable is Madrid.
Important: While these changes affect taxpayers only in Andalucia and Madrid.
It’s worth noting that some Spanish regions may apply a tax reduction or exemption for the Wealth Tax, so it’s important to consult with a tax professional to determine the specific tax rates and deductions that apply to your individual situation.
All rates, exemptions, and rules of these tax amounts are based on the Wealth Tax Law of Spain.
Special Tax (GEBI)
GEBI stands for «Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana», which translates to the Tax on the Increase in Value of Urban Land. This tax, also known as the «plusvalía», is a local tax levied on the increase in value of urban land when it is sold or transferred.
The tax rate for GEBI in Spain varies depending on the municipality where the land is located, as each municipality can set its own tax rates. Generally, the tax rate is calculated based on the number of years the property has been held by the seller, the value of the land, and the cadastral value of the property.
The GEBI tax rate is usually between 0.5% and 3.5% of the increase in value of the land, depending on the above factors and the specific regulations of the municipality. It’s important to note that the GEBI tax is separate from other taxes and fees that may be levied on the sale or transfer of property in Spain, such as VAT, Transfer Tax, or Stamp Duty.
The relevant tax payment must be made by 31st of December. The form Modelo 213.
What does a non-resident face when ignoring these taxes in Spain?
Under such circumstances, you will be denied a residence permit renewal as a violator of Spanish laws. In the future, your property can be sold, gifted or inherited. However, do not forget that penalties are imposed on overdue debts, and the municipality can recover the debt by enforcement, block your bank accounts, and in the worst case, even take away your property for non-payment.
How can I find out about my taxes and debts being outside Spain?
You can get all the necessary information through your trusted representative. This person can be authorized to receive all your tax notices in Spain. You can also contact our company Easy Tax & Legal. Here you will be properly advised on all the latest changes in the Spanish Tax Law and your personal tax obligations.
Thanks to our article today, you learned a little more about taxes for non-resident homeowners. And, this means that you can feel more confident when buying and further using your property in Spain, without the risk of unnecessary problems. But, if you still have any additional questions – feel free to contact the specialists of «Alegria», and we will surely be able to find the right solution together.
