Purchasing real estate in Spain is a happy event, but entailed responsibilities. It involves the payment of property purchase tax, usually ranging between 8% and 10%. But there are also exceptions: in the Canary Islands, the IGIC tax with the rate of 6.5% is applied instead of VAT (IVA).

VAT on social housing can be reduced to 4%, and there are tax benefits for large families, young people and people with disabilities. The amount of tax depends on that whether the property is newly built, sold by banks or developing companies, or the property has already been owned by another person, or resale takes place.

If one day you decide to buy a property in Spain, read this article to know in advance what taxes are expected for you. To make it easier to navigate this issue, consider the concepts of «resident» and «non-resident».

If you are in the country for not less than six months a year, invest in the economy of the state, and your family members live in Spain, the administrative system automatically determines you as a resident. If you do not meet the specified criteria, you will – non-resident.
Under Spanish law, each of the spouses is a separate taxpayer and submits a tax return independently. If they have a common property, then all obligations are split in half.

What does a non-resident face for ignoring these taxes in Spain?

The tax inspector’s guide is a scorecard, where the value of real estate is usually slightly underestimated. The cadastral value is indicated in the IBI document (even for a warehouse or shed).

A non-resident acquiring real estate has to pay the following types of taxes in Spain:

  1. Income tax for non-EU residents. It is payable regardless of whether you receive rental income or not.
  2. IBI tax.
  3. Rubbish collection tax.
  4. Luxury tax (applied selectively).
  5. Special tax (affects only offshore holding companies).
  6. Property transfer tax.

Let’s take it point by point:

The income tax for non-EU residents

The amount of tax will depend on whether you receive rental income. How to calculate this tax?
You have to multiply the cadastral value by 2% (1,1% if the property value was revised over the past ten years), i.e. only 2% (1,1%) of the property value is taxed. Then this «tax base» is multiplied by the appropriate tax rate, which differs for residents and non-residents of the EU or EEA (European Economic Area):

  • For EU residents – 19%
  • For non-EU residents – 24%

Example: if you are a non-resident and the cadastral value of your property is 85.000€ (the value was revised over the past 10 years), then you will need to pay income tax on real estate:

  • 85.000×1,1%×24%= 224,40€

Do I have to pay taxes if I don’t rent out my property?

According to Spanish law, this type of tax is calculated every year, without taking into account whether this property generates income or not.

Tax for EU and EEA residents

  • The tax rate is 19%.
  • There are no benefits.
  • It is payable once a year. Property purchased in the middle of the year is charged from the moment of purchase;
  • The Form 210.

Tax for non-EU and EEA residents

  • The tax rate is 24.
  • There are no benefits.
  • This is one-time annual payment. When housing is bought in the middle of the year, assessments are made from the time of purchase.
  • The Form 210.

If you receive income from renting of the property

For residents:

  • The tax rate is 19%;
  • There are benefits. The tax does not apply to amounts of insurance for the house, mortgage interest, etc.
  • The payment is to be made every three months.
  • The Form 210.

For non-residents:

  • The tax rate is 24%.
  • There are no benefits.
  • The payment is to be made every three months.
  • The Form 210.

The property tax IBI

Property tax in Spain

The IBI-tax is common to both groups of owners (residents and non-residents). This tax is charged by the city hall at the place of residence. Local authorities independently regulate the rates from 0,4 to 1,1% of the cadastral value.

For example, the tax rate in the city of Torrevieja is set in amount of 0,4105%. That is, if the cadastral value of an apartment in Torrevieja is 75.000, you must pay:

  • 75.000×0,4105% = 307.87€.

The due date for IBI payment in Torrevieja is: since yearly July to the 4th of October, annually.

Important: failure to pay entails confiscation of property. To avoid these complexities by paying the tax, we recommend to contact our employees Easy Tax&Legal to keep your tax reporting duly.

Rubbish collection tax

It is paid by both residents and non-residents. Regular payment in Torrevieja is: two times a year (21,36€). Terms and amounts vary from one town hall to the next.

The luxury tax

There is ongoing debate to abolish it, but in the meantime, if there are assets worth over seven hundred thousand euros, you have to pay tax, calculated as follows:

  • 0,2 – 2,5% of the asset value.

There are no tax benefits for non-EU residents. Payment is made annually until 31/12. The relevant document is the Form 714.

Special tax on real estate (GEBI)

When you purchase real estate in Spain through an offshore holding company, you must pay 3% of the cadastral value of the property annually. Compensation for this tax is occasionally provided for non-resident, but in this case, legal advice would be very useful. Payments are made before 31/12. The relevant document is the Form213.

Property transfer tax

This tax applies if the property is considered as second or posterior transfer. When housing is being resold it incurs a certain transfer tax about 6%-10%. Such tax is applicable for the purchaser and it is levied on transfers that are not subject or are exempted from VAT.

What does a non-resident face for ignoring these taxes in Spain?

As a result, the violator of Spanish laws will be refused to extend the residence permit. You could later sell your property, or give it as a gift, or give as an inheritance. It should be borne in mind that overdue debts accumulate penalties, and the municipality can collect the debt forcibly, block bank accounts, and even take away property for non-payment.

Will a tax debtor be wanted abroad?

It comes down to it rarely. But this person will not be able to conduct real estate transactions and will be sued. Interpol will only be interested in the debtor if:

  • The tax debtor has outstanding mortgages and other loans in Spain.
  • The tax debtor is indebted to a property owner.
  • The tax debtor has a large debt to developers.
  • The tax debtor has a debt that remained even after the confiscation of his property.

How can I find out about my taxes and debts while outside of Spain?

Through your attorney, who will receive all relevant notifications. You can also use the services of our company Easy Tax&Legal. You will be kept up to date with all events and all news related to your tax obligations.

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