Spain: Property Taxes

Overview

Non-resident foreigners are required to pay taxes on income earned in Spain. Married couples who are non-residents can choose to file their tax returns jointly or separately. For couples married under the community property regime, income, capital gains, and related deductions are split equally between them, regardless of whether they file jointly or separately. For those married under the separate property regime, income and deductions are attributed solely to the individual who earned them.

Rental Income Tax

Rental income is classified as investment income under Spanish tax laws. Non-resident foreigners from the EU/EEA are taxed at a flat rate of 19% on gross rental income for 2024, with the tax typically withheld by the tenant. EU/EEA residents can deduct income-generating expenses.

<table> <tbody> <tr class="blue-row" > <td colspan="3"><strong>Monthly income, €</strong></td> </tr> <tr> <td>1500</td> <td>6000</td> <td>1200</td> </tr> </tbody> <tbody> <tr class="blue-row" > <td colspan="3"><strong>Tax rate, %</strong></td> </tr> <tr> <td>19.00</td> <td>19.00</td> <td>19.00</td> </tr> </tbody> </table>

Corporate Taxation

Companies are taxed at a flat rate of 25% on income and capital gains. Expenses related to generating income are deductible. Rental income received by corporations is treated as business income and taxed at the corporate rate of 25%.

Capital Gains Tax

Non-residents selling Spanish property are subject to capital gains tax. The gain is calculated as the sale price minus the acquisition cost (including related expenses) and adjusted for inflation using coefficients published annually. The tax rate is a flat 19%. For properties acquired before December 31, 1994, but after December 31, 1986, inflation relief applies, reducing the gain by 11.1% for each year of ownership before December 31, 1994. Buyers are required to withhold 3% of the sale price and pay it to the Spanish tax authorities, unless the property was acquired before December 31, 1996, and not improved for over 10 years, or if it was contributed to the capital of a Spanish company.

Transaction Costs

<table> <tbody> <tr class="blue-row" > <td><strong>Description</strong></td> <td><strong>Cost Range</strong></td> <td><strong>Who Pays</strong></td> </tr> <tr> <td>Property Transfer Tax</td> <td>6%-13%</td> <td>Buyer</td> </tr> <tr> <td>Legal Fees</td> <td>1%-2%</td> <td>Buyer</td> </tr> <tr> <td>Real Estate Agent Fee</td> <td>3%-6%</td> <td>Buyer/Seller</td> </tr> <tr> <td>Notary Fee</td> <td>0.5%-2%</td> <td>Buyer</td> </tr> </tbody> </table>

Imputed Income Tax (IRNR)

Non-resident property owners in Spain are subject to the Impuesto sobre la Renta de no Residentes (IRNR), or Non-Resident Income Tax, even if the property is not rented out. This tax is based on the property's cadastral value and represents a deemed income attributed to the owner.​

Income Tax Calculation:

Tax Base: A percentage of the property's cadastral value.​

If the cadastral value has been updated within the last 10 years, the applicable percentage is 1.1%.​

If not, the percentage is 2%.​

Tax Rate: For non-residents, the standard tax rate is 24%. However, for residents of European Union (EU) or European Economic Area (EEA) countries, a reduced rate of 19% applies.​

Example: For a non-EU resident owning a property with a cadastral value of €100,000 (updated within the last 10 years):​

Imputed income: €100,000 × 1.1% = €1,100.​

Tax due: €1,100 × 24% = €264.​

Payment: This tax is typically declared and paid annually using Form 210.​

Urban Land Appreciation Tax (Plusvalía Municipal)

The Impuesto sobre el Incremento de Valor de los Terrenos de Naturaleza Urbana, commonly known as Plusvalía Municipal, is a local tax levied on the increase in the value of urban land upon its transfer, such as through sale, inheritance, or donation.​

Urban Land Appreciation Tax Calculation:

Tax Base: Determined by the increase in the cadastral value of the land during the period of ownership.​

Calculation Method: The taxable amount is calculated by multiplying the cadastral value of the land by a coefficient based on the number of years the property was held, up to a maximum of 20 years.​

Tax Rate: The rate is set by each municipality and can be up to 30%.​

Responsibility: Typically, the seller is responsible for paying this tax. However, in cases of inheritance or donation, the recipient may be liable.​

Property Ownership Tax (IBI)

The Impuesto sobre Bienes Inmuebles (IBI) is an annual municipal property tax applicable to all property owners in Spain, both residents and non-residents.​

Property Ownership Tax Calculation:

Tax Base: Based on the cadastral value of the property, which is periodically updated by local authorities.​

Tax Rate: Varies depending on the municipality, generally ranging from 0.4% to 1.1% of the cadastral value.​

Payment: The IBI is payable annually, with specific payment dates and methods varying by municipality.​

Net Wealth Tax (Impuesto sobre el Patrimonio)

The Impuesto sobre el Patrimonio is a tax on the net wealth of individuals, applicable to both residents and non-residents owning assets in Spain.​

Exemptions and Thresholds:

General Exemption: Each individual has a tax-free allowance of €700,000.​

Primary Residence: An additional exemption of up to €300,000 may apply to the primary residence; however, this is typically not applicable to non-residents.​

Net Wealth Tax Calculation:

Tax Base: Net value of assets located in Spain, after deducting liabilities.​

Tax Rates: Progressive rates ranging from 0.2% to 2.5%, depending on the net taxable value.

Example of Tax Rates:​

<table> <tbody> <tr class="blue-row" > <td><strong>Taxable Base, €</strong></td> <td><strong>Tax Rate (%)</strong></td> </tr> <tr> <td>Up to 167,129</td> <td>0.2</td> </tr> <tr> <td>167,129–334,253</td> <td>0.3</td> </tr> <tr> <td>334,253–668,500</td> <td>0.5</td> </tr> <tr> <td>668,500–1,337,000</td> <td>0.9</td> </tr> <tr> <td>1,337,000–2,673,999</td> <td>1.3</td> </tr> <tr> <td>2,673,999–5,347,998</td> <td>1.7</td> </tr> <tr> <td>5,347,998–10,695,996</td> <td>2.1</td> </tr> <tr> <td>Over 10,695,996</td> <td>2.5</td> </tr> </tbody> </table>

Payment: The wealth tax is declared and paid annually, typically alongside the income tax declaration.

Note: Tax regulations can vary by autonomous community, and there have been discussions about reintroducing or modifying certain taxes. It's essential to consult with a local tax advisor for the most current information.