Tax Guide for Spain Property

PLEASE NOTE: The Spanish Government temporarily cut VAT on new homes from 8% to 4% until 31.12.11. See VAT section below.  This was extended by the new government until 31.12.2012

Taxes in Spain can be complicated and for residents it is advisable to employ an assessoria (accountant).  For non-residents of Spain there is a legal requirement to have a nominated assessoria to take control of the annual tax returns.

For non-residents, the UK and Spain have a double tax treaty meaning that total annual taxes are recovered in the relevant countries and not both.  For residents of Spain then global income and assets are included in the annual tax returns in Spain. For UK residents, any taxes paid in Spain are offset against the UK tax bill.

Income tax

Is split into general income (renta general) and savings income (renta del ahorro). General income is taxed at progressive scale rates, which range from 24% to 45%. In some autonomous regions this can rise to 49%

Savings income is taxed at 21% and includes income from interest and dividends, income from a purchased annuity and capital gains. 

Capital Gains tax

This tax is now set at 30% for residents and 21% for non-residents.

Inheritance and Gift Tax

This tax applies to the beneficiaries of the inheritance or gift. The tax is on assets received over a certain value. Even if the beneficiaries are not residents of Spain, they must pay this tax when the assets or rights are located in Spain. The tax rate starts at 7.65% and rises to 34% for assets over a certain value. If the beneficiary is a child (under age 18) of the deceased, then the tax rate on the assets is reduced to 5%.

Wealth Tax (impuesto sobre el patrimonio):

First introduced in 1977 as a temporary tax it lasted 3 decades, suspended in 2008 which brought Spain more in line with European neighbours, it then got re-introduced as an austerity measure in 2011

The tax  (patrimonio) is paid on net assets above 700,000 Euros, with a main-home allowance of 300,000 Euros (not applicable to holiday-homes).

The autonomous governments are responsible for this tax, so local variations may occur.

Corporation Tax

Is 30% but the withholding tax rate for certain types of income such as dividends, rental income, is increased from 19%to 21% in 2012

Non-resident tax

General income tax rate is 24.75%

Withholding tax on dividends, interest and CGT is 21% (18% 2011)

Property Tax (IBI)

Each year, the municipality issues a property tax payment slip for all properties. The tax is usually between 0.5% and 1.1% of the official value (valor catastral) of your property, which is roughly 20 times lower than the market value.

Deemed rental income tax (Rendimientos del capital inmobiliario)

As a non-resident a "notional rental income" is levied by the Spanish tax authorities. So if your Spanish property is not rented out or not your primary residence (i.e. a holiday home), you may be liable for the deemed rental income tax, whether the property is let or not, unless you can show it is not.

The local town hall will charge you according to the valor catastral (rateable value). It is assumed you are making 2% of this value in rent annually and charge you 25% of that "income", which equates to a total of 0.5% of the valor catastral (rateable value) of the property. For example, if you own a Spanish property with a valor catastral (rateable value) of €200,000 and you are not renting it out, you may still be liable for 25% of €4000, which equates to €1,000.

Municipal Tax (basura)

This varies depending on where you live. Usually assessed per house or building. Sometimes the tax is combined with water consumption. It is generally around euros 200-250 per annum.

VAT Tax (IVA)

The Canary Islands, Ceuta and Melilla have a different rate.  The standard rate is 16%. Services linked to transport and purchases from a property developer (off plan) have a reduced rate of 8% and there is a super reduced rate of 4% for essential food items such as bread, cheese and eggs, newspapers and magazines.  If you are tourist, you can get a refund of this tax at a booth in the airport before you leave Spain by showing your receipts for over €90 (including IVA). The €90 doesn't have to refer to a single item but it does have to be on a single receipt.

Transfer Tax (ATP) / Stamp Duty

Set by municipal governments and so can vary.

This tax is paid by the purchaser, or the beneficiary.  The rate starts at 0.5% (for commercial activities) and rises to 8% (for property transactions).

In Andalucia:

8% up to €400,000
9% €400,001 to €700,000
10% €700,001+

In August 2011 the Spanish Government announced it was temporarily cutting VAT on new builds from 8% to 4% until the end of 2011 and this has been extended to 2012

All prices quoted, statistics, facts and information, were deemed to be relevant at time of publication; however we can accept no responsibility for the on-going accuracy of the details contained within this document, or for error and omission.  The information you will see is for guidance.  Intending purchasers should not rely on information given as statement of fact, but must satisfy themselves by inspection or otherwise as to their accuracy. With regard to in-country legislation and taxation laws, then you must take legal advice during your purchase process, at which time your solicitor will discuss with you up-to-date legislation and costs.