Property taxation in Spain

When acquiring a property in Spain, the amount of taxes represents 8 to 13% of the purchase price. Among the taxes to be paid, we find:

• The Property Transfer Tax or « Impuesto de Transmisiones Patrimoniales » (ITP). Its amount varies from 6 to 11% of the property deed value. It applies only to existing property.
• The stamp duty on the sales deed, representing 0.5% of the value of the house or apartment.
• The Value Added Tax (IVA) or VAT, applicable only to new constructions. The VAT rate on the acquisition of a new property is 10%, except in the Canary Islands, where it is set at 4.5%.
• The tax on legal acts (AJD). This tax consists of a fixed part (notary deed) and a variable part (property registry registration), depending on the declared sale amount. Depending on the autonomous communities, its amount ranges from 0.4% to 1.5% of the purchase price.

Once your dream home is acquired, you’ll need to pay:

• Wealth Tax (IP): This tax considers financial, movable, and property assets held in Spain. The main residence (up to €300,000) is exempt. This tax applies only to households with assets exceeding €1 million.
• Impuesto sobre Bienes Inmuebles (IBI): This tax must be paid by all property owners in Spain as of January 1st of the corresponding year. The amount varies depending on the cadastral value of the property. It rarely exceeds €2,000 per year, regardless of the location of the house or apartment. For properties valued at less than €300,000, expect less than €1,000 in IBI per year.

If you own a property in the land of Cervantes, you must declare the income generated in Spain during the year. The procedures to follow and the taxes to pay vary depending on your residency status.

You are considered a Spanish resident if:

• You live in the country for 183 days or more during the calendar year.
• The main center or base of your economic activities or interests is located in Spain.
• Your spouse and children usually reside in the country.

If this applies to you, you are subject to the Income Tax (IRPF). Every year, you are required to file a tax return, specifying your income from all sources. Certain types of income are exempt from IRPF:

• Social benefits (permanent absolute disability, severe disability).
• Severance pay from employment contracts (within a certain threshold).
• Alimony payments from your parents (court decision).
• Public grants or those provided by nonprofit organizations.
• Specific social benefits and aids.Depending on their nature, taxable incomes are subject to:
• The general progressive tax scale with five brackets (general base).
• The specific tax scale with three rates (category of savings income).

If you have dependent children, ascendants, or if you have a disability, you may be eligible for tax deductions.

You are subject to the Non-Resident Income Tax (IRNR) as soon as you receive income from Spanish sources or own property in the country. Salaries, dividends, interest, and capital gains are taxed at a rate of 19%. If your property is not rented, the tax is calculated based on an imputed rental income, corresponding to 2% or 1.1% of its cadastral value. If it is rented, the tax is calculated based on the net rental income. In both cases, the applicable rate is 19%.

In the event of selling a property in Spain, capital gains generated are subject to taxation. The taxation varies depending on your residency status:

Non-Residents (IRNR): 19% of the difference between the net selling value and the gross acquisition value.

Residents: 19% on gains up to €6,000, 21% on gains between €6,000 and €50,000, and 23% on gains exceeding €50,000.

If you sell your property, you will also need to pay the municipal tax on the capital gain or « plusvalía municipal« . Its amount can range from a few hundred to several thousand euros depending on the property’s location, ownership duration, and cadastral value of the land.
In 2021, the calculation method for capital gains changed. Sellers now have two options:

• Real capital gain: Calculated by comparing the declared or verified value of the land at acquisition and transmission.
• « Objective system »: Takes into account market evolution. The calculation is based on the cadastral value of the land multiplied by a coefficient. The coefficients must not exceed those imposed by law.

You can find calculators on municipal websites to estimate the capital gains tax. For example, for Madrid.
It is the seller who must pay the capital gains tax. In the case of gifts, the recipient is responsible for payment, and in the case of inheritances, the heirs are responsible.