Spanish Taxes for Buying in Spain

When purchasing a property in Spain, there are a few taxes that would have to be settled, depending on whether you are buying a new home directly from a developer or a second hand home (resale).

• Value Added Tax (VAT or IVA) - This tax is levied when buying a new property or a property in the course of construction and is currently fixed to 7%, applicable to the official purchase sum. It is paid directly to the developer/vendor. In addition you would have to settle the 0,5% Stamp Duty. If you purchase parcels of land, commercial premises or garage spaces, the IVA rate is 16%, plus 0,5% Stamp Duty. However, if you purchase the garage with the property, the IVA is reduced to 7% (the maximum numbers of garages that can be included is two).
• Transfer Tax or Estate Tax (ITP) - When purchasing a second hand property, a transfer tax of 7% is applied to the official purchase sum. This tax is not the same as Value Added Tax, which does not apply to second hand property, neither does the 0,5% Stamp Duty tax.
• The Municipal Capital Gains Tax (Plusvalía) - When purchasing a second hand property, a transfer tax of 7% is applied to the official purchase sum. This tax is not the same as Value Added Tax, which does not apply to second hand property, neither does the 0,5% Stamp Duty tax.
• Local Property Tax (IBI) - This tax is levied by the local town hall and is paid annualy. It is based on the fiscal or rateable value, the valor catastral, of the property, and takes into account the value of the land plus the value of the building, according to type, location, and usage. Upon this value, each municipal Town Hall decides on the percentage to be charged in respect of local rates. In the case of Marbella, the formula applied is 0.85% of the rateable value of the property, which is usually far less than its true market value.
• Wealth Tax (Patrimonio) - The Patrimonio tax is set on your assets in Spain, mainly property, bank account, car, bonds, stocks and shares. Non-residents are subject only to wealth tax on their assets in Spain, whereas residents in Spain also pay taxes on their off-shore assets, altough they are exempt from the dwelling in the tax form if it has a value of less than approx. 150.000 Euros. Non-residents are subject to Wealth Tax on any property located in Spain at the same rates as residents, and a tax return must be filed and presented every year to the Tax Authorities.
• Income Tax (IRPF) - Also non-residents are liable to personal income tax in Spain, on property included, as the Spanish Tax Authorities assume that the owner of the property is receiving an annual income from it. Income on property is set to 2% of the cadastral or rateable value of the property and then a rate of 25% tax is applicable to the base value. This tax is filed annualy.
• Capital Gains Tax on Property - Capital gains is due with the sale of a property and the tax is calculated as the difference between the value of the property at the time of its acquisition and the value at the time of its sale. The tax rate is 35% applied to the base value.
• 5% Retention Tax on non-residents in Spain - When a non-resident in Spain sells a real estate situated in the Spanish territory, the purchaser of the property, whether or not resident in Spain, must withhold 5% of the purchase price and pay this amount to the Inland Revenue to cover the vendor’s liability for tax on the gain obtained on the transfer. The vendor can deduct this amount in his annual tax return from the capital gain of the sale, and if the amount withheld exceeds the tax finally payable, the excess is refundable.

The information on this page is based on current legislation and is only there as guidance. It is vital to check important issues with your mortgage lender, legal representatives and estate agent at the time of your purchase.