Guide to Property Taxes for Non-Resident Citizens Buying Property in Spain
Purchasing property in Spain as a non-resident involves understanding and managing various taxes, such as notarial fees, VAT, stamp duty, and land register expenses. These obligations depend on factors such as whether you are an EU/EEA citizen and whether the property is for personal use or rental.
Are you interested in purchasing property in Spain? Does settling down in Spain interest you? Do you want to ensure that your expatriate experience in Spain goes as smoothly as possible? Keep reading this article to get up to speed on what’s required, and how to prepare.
This Pacific Prime Latin America article will serve as a guide to taxes payable by non-residents when purchasing property in Spain, providing a few tips on what’s required to settle down in the land of Cervantes.
Taxes When Buying Property in Spain
When purchasing property in Spain, the key types of taxes to pay are VAT, stamp duty, notarial fees, and land register fees. The total taxes and expenses will range from about 8% to 15% of the purchase price, depending on whether the property is new and the region it is located in.
For new industrial warehouses or premises, which are subject to 21% VAT, the expenses are around 24%-25%. However, the VAT can be subsequently deducted if the property is rented out or leased.
Listed below are the types of taxes payable when purchasing new and second-hand property in Spain:
New Property Tax (Throughout Spain):
- 10% VAT
- 1.5% Stamp Duty
Second-Hand Property Tax by Region:
- Catalonia: 10%
- Madrid: 6%
- Andalusia: 8% – 10%
- Valencia: 10%
Holding Property Tax in Spain (Annual):
To preface, when dealing with property and wealth taxes in Spain, it’s essential to understand the distinctions between residents and non-residents of the European Union. For the IRNR (Non-Resident Income Tax), EU residents face a tax rate of 19%, whereas non-EU residents are taxed at 24%.
The IP (Wealth Tax) employs progressive rates from 0.2% to 2.5%, applicable to both EU and non-EU residents, though specific rates vary by region. The IBI (Property Tax) is determined by the municipality and typically ranges from 0.4% to 1.1% of the property’s cadastral value.
Listed below are the types of holding taxes and their rates for EU residents and non-residents:
IRNR (Non-Resident Income Tax)
Non-resident property owners in Spain must pay the Non-Resident Income Tax (IRNR) annually. The tax is based on the cadastral value. A coefficient from the latest appraisal is applied to determine the gross tax base. The tax rate is 24% for non-EU residents and 19% for EU/EEA residents.
A summary is listed below:
- Residents of the European Union: Tax Rate: 19%
- Non-Residents of the European Union: Tax Rate: 24%
IP (Wealth Tax)
Non-residents owning assets in Spain must pay annual taxes on assets exceeding €700,000. Property must be declared at the highest of these values: cadastral, administration-checked, or purchase value. Mortgages can be deducted. The tax is due on December 31st, affecting assets held on that date.
A summary is listed below:
- Residents of the European Union: Tax rates ranging from 0.2% to 2.5% (varies by region)
- Non-Residents of the European Union: Tax rates ranging from 0.2% to 2.5% (varies by region)
IBI (Property Tax)
Property tax (IBI) is a local tax on property ownership based on its cadastral value, not the acquisition value. In cities like Madrid and Barcelona, it averages €800 to €1,800 annually. Non-residents must pay annually, usually via direct debit, in 3-4 installments, depending on the location.
A summary is listed below:
- Residents of the European Union: Tax rates vary by municipality (typically 0.4% to 1.1% of the cadastral value)
- Non-Residents of the European Union: Tax rates vary by municipality (typically 0.4% to 1.1% of the cadastral value)
Tax Upon the Sale and Transfer of Property
Non-residents selling property in Spain must pay the IRNR Non-Resident Income Tax and IIVTNU Capital Gains Tax on Urban Land. The IRNR is 19% of the difference between the sale and purchase price.
The buyer retains 3% of the purchase price for the tax authorities. The seller then files an IRNR return within 2-4 months, deducting the retained amount.
An example of how this tax is applied is listed as follows:
- Sale Price: €700,000
- Purchase Price: €600,000
- Profit: €100,000
- Gross Tax Base: €100,000
- 19% Tax Rate (Payable): €19,000
Conclusion
In conclusion, purchasing property in Spain as a non-resident involves navigating a complex landscape of taxes and obligations. From VAT and stamp duty to annual property taxes like IBI and IRNR, understanding these financial responsibilities is essential for a successful investment.
Whether you’re buying a new property or a second-hand one, and regardless of your residency status within the EU, being aware of these tax implications ensures compliance and financial planning. This guide provides a comprehensive overview to help you navigate these considerations and make informed decisions when buying property in Spain.
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Frequently Asked Questions
What are the main taxes to consider when buying property in Spain as a non-resident?
When purchasing property in Spain, non-residents must account for VAT (10% for new properties), stamp duty (1.5% for new properties), and annual taxes like IBI (0.4% to 1.1% of cadastral value). Additional taxes include IRNR Non-Resident Income Tax (19% for EU residents, 24% for non-EU residents).
How do property taxes vary between new and second-hand properties in Spain?
New properties attract 10% VAT and 1.5% stamp duty uniformly across Spain. Second-hand property taxes vary regionally: Catalonia (10%), Madrid (6%), Andalusia (8% to 10%), and Valencia (10%). These rates depend on the property’s location in Spain.
What are the obligations regarding property taxes upon selling property in Spain as a non-resident?
Non-residents selling property in Spain must pay IRNR Non-Resident Income Tax (19% of capital gains) and IIVTNU Capital Gains Tax on Urban Land. The buyer typically withholds 3% of the purchase price for tax purposes, with the seller later filing an IRNR return to settle any further tax liabilities.
Upon graduating from Mahidol University International College’s International Relations program, he spent his career in marketing and business development, working for an international subcontractor, a marketing research firm, an international news agency, a software development company, and a creative agency. His journey now continues at Pacific Prime, where he hopes to make an impact by simplifying insurance.
In his free time, Piyanat is an avid martial artist and musician, spending most of his time at boxing gyms in Nakhon Pathom and music studios with his friends in the music industry. He’s also a big fan of turtles.
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