Property tax in Spain - payment and taxes when buying and selling

Spain is famous for its hefty tax burden, although it does not reach extreme levels as is the case in some other European countries. Thanks to the collection of taxes, the country maintains a decent standard of living for the population, including a high quality of healthcare. However, we strongly recommend that anyone considering buying residential or commercial real estate carefully study the list of potential tax liabilities for foreigners and carefully analyze all the pros and cons. It is important to note that foreigners who do not have permanent resident status and live in another country for more than six months in a calendar year are required to pay increased taxes. But what exactly are the additional taxes on real estate in Spain for foreign citizens?

First of all, this applies to income tax for persons who are not permanently resident in Spain. Such persons who own property in the country must file a tax return once a year. In the case of entrepreneurial activity, the need to submit a declaration arises every quarter. For the ownership of real estate, the tax rate is set at 24%, and for income from financial transactions, the rate varies and can range from 35 to 40%, depending on the type of transactions. All other taxes for residents and non-residents are the same.


In Spain, a country with a vibrant seascape and European comfort, the real estate market is attractive to investors, however, the following tax obligations must be taken into account:


Tax on the transfer of ownership


This tax is mandatory for the purchase of secondary residential properties, which makes up a large part of market transactions. The amount of the tax varies: in Catalonia and Andalusia it ranges from 7 to 10%, in Madrid it is 9-10%, and in Asturias it is from 6 to 8%.


Value Added Tax (VAT)


New buildings in Spain are subject to VAT, now the rate is 10% for residential buildings and 21% for commercial properties. You will also have to pay a duty, which varies from 0.75% to 1.5%.


Taxation of Property Ownership


Owners of real estate on the Spanish coast, including the popular Costa Brava and Marbella, are subject to the following tax obligations:


Municipal Property Tax


Depending on the location of the object and its type, it can range from 0.4 to 1%.


Income tax


It is approximately equal to 2% and is calculated on the basis of declared income and expenses.


Wealth tax


This tax applies to real estate worth more than 700,000 euros and can reach 1-2%.


Tax liabilities when selling real estate


Now is a favorable period for selling, but experts assume a future increase in prices. When selling properties, owners pay capital gains tax, the rates of which vary depending on the region.


Tax aspects when applying for a mortgage


Mortgages in Spain are provided at low interest rates and allow you to finance up to 80% of the value of the property. Although there are no mortgage taxes, it is necessary to take into account the costs of notary, loan processing and evaluation. Mortgage lending can also have a positive impact on the amount of income tax.


Property tax in Spain for residents and non-residents has its own characteristics, and it is important to know the differences to avoid unexpected expenses. The annual property tax in Spain, which is levied on both foreigners and citizens of the country, requires attention when calculating it and paying it on time. You can pay property tax through local tax authorities or banking institutions by following the established procedures. In general, competent management of tax liabilities will help to avoid unnecessary costs and make owning a property in Spain less expensive and more predictable.