Purchasing real estate in Spain is an attractive investment for many foreign buyers. However, not understanding the tax implications can lead to unexpected costs, legal complications, and reduced profitability.
This comprehensive guide will provide a detailed breakdown of the taxes you must pay when buying, owning, renting, and selling property in Spain as a non-resident, including VAT, transfer tax, stamp duty, and annual property taxes.
1. Taxes When Buying Property in Spain
When purchasing a property in Spain, non-residents must pay different taxes and fees depending on whether the property is new or second-hand.
1.1 VAT and Stamp Duty for New Properties
If you buy a new-build property directly from a developer, you must pay Value Added Tax (IVA) and Stamp Duty (AJD – Actos Jurídicos Documentados).
- VAT (IVA):
- 10% on residential properties.
- 21% on commercial properties and land.
- Stamp Duty (AJD):
- Varies between 0.5% and 1.5%, depending on the region.
Example Calculation for a New-Build Apartment
If you purchase a new apartment in Madrid for €400,000, the taxes would be:
| Tax Type | Rate | Amount (€) |
|---|---|---|
| VAT | 10% | 40,000 |
| Stamp Duty (AJD) | 1.2% | 4,800 |
| Total Additional Cost | €44,800 |
📌 Key Insight: If you’re buying a property with a mortgage, VAT is paid at the time of purchase, while Stamp Duty is paid when registering the property.
1.2 Transfer Tax (ITP) for Resale Properties
If you buy a second-hand (resale) property, instead of VAT, you must pay the Property Transfer Tax (ITP – Impuesto de Transmisiones Patrimoniales).
- ITP rates vary by region, usually ranging from 6% to 10%.
| Region | ITP Rate |
|---|---|
| Madrid | 6% |
| Andalusia | 7% |
| Catalonia | 10% |
Example Calculation for a Resale Property
If you buy a resale apartment in Catalonia for €400,000, the tax cost would be:
| Tax Type | Rate | Amount (€) |
|---|---|---|
| Transfer Tax (ITP) | 10% | 40,000 |
| Total Additional Cost | €40,000 |
📌 Key Insight: In some regions, first-time buyers or young buyers may qualify for lower ITP rates.
1.3 Notary, Land Registry, and Legal Fees
Aside from taxes, buyers must cover additional administrative costs.
| Cost Type | Estimated Amount (€) |
|---|---|
| Notary Fees | €600 – €1,500 |
| Land Registry Fees | 0.5% – 1% of the property price |
| Legal Fees (Hiring a lawyer) | Typically 1% of the property price |
📌 Key Insight: Hiring a lawyer who specializes in Spanish real estate law is strongly recommended for foreign buyers to ensure the property is free of debts and properly registered.
2. Ongoing Property Taxes in Spain
Once you own a property in Spain, you must pay annual taxes, regardless of whether you rent it out or not.
2.1 Annual Property Tax (IBI – Impuesto sobre Bienes Inmuebles)
IBI is a municipal tax that all property owners in Spain must pay.
- Tax Rate: 0.4% – 1.1% of the cadastral value (official valuation of the property for tax purposes).
- The cadastral value is typically much lower than the market value.
Example Calculation for IBI
- Cadastral value: €150,000.
- Municipal IBI tax rate: 0.8%.
- Annual IBI: €1,200.
📌 Key Insight: IBI varies by location—properties in prime urban areas tend to have higher cadastral values and higher IBI rates.
2.2 Wealth Tax (Impuesto sobre el Patrimonio)
Non-residents must pay Wealth Tax if their Spanish property exceeds the tax-free threshold.
- General tax exemption: €700,000 per person.
- Tax rate: 0.2% – 3.5%, depending on the net value of assets in Spain.
Example Calculation for Wealth Tax
- Total assets in Spain: €1,200,000.
- Exempt amount: €700,000.
- Taxable amount: €500,000.
- Wealth Tax Rate: 0.3%.
- Wealth Tax Due: €1,500 annually.
📌 Key Insight: Some regions (such as Madrid) offer exemptions or reductions for Wealth Tax.
2.3 Non-Resident Tax on Properties Not Rented
If you do not rent out your property, Spain still applies an annual imputed income tax.
- Tax Rate:
- EU/EEA Residents: 19% of the imputed income.
- Non-EU Residents: 24% of the imputed income.
- Imputed income is based on 1.1% – 2% of the cadastral value.
Example Calculation for Non-Resident Tax
- Cadastral Value: €150,000.
- Imputed Income: €1,650 (1.1%).
- Tax Due (EU Resident, 19%): €313.50.
- Tax Due (Non-EU Resident, 24%): €396.
📌 Key Insight: Even if you never rent out your property, you must declare and pay this tax annually using Form 210.
3. Capital Gains Tax When Selling Property in Spain
When you sell your Spanish property, Capital Gains Tax (CGT) applies to the profit.
3.1 Capital Gains Tax Rates
- EU/EEA residents: 19%.
- Non-EU residents: 24%.
3.2 The 3% Withholding Tax for Non-Residents
- Buyers must withhold 3% of the sale price and pay it to Spanish tax authorities.
- If CGT owed is lower than 3%, the seller can request a refund.
Example Calculation for Capital Gains Tax
- Sale Price: €500,000.
- Purchase Price: €350,000.
- Profit: €150,000.
- CGT Due (EU resident, 19%): €28,500.
- CGT Due (Non-EU resident, 24%): €36,000.
Avoid Costly Tax Mistakes – Get Expert Investment Advice
Thinking About Buying Property in Spain? Plan Your Taxes First!
That’s why we created the Investment Strategy Session—a 1-hour consultation designed to help foreign investors optimize their tax position.