Taxes. There’s no escaping them. And when it comes to property, whether residential or in any other form that’s subject to taxation, the Spanish tax system is no more or less complicated than anywhere else, so please be advised that the following should only serve as a guide and for further details you should consult with a property tax lawyer or qualified gestor.
There are two types of taxes on assets in Spain:
- An estate tax (Impuesto Extraordinario Sobre El Patrimonio) that covers all your assets including residential property, but also business assets, bank balances, fixed income securities and company shares, among other assets.
- A property tax (Impuesto sobre Bienes Inmuebles or IBI) which specifically relates to real estate. The IBI is an annual municipal property tax, due by the person who owns the property on January 1 of the current year. It is calculated from the rateable value of the property, which is determined by the size, condition, location, and purchase price, among other factors.
Tax calculated on residential real estate (not rented)
A non-resident income tax is payable for all real estate property reserved for residential use; for example, a second home in Spain that is not rented out when it’s not in use. It is calculated by applying a rate (19% for residents of the European Union, Iceland and Norway, 24% for residents of other countries) on a notional rent of 1.1% or 2% of the cadastral or rateable value of the property.
Tax on rental income
Rental income from real estate held in Spain by non-residents is subject to taxation which also differs according to the country of residence of the owner. For residents of the European Union, Iceland and Norway, the tax rate is 19 percent and applies to net rental income
The tax on capital gains
There are two types of capital gains taxes in Spain after the sale of a property:
- The tax on the difference between the sale price and the purchase price plus the costs and taxes related to the purchase of the property.
- The municipal plusvalia tax, determined by the municipality according to the cadastral value of the property and the number of years in which the seller has owned it.
Filing tax returns
The obligation to file a tax return depends on whether the taxpayer is resident in Spain for tax purposes. If this is the case, they must submit a tax return if their net assets exceed €102,172 or their gross assets exceed €601,012. Autonomous regions, such as the Community of Valencia, to which the Costa Blanca belongs, are entitled to set their own minimum amounts.
Even if the taxpayer
has their tax residence abroad, they must still submit a property tax return,
but only in relation to the assets they own in Spain.