Property Taxes in Spain: Essential Guide for Buyers and Owners

For those considering buying property, whether moving to Spain or not, understanding the tax framework is a necessity. From initial transaction fees to ongoing annual obligations, a clear grasp of these costs is crucial for a confident decision. Here’s a straightforward, factual breakdown of all the key taxes you need to know about.

How Much Are Property Taxes in Spain?

Here's a quick breakdown on how much you can expect to pay:

Taxes on a Transaction

• Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales): If a pre-owned property is purchased, this is the main tax to consider. The autonomous communities set the rates, which can range from 6% to 11% of the purchase price.
• Value-Added Tax (VAT) (Impuesto sobre el Valor Añadido) and Stamp Duty (Actos Jurídicos Documentados): When a brand-new home is bought directly from a developer, VAT is paid at a national rate of 10%. On top of that, there is a regional Stamp Duty, which is usually between 0.5% and 2%. These two charges apply only to new builds and replace the Property Transfer Tax, which is paid instead when buying a resale property.
• Municipal Capital Gains Tax (Plusvalía Municipal): This local tax is paid by the seller. It’s a tax on the increase in the value of the urban land (not the building) since the last time the property was transferred.

Example: Imagine you are buying a pre-owned property in Valencia for €300,000. In Valencia, the Property Transfer Tax (ITP) is 10%. Tax on this transaction would be: €300,000 x 10% = €30,000

Annual Taxes

• Property Tax (Impuesto sobre Bienes Inmuebles): This is the main annual tax on property, paid to the local town hall. It’s calculated using the property’s cadastral value (valor catastral), a figure set by the authorities that is usually less than the market price. Each municipality sets its own tax rate, typically from 0.4% to 1.1% of the cadastral value for urban homes. The amount can change a lot from one town to the next.
• Non-Resident Income Tax (Impuesto sobre la Renta de No Residentes): If a property is owned by a non-resident who doesn't rent it out, an annual imputed income tax must still be paid. The imputed income is 2% of the cadastral value (or 1.1% if the value has been updated within the last 10 years) and the applicable tax rate is 19% for EU/EEA residents and 24% for all other individuals—this is a key part of the Non-Resident Income Tax in Spain. If the property is rented out, tax is paid on the rental income itself instead. EU/EEA residents can deduct expenses like mortgage interest and maintenance, but non-EU residents cannot.
• Wealth Tax (Impuesto sobre el Patrimonio): This is a progressive tax on total assets, including real estate. The national tax-free amount is €700,000, but some regions have changed the rules. For example, some autonomous communities have a 100% bonus, so you don't have to pay it at all.

Example Property Tax: For the same €300,000 property, let's assume its valor catastral is €150,000, and the local IBI rate is 0.5%. Your annual Property Tax (IBI) would be: €150,000 x 0.5% = €750.

Example Non-Resident Income Tax: For a property with a valor catastral of €100,000 last revised within the past 10 years, the imputed income is €1,100 (1.1% of €100,000). An EU/EEA owner would pay 19% of this amount (€209), while a non-EU/EEA owner would pay 24% (€264).

To know more about Spain’s tax incentives for expats, check out “Spain’s Tax Incentives for Expats: Golden Opportunity or Done and Dusted?”

What Does the “100% Property Tax in Spain” Mean?

You may have already come across the term "100% property tax in Spain". It should be noted that this is a proposed law, rather than a tax currently in effect, as the government has introduced a bill for a new "State Complementary Tax." If eventually enacted (which is far from certain) this tax would be applied to non-EU, non-resident individuals purchasing pre-owned homes.

According to the proposal, the tax would add a 100% surcharge on the Transfer Tax (ITP). A non-EU buyer without tax residence in Spain would face €400,000 in taxes on a €400,000 property, doubling the overall cost. The bill is currently under review and faces legal challenges, with many experts deeming it unconstitutional and discriminatory. However, it should be noted that this would not apply to new homes, which are taxed with VAT. The proposal has prompted some buyers to reconsider their options, but it is not yet law.

Is It Wise to Buy a Property in Spain Now?

The Spanish market is robust, and the aforementioned proposed tax is not a determining factor for EU residents. However, for non-EU buyers, it's a significant point to consider, although it's not yet a done deal.

Those working with a limited budget can still find affordable homes in many regions of Spain. Regardless of whether the relocation is permanent or an investment, it is essential to conduct thorough research and understand all associated costs.

Conclusion

To summarize, Spain’s main property taxes include the annual property tax, as well as transactional taxes such as the transfer tax (ITP) on resale properties and the value-added tax (VAT) on new builds. For non-residents, an annual income tax on the property is also a factor. Since tax rates can differ greatly between autonomous communities, local regulations must be taken into account when buying property.

Given the complex tax structure in Spain, it is highly recommended to consult with a Chartered Tax Advisor, especially for those with a global financial situation, to ensure all tax obligations are met.

At Tytle, we provide global tax services, including:

• Accounting/bookkeeping
• Accurate tax filing
• Estate planning
• Cross-border advice
• Immigration services
• And much more!

For more international tax advice, feel free to explore: “Retiring in Spain: Clock Ticking on Tax Perks?” and “Property Tax in Italy: Essential Guide for Buyers and Owners”.