In this article, we explore the tax obligations that come with owning property in Spain. Many property owners are unaware of the various Spanish property taxes, who is responsible for paying them, and the proper way to do so.
Failing to pay your non-resident property tax on time can lead to significant financial penalties. By the end of this guide, you’ll learn how to avoid expensive pitfalls and streamline the process of managing your Spanish property taxes as a non-resident owner.
Introduction:
Spain has become one of the most popular destinations in the world for foreign property investment and it’s not hard to see why.
Holiday homes and buy-to-let properties are a dream for many foreigners, and investing in Spain is as appealing as ever.
Understanding your Spanish property tax obligations is essential when budgeting for your property purchase.
In this guide, we will explain what you need to know about property tax in Spain.
Can non-residents buy property in Spain?
Yes, as a non-resident, you can purchase real estate in Spain. To purchase a property as a non-resident you will require an NIE.
What is an NIE – Número de identidad de extranjero?
This is your Spanish tax identification number and you apply for it before you buy real estate. Your carefully selected property lawyer should offer this service.
The NIE is required when registering the property in your name, resolving issues with the Inland Revenue, and paying your Spanish property taxes. It serves as your identification with the Spanish tax authorities.
Am I considered a resident or non-resident for tax in Spain?
You are considered a non-resident in Spain if you live there for less than 183 days in a calendar year. If that’s the case, you are obliged to pay taxes on any income from Spanish sources.
If you are a foreign property owner in Spain, whether or not you rent out your property, you are required to file a tax return and pay both Spanish non-resident property taxes and local taxes
Are there double-taxation agreements between Spain and other countries?
Yes, to avoid double taxation, Spain has signed treaties with many countries.
What taxes are paid when you buy a property in Spain?
Whether you’re a resident or non-resident, all property owners in Spain must pay certain taxes when purchasing property:
· VAT – This tax applies if you buy a newly built home directly from the property developer. The VAT rate is 10% of the sale price.
· ITP – Property Transfer Tax – This tax is applicable when VAT does not apply, such as when purchasing a second-hand home. The rate for ITP
varies by Autonomous Community (the first-level political and administrative divisions in Spain, as defined by the Spanish Constitution) and depends on the buyer’s personal situation.
What annual Spanish property tax do property owners pay?
· Impuestos sobre Bienes Inmuebles, or IBI (Tax on Real Estate Assets).
Any homeowner is required to pay this council tax. It is paid once a year/ but the time of year varies by area. The amount is determined by the cadastral value of your property, which means the amount of tax you pay depends on the place where the property is located and the personal situation of the taxpayer. It is paid to the Town Hall (Ayuntamiento) where the property is located.
· IRPF (Personal Income Tax)
As a property owner, if you are a tax resident (i.e. you spend more than 183 days in Spain in a year), you are obliged to declare this in your IRPF Income Tax Return.
If this real estate is your main residence, no tax is due.
If the property is empty or is not your main residence, imputation of income is applied (deemed tax).
The amount of tax you will pay depends on the cadastral value (the Spanish administration gives each property a ‘cadastral value’, based on data found on the land registry) of the property and when the cadastral value was last changed.
· IRNR (Non-residents’ Income Tax)
Impuesto Sobre la Renta de no Residentes (IRNR) is a tax on rental income for non-residents in Spain. If a property is rented, then an income tax return should be submitted and income tax paid to the Spanish tax office. If your real estate is rented out, and there is a profit, you as a non-resident will pay 19% after expenses or 24% on your gross rental receipts (depending on where you are resident).
The tax rate for citizens of the EU, Norway, and Iceland is 19%, and rental expenses (including mortgage interest) can be deducted. The tax rate is 24% for residents of other countries and the rental income is fully taxable with no deductions.
Tax is owed after the income is received – either monthly or quarterly. If the real estate is owned by a married couple, each person must file a tax return.
What Spanish property tax should you pay when you sell your property?
Both residents and non-residents pay this tax:
Plusvalia (Capital Gains Tax) – When a property is sold, the seller is obliged to pay the Plusvalia on the increase of the property’s value. It is a fee that the individual who sells a property pays to the local authorities.
Capital Gains Tax in Spain is 19% for non-residents from the EU and EEA, and 24% for non-residents from other countries.
What is the Wealth Tax (Patrimonio) in Spain?
Both resident and non-resident property owners in Spain are liable for the Spanish Wealth Tax, known formally as Partimonio. Non-residents are liable only for net assets held in Spain, although they are exempt from certain allowances.
The Wealth Tax only applies to assets worth more than €700,000.
Note that the amount of Wealth Tax you are required to pay will depend on your place of residence as each region has its own rules.
If the total value of your assets exceeds €2,000,000, you are obligated to file a Wealth Tax return, even if no tax is owed.
The following deductions are available:
· Deduction for individuals: €700,000 (previously €108,182,18 for immigrants, €0 for non-residents).
· Non-residents are ineligible for permanent residence deduction.
Who has to file a tax return in Spain?
- Every non-resident Spanish property owner is required to file a tax return in Spain.
- If you own property in Spain that is not rented out, you are still obliged to file a tax return. It’s called a deemed tax return.
- If you rent out your property, you are obliged to submit a tax declaration for every quarter in which you have rental income prior to 2024, starting 2024 it is possible to file an annual tax declaration.
Can any tax deductions be claimed by Spanish property owners?
Citizens of the EU, Norway, and Iceland are entitled to deduct a number of different expenses from their Spanish rental income, including:
- · Management fees
- · Letting agent fees
- · Bank charges
- · Mortgage Interest (excluding capital element which is not allowable)
- · Insurance
- · Local rates (IBI and Community charges)
- · Maintenance and improvement costs
- · Cleaning
- · Running costs
- · Building and furniture depreciation (Capital allowances)
If you do not enclose your residency certificate, no expense deductions can be claimed.
What are the deadlines for submitting the Spanish property tax returns?
There are four quarters during the tax year and four deadlines. The tax return must be filed by the 20th day after the end of the previous quarter. Here are the deadlines:
- Quarter 1 – 20 April
- Quarter 2 – 20 July
- Quarter 3 – 20 October
- Quarter 4 – 20 January
What if my property was not rented through the entire year?
ЕU residents who have not generated any income during the quarter can submit a deemed tax return for the whole year. If there is a loss generated in any quarter, it is declared at the end of the year with an annual tax return.
If your property was rented for 100 days, for instance, you are obliged to file a deemed tax return for the other 265 days. This return is in addition to the quarterly property income tax returns.
What exactly is a deemed tax return?
The rule is that if you do not rent out your property, you are obliged to file a deemed tax return. The deadline to file is 23 December following the end of the tax year.
In general, the taxable amount is from 1.1%-2% of the cadastral value of your property.
If your Spanish real estate is rented only for a part of the tax year, you need to file a deemed tax return only for the period in which the property is not let.
Is it possible to file one tax return, rather than four separate tax returns?
Yes, it’s possible to file one tax return rather than four separate tax returns from 2024 onwards.
For previous years you still need to file quarterly. If you have received any income during the quarter, you are obliged to file a quarterly income tax return and pay the tax before the deadline.
If your property was empty through the entire year, you can file only one annual deemed tax return.
What if I miss the filing tax deadline?
If you miss the filing and payment deadline, you may incur fines, as follows:
| Up to 3 months | 5% |
| Up to 6 months | 10% |
| Up to 12 months | 15% |
Who can help me prepare my Spanish property tax return?
The Spanish tax system can be very confusing, especially for foreigners!
While you can always file your tax return directly with the Spanish tax authorities, the responsibility for filing correctly and claiming any available tax relief falls entirely on you.
However, if the thought of dealing with tax documentation in Spanish seems overwhelming, you can always turn to a property tax filing specialist.
Move to Malaga has partnered with Property Tax International to help you file your Spanish property tax return.
At Property Tax International their team of tax experts specializes in property tax returns for international property owners. They will:
- Handle all your foreign tax return preparation, and follow any changes in the Spanish tax legislation.
- Minimise your tax liability by applying every international tax agreement, tax relief, allowable expenses and property tax deductions you are entitled to depending on your personal circumstances.
- communicate directly with the Spanish tax office on your behalf and will keep you updated throughout the process.
- Property Tax International has multilingual support via phone and email. Their tax experts can answer any of your international property tax-related questions.
The Property Tax International team will:
- Help you file your Spanish tax return and pay your taxes online on time
- Help you avail of allowable expenses and dual-taxation agreements
- Deal with the language barriers with the Spanish tax office
- Answer all your property tax-related questions
- Help you minimize your tax liability