In this article, we are looking at your tax liabilities if you own a property in Spain. Many purchasers are not aware of the different types of Spanish Property Tax, who must pay them, and how.
Failure to pay your non-resident property tax on time can become costly. At the end of this article, we show you how to avoid costly mistakes and how to make your life easier paying your Spanish property tax as a non-resident property owner.
CLICK HERE to learn how to make paying your Spanish non-resident property tax easier …
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 property is a dream for many foreigners, and investing in Spain, despite all the recent events, 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.
It is needed when you register the property in your name when you have to resolve an issue with the Inland Revenue when you pay your Spanish property taxes. It is 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 foreigner, and you own real estate in Spain, whether or not you rent it out, you are obliged to submit a tax return and pay Spanish non-resident property tax 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. See the full list HERE.
What taxes are paid when you buy a property in Spain?
All property owners, residents, and non-residents must pay the following Spanish property tax:
- VAT – This tax has to be paid if you buy a newly built home (when the property developer sells it directly). VAT is 10% of the sale price.
- ITP – Property Transfer Tax – This tax is applied to homes to which VAT is inapplicable. This means that you will pay it if you decide to buy a used home. It is paid in the Autonomous Community in which the property is located.
The amount of the tax varies depending on the Autonomous Community (Comunidad autónoma is a first-level political and administrative division, created in accordance with the Spanish constitution) and the personal taxpayer 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) If you are a tax resident (ie. you spend in Spain more than 183 days in a year), as an owner of the property, 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 the tax that 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% or 24% on your gross rental receipts (depending on where you are resident).
In 2020, 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.
The 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 owners of property in Spain are liable for the Spanish Wealth Tax. 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.
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.
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:
- Bank charges
- Mortgage Interest (excluding capital element which is not allowable)
- Insurance
- Local rates
- Management fees
- Letting agent fees
- Cleaning
- Running costs
- Building and Furniture depreciation (Capital allowances)
- Maintenance and improvement costs
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 and the deadline is 31 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?
This is not possible. 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!
Of course, you can always file your tax return yourself directly with the Spanish tax authorities. In this situation, the responsibility of filing correctly and claiming every tax relief you are entitled to will lie solely with you.
However, if the thought of dealing with tax documentations in Spanish seems overwhelming, you can always turn to a property tax filing specialist.
Move to Malaga have partnered with PTI to help you file your Spanish property tax return.
At Property Tax International (PTI), 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 legislation.
- They will 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.
- PTI will communicate directly with the Spanish tax office on your behalf and will keep you updated throughout the process.
- PTI has multilingual support via phone and email. Their tax experts can answer any of your international property tax-related questions.
The PTI 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
