Property taxes in Spain: a guide for foreigners

Buying a property in Spain is a very attractive thought, but how do property taxes work? This guide is here to teach you how much taxes you will pay when you:

1. buy
2. own, and rent out
3. sell

Spoiler alert: you will get bored by this article, and will want to hire an accountant to do that for you, as I do. So check out our section on Tax Advisors in Spain.

1. Buying: 8% to 15% of the property price

As a rule of thumb, consider 8% to 15% of the property price in taxes and fees. I say that by experience, as I bought a flat in Valencia in 2018.

Indeed, when buying in Spain, you must consider all the acquisition costs, including of course the taxes. But don’t forget other costs, as various stakeholders are usually involved such as lawyers, and real estate agents. How to get an easy estimate?

The acquisition costs are estimated at around 8% to 11% of the purchase value of the property excluding advisory costs. Including advisory costs (lawyer, real estate agents), 8% to 15% is a better estimate.

Which taxes and how much you pay depend on whether you’re buying a new or resale property.

New properties

The purchase of a new build (a property being sold for the first time) involves the payment of VAT (IVA in Spanish) which is 10% of the price, plus 1.5% Legal Documentation Tax (AJD in Spanish). This brings your total tax bill to 11.5% if you’re buying a new property in Spain. Except if it’s in Canarias, where VAT is 6.5%.

Resale properties

This is the most common case in Spain (81% of transactions in 2019 were resale properties). The costs you will face when buying a resale property (property that has been sold before). are mostly a transfer tax (ITP in Spanish), which is a proportion of the purchase price. Depending on the region where you buy (Comunidad Autonoma), you pay between 8% and 10% of the property price.

Case Study

• Purchase value: € 100,000
• Notary fees: 1% x € 100,000 = € 1,000
• ITP: 10% x € 100,000 = € 10,000
• Buyer’s agent (not mandatory, but I recommend it) : 3% HT x 100,000 € (minimum of 4,000 € HT) = 4,840 € TTC;
• Agency fees: 3% x 100,000 € (minimum of 3,000 € HT) = 3,630 € TTC.
• A total of € 119,470.

2. Owning

There will of course be costs associated with owning a property in Spain.

IBI

IBI is the Property Ownership Tax, in Spanish “Impuesto Sobre Bienes Inmuebles”.

IBI is a local tax on the ownership of property in Spain, irrespective of whether the owner is a resident or not. Calculated on the basis of the valor catastral (administrative value, usually lower than market value) set by the town hall the tax rate goes from 0.4% – 1.1% of the valor catastral depending on the Spanish region.

The IBI is:

• Paid directly to the town hall or the SUMA offices
• Collected annually
• Collected at different times of the year according to the area
• Based upon the value of your property known as “valor catastral”

Example: I pay 158€ in IBI for a 85 square meter flat that I own in Valencia.

Non-Resident Imputed Income Tax (NRIIT)

The NRIIT does not really exist. It is the same thing as the IRNR (described in this article), in the declaration 210. So do not look for a separate declaration, because you won’t find it. It is a cell which is part of the IRNR declaration, within determination of taxable amount. The cell itself is called “210 I Renta inmobiliaria imputada”, which can be (badly) translated to NRIIT.

All non-residents owning property in Spain need to file this tax once a year.

The NRIIT is paid by non-resident property owners who do not rent out their second-home and so do not pay rental income tax. However, it is also paid by non-resident property owners who have had vacancies during the year. In such a case, the NRIIT will be pro-rata to the number of days that the property was not rented out.

In short, Non-Resident Imputed Income Tax:

• is paid on a second home that is not rented out (or not 100% of the year)
• is declared in the non-resident annual tax declaration
• is paid to the Spanish Tax Authority
• is 1,1% or 2% of valor catastral (rateable value of a property in Spain)
• Filed once a year, before end of December of the following year

Again, for clarification, when I asked my Spanish accountant about NRIIT, he told me that NRIIT is the exact same thing as the IRNR (see below). It’s only a different wording, that might be used when the property is not rented out.

Whether you rent out your property or not, you pay taxes

IRNR – Impuesto sobre la Renta de No Residentes

IRNR is Spanish for Personal Income Tax. Non-residents who own property in Spain have to pay an annual income tax that varies according to whether the property is rented out or not.

To keep it short and sweet:

• If you do not rent out your property: consider as a gross estimate a tax of 0.5% of your property’s valuation, per year. To be exact, you will pay each year 25% of 2% of the valor catastral of the property. In short, for a property worth €700,000, that’s €3,500 per year in taxes.
• If you rent out your property: 19% to 24% of your net rental income (revenues minus costs).

19% or 24%?

The Spanish rental income tax rate for non-residents is 24% of gross income. However, EU residents may deduct expenses provided that such expenses are directly related to the rental income generated from the Spanish property. Also, EU residents enjoy a reduced income tax rate of 19%, under the condition that this income is declared quarterly.

When should I pay the rental tax?

The Income Tax for non-residents in Spain is collected quarterly. After the end of each quarter of the year, you have 20 days to fill in the tax form 210 (Non-Resident Income Tax), corresponding to the rental tax:

• 20^th April – first quarter (January, February, March)
• 20^th July – second quarter (April, May, June)
• 20^th October – third quarter (July, August, September)
• 20^th January – fourth quarter (October, November, December)

What revenues do I declare as rental income?

The revenue to report is the total amount received from tenants. Short and easy.

What expenses can I deduct?

You can deduct certain expenses such as:

• IBI
• insurance
• utility fees
• repairs
• loan repayments
• interests
• refurbishment costs

So, if you’re a EU resident, you will pay 19% of the revenues minus all these costs.

What documents do I need to prepare?

To complete the taxes obligations, you will need to prepare the following documents:

• NIE
• Passport
• Deed, or copy the real estate transaction
• Copy of the invoices of the renovation / refurbishment costs
• Copy of the rental contracts
• Tax address (in your home country)
• Date and place of birth
• Tax representative in Spain
• Rental income (total)
• Expenses and invoices corresponding (IBI, insurance, refurbishment, etc.)

3. Selling

National tax on real estate appreciation

When selling your property, you will have to pay the national tax on capital gains (“plusvalía de Hacienda”).

If the seller is resident in Spain, he is subject to the IRPF, the personal income tax. For the first 6000 € of capital gain, it is taxed at 19%. From the 6,000 to 50,000 € bracket, the rate is 21%. And above € 50,000, it’s 23%.

If the seller is not resident in Spain, he is subject to IRNR, the non-resident income tax (“Impuesto sobre la Renta de no Residentes”). The rate is 19% on the capital gain realized.

PlusValia – Town Hall capital gain tax

The Town Hall capital gain tax is called “plusvalía municipal” or “Impuesto sobre el Incremento del Valor de los Terrenos de Naturaleza Urbana”. It is a local tax which depends on the location of the property, the duration of ownership and the cadastral value of the land on which the housing is built. The cost varies from a few hundred euros to several thousand euros.