Buying property in Spain as a foreigner can be an attractive investment, but it also comes with certain tax obligations. At Torregolf Homes, specialists in properties along the Costa Blanca and Costa Cálida, we explain in detail the taxes foreigners must pay when purchasing property in Spain. This guide will help you understand the costs before taking the leap.
Taxes When Buying a Property
The taxes you need to pay depend on whether the property is a new build or a resale property:
A. New Builds
- VAT (Value-Added Tax): 10% of the purchase price. For commercial properties or garages not linked to a home, the rate increases to 21%.
- Stamp Duty (AJD): Ranges between 0.5% and 1.5%, depending on the region.
B. Resale Properties
- Transfer Tax (ITP): Ranges from 6% to 10%, depending on the region. This tax replaces VAT for resale properties.
Annual Taxes After Purchase
Once you’ve purchased a property, you’ll need to pay the following annual taxes:
A. Property Tax (IBI)
- A local tax based on the property’s cadastral value. Rates vary between 0.4% and 1.1%, depending on the municipality.
B. Non-Resident Income Tax (IRNR)
- If the property is not rented out: A deemed income tax based on 1.1% or 2% of the cadastral value, taxed at a rate of 24%.
- If the property is rented out: A tax of 24% on gross rental income, or 19% if you’re a resident of the EU, Norway, or Iceland.
C. Waste Collection Tax
- A local tax covering waste management services. Costs vary by municipality
Taxes in Case of Future Sale
If you decide to sell the property in the future, you must consider:
- Municipal Capital Gains Tax (Plusvalía Municipal): A tax on the increase in land value from the time of purchase to the time of sale.
- Capital Gains Tax for Non-Residents: 19% for EU, Norway, or Iceland residents, and 24% for residents of other countries, calculated on the profit made.
Additional Costs to Consider
In addition to taxes, foreign buyers should account for other costs associated with purchasing property in Spain:
- Notary Fees: Usually between 0.5% and 1% of the purchase price.
- Land Registry Fees: Typically between 0.2% and 0.5%.
- Legal Fees: Hiring a lawyer can cost between 1% and 2% of the purchase price.
- Valuation Fees: Required if applying for a mortgage, usually costing between €300 and €600.
Tax Benefits for Foreigners
Spain offers specific incentives to attract foreign investors, such as the Golden Visa, which grants residency to those who invest €500,000 or more in property. This is particularly attractive for individuals seeking to establish themselves in Spain or enjoy free movement within the Schengen area.
Recommendations for a Secure Purchase
To avoid surprises and ensure a secure purchase, follow these recommendations:
- Seek Professional Assistance: Having a lawyer and a real estate agent like Torregolf Homes is essential for managing legal and tax aspects.
- Request a Nota Simple: Verify that the property is free of debts or encumbrances.
- Check Local Regulations: Each region has its own rules on taxes and fees.
